Pacific Reset, day 211: With Trump, trade deficit returns to the forefront of negotiations
Yesterday, we noted that with the tweeter-in-chief’s signal that he is willing to meet directly with Xi Jinping at the close of the 90-day negotiation period, Trump effectively took back the position of chief trade negotiator that he had delegated to Robert Lighthizer.
The White House released a transcript of “Remarks by President Trump in meeting with Vice Premier Liu He of the People’s Republic of China.” It contains many interesting tidbits, including a readout of a letter from Xi to Trump, in which Xi says he hopes to “step up consultations by meeting each other halfway in order to reach an early agreement,” and adds a dash of flattery:
As I often say, I feel we have known each other for a long time, ever since we first met. I cherish the good working relations and personal friendship with you. I enjoy our meetings and phone calls in which we could talk about anything.
The transcript also includes, the SCMP notes, flattery from Trump describing Liú Hè刘鹤 as “truly one of the most respected men in Asia, one of the most respected men in all of China, and, frankly, one of the most respected men anywhere in the world.” Trump also calls the Chinese purchase of 5 million tons of soybeans a “fantastic sign of faith.” (This is less than a third of the estimated 18 million tons that American soybean farmers missed out on selling to China due to tariffs in 2018.)
Moreover, when asked if the Huawei case was discussed during negotiations, Trump responded, “No, we haven’t discussed that yet. It will be, but it hasn’t been discussed yet.”
In addition, the White House released a “Statement of the United States Regarding China Talks.” This is more substantive. The statement lists seven points of negotiation clearly reflecting the agenda of U.S. Trade Representative Robert Lighthizer. In short:
- Technology transfer
- Intellectual property
- Obstacles for American business in China
- Commercial cyber theft
- Subsidies for SOEs
- Obstacles for American trade to China
- Currency concerns
But then the statement separately emphasizes reductions to the trade deficit, reflecting Trump’s focus:
The two sides also discussed the need to reduce the enormous and growing trade deficit that the United States has with China. The purchase of United States products by China from our farmers, ranchers, manufacturers, and businesses is a critical part of the negotiations.
Another sentence in the statement seems to put all seven of Lighthizer’s substantive negotiating points on effectively equal footing with deficit reduction: “The United States is particularly focused on reaching meaningful commitments on structural issues and deficit reduction.”
Xinhua was more than happy to, in its own report on negotiations, refer to the deficit first in its list of issues discussed: “The two sides held candid, specific and constructive discussions about issues of common concern, which included trade balance, technology transfer, protection of intellectual property rights and a two-way enforcement mechanism, as well as other issues of concern to the Chinese side.”
Other news related to the trade war, and broader recalculation of relations with Beijing led by (but by no means limited to) the U.S., which we are terming the Pacific Reset:
- A Thousand Talents, but no Americans
Energy Department to ban foreign talent-recruitment programs / WSJ (paywall)
“The U.S. Energy Department says it will ban its scientists and other employees from participating in talent-recruitment programs sponsored by China and other countries suspected of using them to obtain sensitive research… The Energy Department’s initiative takes aim at programs such as China’s ‘Thousand Talents Plan,’ which pays scientists working abroad and says its mission is to gather ‘global wisdom.’ The programs target a mix of Americans and foreign nationals.” - Antagonistic visa policies from the Trump administration
Restrictions on PRC scholars coming to America / Sinocism
“I am hearing now that several more well-known PRC American scholars were denied visas, or had existing ones canceled, including for some planning to attend the US for a recent seminar at a well-known institution to celebrate the 40th anniversary of the establishment of US-China relations. At least some of the lucky scholars who did get visas were subject to secondary searches upon entering the US, as well as in some cases visits from law enforcement.” - Huawei and 5G
Exclusive: EU considers proposals to exclude Chinese firms from 5G networks / Reuters
“While efforts by the EU’s executive are still at the very early stages, and could prove complicated to implement, the move marks a shift in the EU’s stance amid growing security concerns in the West about China.”
U.S. wants Western tech to be used instead of Huawei kit / Reuters
Israeli cyberexpert detects China hack in Ottawa, warns against using Huawei 5G / Toronto Star
“The 2016 incident involved the surreptitious rerouting of the internet data of Rogers customers in and around Canada’s capital by China Telecom, a state-owned internet service provider that has two legally operating ‘points of presence’ on Canadian soil, said Yuval Shavitt, an electrical-engineering expert at Tel Aviv University.”
Briefing: Huawei reaches interim deal to license Qualcomm tech / TechNode
“Qualcomm has reached an interim agreement with Huawei to license its technology to the Chinese telecommunications giant. Huawei will temporarily pay Qualcomm $150 million every quarter for the use of its tech.” - Analysis and commentary
Opinion: Do not underestimate the risk of an iron curtain in tech / FT (paywall)
Gillian Tett writes, “Imagine a world where American technology companies were prevented from sourcing components from Chinese suppliers, or exporting equipment to them… Until recently — say, two years ago — those questions almost seemed preposterous…
But last week this once-fanciful question sparked some heated — and nervous — debate at private dinners at the World Economic Forum in Davos. And this week, two of the biggest US financial groups told me they had quietly asked their investment committees to conduct scenario planning for these formerly outlandish ideas.”
What can the U.S. sell China? Services / WSJ (paywall)
“American companies are either leaders or internationally competitive in financial services, insurance, engineering, consulting, software development and many other high-skilled service industries. But the U.S. provides far fewer of these services to China than to the rest of the world… China places heavy restrictions on the ability of foreign companies to invest in these sectors.” - Apple’s trade secrets for secretive self-driving car project
Chinese engineer charged with stealing secrets from Apple’s self-driving car project / CNN
“The FBI is accusing a Chinese national of stealing trade secrets while working for Apple. It alleges that engineer Jizhong Chen attempted to take key details from Apple’s secretive self-driving car project. Chen was arrested and charged last week, just before he was scheduled to fly to China, according to a criminal complaint filed in US district court in California.”
“It’s the second time in about six months that a Chinese national has been charged with stealing secrets from the Apple project, whose existence the company refuses to even acknowledge publicly.” - Human rights criticism from U.S. government
US lawmakers nominate jailed Uygur Ilham Tohti for Nobel Peace Prize, seeking global pressure on China / SCMP
Jerome Cohen 孔傑榮(柯恩) on Twitter: “Here is an excellent statement by the State Department on Wang Quanzhang. I hope it will receive wide circulation. [Sentencing of Wang Quanzhang / U.S. Department of State]” - Deutsche Bank applies for a CDR
Deutsche Bank said to seek China license in move to boost ties / Bloomberg (porous paywall) - Lego is doing fine in China
Toymaker Lego to open 80 new shops in China this year / Reuters - Boeing posts record revenue
Boeing smashes Wall Street expectations amid US-China trade tensions / CNBC - Tesla
Chinese banks are scrambling to fund Tesla’s Shanghai plant, sources say / Caixin (paywall) - Brazil trade
Brazil to restart high-level talks with China, could boost farm trade / Reuters
“Brazil and China are expected to hold their first high-level political and economic talks since 2015 later this year, Brazil’s agriculture trade secretary told Reuters.”
Previously in The China Project’s trade war coverage:
