The U.S.-China trade negotiations were held in Washington from January 30 to 31. This is a crucial negotiation for both China and the United States. The result would have major impact on the turbulent global economy and has therefore it has received worldwide attention. From the signs before the negotiations, especially the signals shown by the U.S., the two sides are working hard to promote the development of trade negotiations in the direction of success.
The U.S. Treasury Secretary Steven Mnuchin said on January 29 that the United States expects trade negotiations with China to make significant progress. Larry Kudlow, White House Economic Advisor also said on January 29 that progress on January 30 and 31 is crucial and that U.S. Trade Representative Robert Lighthizer would lead a trade discussion with Chinese representatives on these two days. Other than Kudlow, members of the U.S. delegation include Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and Trade Advisor Peter Navarro. Kudlow expressed his thought that he thinks everyone, including the U.S. President Donald Trump, was moderately optimistic about resolving trade disputes between the two largest economies in the world, and that the works done on the January 30 and 31 were to propose important options. Kudlow also revealed that Trump said he hoped to participate in the latest talks.
There were not much of information available during the talks, despite many different parties intended to dig out the clues. Anbound's Chief Researcher Chan Kung said that according to experience, this often meant that there might be a better result. Chan Kung did not agree very much with the pessimistic view that the U.S.-China Chamber of Commerce chairman had previously published in the New York Times; he believed that view was too pessimistic. From the standpoint of President Trump, he too pretty much hoped to achieve a great success to relieve the pressures from the American society on the investigation of Russiagate. Chan Kung believes that once U.S.-China trade is going well, Trump may win unprecedented support.
Forecast might be helpful to make uncertainty downward, but this has never been easy. As an independent think tank in China, Anbound has a deep understanding that from the standpoint of public policy research, it is very difficult to predict the direction of a country's public policy, as public policy research is a highly complicated system. Most of the time, what people can see are opinions. As an experienced public policy researcher, Chan Kung's view is that although opinions are important, they cannot replace forecasts and judgements, because only these two can provide low-cost public policies that are of the nature of knowing things before they actually happen. Once such things have happen, even if they are properly handled, the economic and social costs will be very high. Chen Gong pointed out that usually only countries and societies that do not have the ability to predict and provide judgement will be forced to use high-cost, or even super-high-cost post-processing methods.
With the ongoing U.S.-China trade negotiations, Chan Kung expected that the negotiations would result in a number of acceptable results for both sides, not a more intense overall confrontation. Bloomberg reported on January 18 that some sources said that China would increase imports of US$1 trillion in U.S. products in the next six years until the U.S.-China trade deficit falls to zero in 2024, which would change the U.S.-China trade structure. It is worth noting that the current Republican Party has reached an agreement to support Trump's re-election. If Trump succeeds in re-election, then 2024 would be the last year of his second term. If the U.S.-China trade structure balancing can be completed during the term of Trump's office, this would leave Trump an indelible legacy.
Expanding imports from the United States is not a challenge that China cannot accomplish. In the past six years, it has increased imports by US$ 1 trillion, equivalent to an annual increase of US$160 billion in imports of U.S. goods. This is only half of the US$32 billion in U.S.-China trade deficit in 2018. For China, buying American products would be a good option too, since it needs to buy the products anyway. Therefore, this figure for President Trump is completely acceptable to China.
The question is, what is the impact of the successful U.S.-China trade negotiations on world? Chan Kung's view is that the impact would be enormous.
From the perspective of economic common sense, China's substantial increase in imports from the United States is equivalent to the U.S. interest rate cut, which would mean the expansion of the U.S. market space. This is like the United States achieving the same effect of cutting interest rates and stimulating economic growth without actually doing so, and without financial turmoil and shocks.
If it is so, why did the United States not adopt the measure to stimulate its economic growth? Obviously, this is a very easy question for public policy makers in the United States to think of. For, Chan Kung, in the U.S. public policy, one of the focuses is to expand the U.S.-China trade negotiation model and win greater market space for U.S. goods in the world market. Such means is the same as the talks and practices in the U.S.-China negotiations. Imagine a scenario where Europe also added US$1 trillion in U.S. goods imports, and Japan added US$1 trillion of the imports as well, this is equivalent to providing US$3 trillion in purchase orders for U.S. manufacturing. This would have a positive impact of 1 to 3 percentage points per year on the U.S. economic growth rate.
If these views turn out to be as they are expected, Chan Kung suggests that the next public policy trend of the United States is to replicate the success of trade negotiations with China to obtain greater economic benefits from Europe, Japan, South Korea and Canada. Europe and Japan will eventually pay a price for their ambiguous attitude global multilateral trade, though this would happen slightly later. Based on history and the basic logic of the industries, one possible consequence is that Europe and Japan may pay higher price than China. Compared with China, the goods of these countries are far more competitive than the Chinese products to the United States. Chan Kung has previously insisted the view that the U.S.-European competition in the era of trade wars was the main axis, and that is reason why it is so.
Final analysis conclusion:
U.S.-China trade negotiations are likely to achieve tangible results. Should the negotiations were successful, this model may guide the U.S.'s next public policy, which would be replicated to Europe and Japan in the future.
