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Xi-Biden Summit Lays Groundwork, But 'significant Challenges' Remain In Trade Talks

US business lobby expects future talks to cover more equitable market access, easing travel restrictions, SOE subsidies and China's WTO obligations Chinese analysts question how far negotiations can progress amid anti-China rhetoric on Capitol Hill and simultaneous containment efforts by Washington

Xi-Biden Summit Lays Groundwork, But 'significant Challenges' Remain In Trade Talks

Trade talks between China and the United States have been fast-tracked after a virtual meeting between presidents Xi Jinping and Joe Biden, but finding common ground for future negotiations is still far from assured, according to analysts.

While both sides appeared to put aside recent acrimony to address bilateral economic issues, Chinese analysts still question what is behind the US' "strategic competition" and how far negotiations will progress amid anti-China rhetoric on Capitol Hill and accusations that China is a "non-market economy".

Tuesday's meeting showed the two countries were keen on lowering the temperature, but they remain wide apart on issues of economics, geopolitical influence, tech and human rights.

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Chen Fengying, a senior fellow of the China Institute of Contemporary International Relations (CICIR), said Chinese purchases under the phase-one trade deal, along with supply-chain issues, could be future topics of discussion, especially as the Biden administration looks to cool US inflation.

If they were resolved, the US could cancel the 7.5 per cent tariff it slapped on US$120 billion worth of Chinese goods and reduce the 25 per cent tariff on US$250 billion worth of merchandise, she said.

Chen said the phase-one deal - signed in January 2020 and due to expire on December 31 - was good overall despite some controversy over intellectual property and China's purchases of US goods.

"It doesn't need to be renegotiated, but renewed with some kind of new agreement," she said.

China promised to buy an additional US$200 billion worth of American goods from 2020-21, relative to 2017 levels, but it is falling far short of the target.

"The President [Biden] did underscore the importance of China fulfilling its phase-one commitments, and his desire to see real progress on the conversations that ambassador [Katherine ] Tai is having with her counterpart, Vice-Premier Liu He," according to the US press statement released after Tuesday's talks.

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While intellectual property and trade-deal purchases could be low-hanging fruit in future negotiations, the US-China Business Council, an advocacy group representing more than 200 American businesses, expected other issues to be followed up on.

Among them were more equitable market access for American businesses in China, the easing of travel restrictions, addressing subsidies to Chinese state-owned enterprises, and China's obligations at the World Trade Organization (WTO).

"We hope separate meetings will be scheduled soon to discuss economic and trade issues with China," the council's president, Craig Allen, said in an emailed statement. "The challenges are significant, and much hard work needs to be done."

Analysts, however, doubt that complicated economic issues will be high on the agenda, especially as they were due to be discussed after the phase-one deal, but have not been followed up on.

"One of the Biden administration's themes has been that we will not be able to successfully negotiate changes with China that China doesn't want to implement on its own," said Derek Scissors, a fellow with the American Enterprise Institute.

"It's hard to imagine [United States Trade Representative] Tai making the mistake of starting yet another supposedly comprehensive dialogue."

Washington is evaluating the full range of tools available to it to deal with China's non-market economic practices, US National Security Adviser Jake Sullivan said at a Brookings event on Tuesday.

On Wednesday, the US, Japan and European Union jointly announced their renewal of a trilateral partnership to "address the global challenges posed by non-market policies and practices of third countries". Tai is on her way to Seoul and New Delhi to enhance relations with Asian allies.

Chinese policy advisers have expressed concern that any future economic agreement could be jeopardised without good diplomatic relations.

Some pointed to the China-EU Comprehensive Agreement on Investment, which was shelved earlier this year over Hong Kong, alleged Xinjiang human rights abuses and other issues.

But confidence seems to be growing in China that the country has the economic might and political solidarity to stare down US challenges.

Xu Lin, who negotiated industrial policy during China's accession to the WTO, said Biden's China policy had not deviated from the Trump administration.

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"It will cite market-economy standards and fair competition to force Chinese reforms in SOEs, industrial policies, government subsidies, labour rights, climate, intellectual property right protections and commitments to reduce market and trade distortions with enforceable bilateral deals," Xu wrote in an analysis last week.

Meanwhile, the US will continue trying to contain Chinese technological advancements to maintain an advantage, he said.

Xu suggested China must pressure Western countries to abandon bans on hi-tech exports. "If the US refuses to do so, China has the right to adopt export-replacement policies in relevant sectors," he said.

Chen, of the CICIR, said the US will continue its hardline policies and could even become tougher.

[The US] prefers talks with its allies, rather than having direct negotiations with China, because it has realised it can no longer deal with China alone

Chen Fengying

"[The US] prefers talks with its allies, rather than having direct negotiations with China, because it has realised it can no longer deal with China alone."

Wang Yong, director of Peking University's Centre for American Studies, said given the bipartisan view that the US must be tough on China, the Democrats might not want to strike a deal ahead of the midterm elections

"The US has run out of tools, as seen from the results of the tariff war, supply-chain disruptions and its own macroeconomic problems. It is becoming very difficult to pressure China," he said.

Beijing has insisted on its own pace of reform. Despite its so-called dual-circulation strategy, which relies more on technological self-reliance and the domestic market for growth, China has shown intentions to continue opening-up and to push forward with structural reforms.

Beijing's willingness to reform was highlighted in its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA) - both of which would require significant reform.

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