Chen Wenling: China’s Market Dividend Will Play a Major Role in China-US Negotiations

“The China-US trade negotiation is the consensus reached by the Chinese and US leaders on December 1, 2018, that is, China and the United States cannot be decoupled and will be negotiating,” said Chen Wenling, chief economist of China Center for International Economic Exchanges. The key issue is how to negotiate, what to negotiate and what outcome should be achieved? These are matters of particular concern to everyone.

On the morning of January 30, 2019, the opening ceremony of the China-US high-level economic and trade consultation was held in the Eisenhower Executive Office Building of the White House. Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and leader of the China-US Comprehensive Economic Dialogue team, Robert Lighthizer, US trade representative Steven Mnuchin, Secretary of Treasury and other senior officials attended the dialogue.

In addition to Robert Lighthizer and Steven Mnuchin, other senior US officials such as Wilbur Ross, the US Secretary of Commerce, Larry Kudlow, Director of the National Economic Council under President Donald Trump, Willems, deputy director of the National Economic Council, Jeffrey Gerrish, Deputy Trade Representative, David Malpass, Under Secretary of the Treasury for International Affairs, and other senior officials were also present at the dialogue.

Robert Lighthizer did not say much at the press conference and asked all the reporters to leave after taking photos.

So, how should we assess the current status, trend and coping strategies of the China-US negotiations? Chen Wenling pointed out that the leading negotiators of the US delegation are Robert Lighthizer and two other officials, who are the “three carriages” of the China-US trade negotiations and are responsible for formulating the US trade policies. Robert Lighthizer is a very tough opponent and we can expect an intense negotiation.

Previously, Michael Pillsbury, an expert in Chinese issues at the US Hudson Institute, pointed out that choosing Robert Lighthizer to be the leading negotiator means to bring the negotiations in a new direction and the negotiations in the future will be more formal. The outcome Trump wants is to sign an agreement and execute it immediately, unlike the informal negotiations pursued by Mnuchin. Insiders say that choosing Robert Lighthizer to be the leading negotiator made Trump more confident and believed that the United States would adopt a tough attitude toward China during the negotiations. Robert Lighthizer and his team were previously responsible for the trade investigation of China, and had conducted similar negotiations with the European Union and Japan, and are highly-experienced in trade negotiations.

Never allow the United States to impose sanctions on other countries with domestic rules.

Regarding the possible trend of this negotiation, Chen Wenling made an analysis from three aspects. First, some requirements put forward by the US are in line with China’s expansion and opening up and thus, consensus can be reached without difficulties in this regard. Taking IP protection as an example, the production, use, and protection of intellectual property rights are the needs of China’s own development. China’s manufacturing industry is moving towards the mid-to-high end, its innovation capability and scientific research capabilities have been strengthened. The annual publication of Chinese scientific papers has surpassed the United States for many years.

Some of China’s technologies may not be as good as the United States but they have developed rapidly. Therefore, intellectual property protection is also a necessity for China’s own development. With the advancement of the “Belt and Road Initiative”, China needs to strengthen intellectual property protection and consequently, it should not be hard for China and the US to reach an agreement in this regard.

China must stick to its bottom line. For example, we must not make any kind of compromise on China’s political system and major policies. We will not allow the United States to intervene in other countries with its own domestic rules.

“The negotiating team of the US is small but efficient and keeps a low profile,” said Chen Wenling. They do not do propaganda, they do not justify and their negotiations are mainly bilateral, even under the multilateral framework. For example, the previous US-Canada-Mexico Free Trade Zone has changed to US-Mexico-Canada because it first negotiated with Mexico, followed by Canada.

“The US likes to pressurize other countries to get what it wants, especially President Trump,” said Chen Wenling. The extreme pressure exerted by the US forced many countries to compromise and eventually they reached multilateral agreements. When negotiating with China, the United States will also put more pressure on China to make concessions.

Chen Wenling pointed out that China can make concessions on some issues. For example, we can expand exports and trade. We import energy from all over the world and 70% of our energy resources are imported. The US energy price is lower than in many countries and why should we not import more from the US? We can also resume the imports of Boeing aircraft, soy products and so on. The huge Chinese market and market competitiveness are our biggest bonus and the greatest strength.

China market dividend will play a major role in the negotiations.

“China has a huge domestic market and we can surely import more products from the United States if they have a price advantage,” said Chen Wenling. China is restructuring its industries and trade, has 1.4 billion people and thus, the trade deficit with the United States can be reduced if the United States can relax its export of high-tech products to China. For example, the import of high-end chips alone is worth 87.5 billion. The US weapons are exported to 98 countries, but Chinese is not included. Most of the weapons exported to Taiwan are outdated. The US also put restrictions on exports to India, so India also imports from Russia.

I believe that all the countries will try to maximize their own interests according to their core national interests and the current world pattern. As for the China-US trade negotiation, we can predict that we will resume imports from the United States, and China’s largest market dividend will play a major role in the negotiations.