How? Trump was apparently (ill) advised that China’s readiness to reduce the bilateral trade imbalance won’t be enough. No, Washington needed to impose on China enforceable structural reforms. Without that, as has been frequently repeated by U.S. Commerce Secretary Wilbur Ross, China’s destabilizing trade surpluses would be back in no time.
What are those enforceable structural reforms the U.S. wants China to implement?
Essentially, there are three: the protection of intellectual property, the outlawing of forced technology transfers and the cessation of illegal, market-distorting industry subsidies.
China denies any of those violations, leading to an apparently insurmountable stalemate.
It was obvious that China would not accept the claim that its economic and industrial revival was based on decades of intellectual property theft and coerced technology transfers. Beijing says that’s slander and part of Washington’s attempts to smear and contain China.
One of the news leaks from last week’s trade negotiations in Beijing is an example of the key blockages. Reportedly, China would make its industry subsidies compliant with the relevant rules of the World Trade Organization, but it is not willing to discuss that with Washington. China wants to work with the WTO to align its policies with existing trade rules and arbitration procedures. The U.S. can participate in those deliberations as any other WTO member.
Washington finds that unacceptable because it wants to keep the “enforcement control” as a trigger for trade tariffs in case it determines that China violated agreed-upon industry subsidy rules.
That is, in a nutshell, the entire U.S.-China trade problem: Beijing rejects the coercion of an American trade “enforcement mechanism” and wants to operate in the multilateral framework of WTO rules.
Those breakdown lines in a months-long technical dialogue are clear and simple. They leave nothing for the American and Chinese heads of state and government to talk about. Beijing seems to understand that, but Washington apparently believes it can still bring China into its own world.
That is an appalling ignorance of China’s statecraft.
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