We are now well into the first 100 days of the Trump administration. His supporters expect major changes in the China relationship. They voted for a man who promised to impose a 45 percent tariff on Chinese goods and slap China with the currency manipulator label on day one (a threat he later rescinded). Mr. Trump’s critics, on the other hand, braced for rough handling of a delicate relationship. Many were horrified by what they perceived as fumbling of the “one China” policy even before he took office. Thus far, President Trump has not met the expectations of either side and, true to form, he keeps us guessing.
Given his reputation for volatility and his rough treatment of America’s traditional allies, a sigh of relief could be heard around the world after President Xi concluded his first phone call with Mr. Trump as president. Reports indicate the call was cordial, with China receiving the assurance it wanted regarding the “one China” policy. Prior to that, Trump had managed to put China on the defensive by accepting a phone call from Tsai Ing-wen, the leader of what China calls the “renegade province” of Taiwan. Even Trump’s harshest critics had to admit that by making the call during his last days as a private citizen he had cleverly put this delicate subject in play without provoking a direct confrontation. What will America receive as a result of this display of Trump’s legendary deal-making skills?
Trump’s move to withdraw from the Trans-Pacific Partnership (TPP) was another gift for China. Obama’s “pivot to Asia,” of which the TPP was the economic aspect, was poorly understood and disliked in China from the start. The 12-nation partnership left China noticeably outside. Even if China would eventually be invited to join, the agreement established standards for labor and intellectual property that would be difficult for China to meet.
Viewpoint
02.27.17
Back to the Jungle?
Trade negotiators and business people have long understood the value of bringing gifts when dealing with China. This tradition goes back at least as far as 1793, when Lord George Macartney famously brought clocks and other gifts from Britain in his failed attempt to open a trade route. Perhaps Trump had this in mind when creating the issue over “one China,” then backing away from it with nothing to show in return?
We know that the Trump Organization, as distinct from the Trump administration, recently won its suit in China to recover trademarks. The famous Trump toilet seat, a Chinese product using his name without permission, has been pulled from the market. Critics may say this is a narrow win that will not bring broad benefits beyond Trump’s own business. But a win is a win.
Intellectual property protection has long been a subject of dispute in China. American businesses want better protection for their marks, more transparency in dispute resolution, and they don’t want to be forced to hand over intellectual property in exchange for market access. With momentum around intellectual property, will Trump address this?
The American business community in China is patient, and we are still in the early days of the new Trump administration. Now that China has what it wants, what can America expect in return? Will Trump get the cooperation he wants from China to contain North Korea? Can American manufacturing workers expect to get their jobs back? It’s unclear what form that might take in terms of a China deal, but post-election expectations are still high.
The Obama administration had its own way of extracting agreements from China, and timing was key. Obama waited until the eve of what China covets most: the state visit, complete with 21-gun salute. Some speculate that Obama’s negotiators deliberately waited until Xi’s plane was about to depart Beijing before demanding that China come to the table on cybersecurity. We may never know what actually happened, but reports show that industrial espionage has fallen sharply since this agreement.
As for what Trump has planned for China policy, we still have no clear view. At the American Chamber of Commerce (AmCham), we are trying to discern who in the administration we should look to for clues. Peter Navarro has been an outspoken critic of China and has provided most of the ideas behind candidate Trump’s campaign rhetoric. Secretary of State Tillerson would naturally have the foreign policy agenda. He will be familiar with China from his time at ExxonMobil, an AmCham Shanghai member. Will this guide his thinking? Or should we keep our eye on Treasury Secretary Mnuchin, who would take the lead on China’s currency?
AmCham Shanghai will continue to push issues we hope to see at the top of the administration’s agenda. These include market access, China’s industrial policies, opaque regulations, and unfair benefits for domestic companies. Cybersecurity and faster financial sector liberalization are specific key concerns. Foreign banks now have 1.4 percent market share and the trend line is negative, according to the Chinese financial data firm Wind. We also hope this administration will continue negotiating a high-quality bilateral investment treaty. We fully support the calls for more balanced benefits in the relationship and are eager to engage with the new administration to help bring that about.