Commentary: Trump had a chance to gain influence over China but missed it

BEIJING: Last spring, a senior US official complained to a government representative of President Donald Trump's threat to impose a wide variety of tariffs on imports from China, in retaliation for allegedly unfair trade.

The executive argued that the Trump administration's fixation on the balance of merchandise trade between the two largest economies in the world was in itself a useless economic end.

It ignored the US service sector surplus with China, as tariffs would disrupt global supply chains and impose a tax on US companies and their customers.

Without disagreement, the official had an assertive answer: what leverage could the executive use to change the Chinese approaches that frustrate US companies for decades, forced technology transfers to industrial policies led by the US? ;State?

Trump's tariff threat had the effect of unbalancing Beijing and forcing it to enter into deeper trade negotiations more urgently than ever since joining the World Trade Organization in 2001.

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THE TRANS-PACIFIC PARTNERSHIP

The executive had a three-letter answer: TPP, referring to the Trans-Pacific Partnership trade pact in which the United States withdrew on the first day of Mr. Trump's term.

The exchange highlights the fundamental disconnect between US companies and Trump's trade policy in China. While US multinationals support the president's goal, they hate what he's trying to do.

Almost a year later, we are on the verge of knowing if the end justified the means. At the end of April, Mr. Trump and his Chinese counterpart, Xi Jinping, should reach an agreement ending their trade war. Customs duties and punitive counter-tariffs have been imposed on about two-thirds of bilateral trade in goods by countries.

If so, the US president will welcome China's centralized purchases of US exports, which will temporarily reduce the country's trade deficit with China, while making Beijing's foreign trade regime less market-driven than China's. 'now.

US companies will be much more focused on China's "structural" economic concessions – or lack thereof – in the deal.

Will Trump's sales representative, Robert Lighthizer, succeed in forcing Xi's chief negotiator, Vice Premier Liu He, to make significant changes to the unique development model of "capitalism"? State "of China? Or will Mr. Lighthizer's offense be less formidable than Mr. Liu's defense?

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All indications are that Mr. Liu is offering much less than Mr. Lighthizer would like, but Mr. Trump is inclined to accept an agreement anyway.

Fear and disappointment

US multinationals would be disappointed because, after deciding to use the "nuclear option" of tariffs, Mr. Trump would have deviated from the trade problems that mattered most to them.

But they will remain silent about this because they fear a disappointing deal much less than the alternative: higher and higher tariffs affecting the entire exchange of goods between the two countries while the trade war continues.

The biggest disappointment of US companies is perhaps that the trade agreement that is emerging, according to informed people of the negotiations, will be very similar to the bilateral investment treaty that the Obama administration was on the point to conclude at the end of 2016.

As imperfect as the Obama treaty may be, it was supposed to coincide with the launch of the TPP, joining the United States and 11 other Pacific countries, to the exclusion of China.

Its advocates believe that the strategic challenge posed by the TPP would have been a much more effective way to convince Beijing to adopt substantive financial and economic reforms than to try to quell a fiercely nationalist regime with tariffs.

READ: The TPP agreement that was almost not, a comment

Instead, Mr. Trump has withdrawn from the PTP and US companies are counting the cost in terms of losing market share in Japan.

For US multinationals, the leverage Mr. Trump sought on China through tariffs has always existed in the form of the TPP. But unfortunately for them, he threw it.