The Osaka G20 announcement that the US and China would resume trade talks led to an audible sigh of relief within the global business community. But most agree it holds less promise than a similar announcement last December. Much has happened since the talks collapsed in May – most of it negative – and today the prevailing emotions in Beijing and Washington are mistrust and suspicion.

The Hinrich Foundation asked three China-US experts to assess where things are likely to go following Osaka. Their quick takes include:

  • An explanation of the key political, economic and social factors in China and the US that will likely influence the upcoming trade negotiations

  • An analysis of the risks and misperceptions that could hamper the success with the negotiations.

  • An outline of the revised negotiation goals for trade negotiators in Beijing and Washington D.C.

According to these experts, we are now further away from reaching a substantive China-US agreement than ever before. Upcoming discussions will likely be limited to resolving immediate trade issues. As the unaddressed and more contentious issues related to China’s market access and industrial policy will inevitably reemerge, especially over technology, tensions are likely to remain high. The cost to private sector businesses and consumers in both countries could also be significant.

Our three expert papers are summarized below:

Kenneth Jarrett Senior Advisor, Albright Stonebridge Group; and Former President of AmCham Shanghai

Albright Stonebridge Group is a global strategic advisory and commercial diplomacy firm offering perspectives honed at the highest levels of government and business that pave the way for effective engagement, informed decision-making, and sustained success.

Kenneth Jarrett

The resumption of US-China trade talks was welcome news but reaching a deal will be more difficult than ever. Positions have hardened and popular attitudes in both countries have become more negative. Neither President Trump nor President Xi is in a rush to make a deal.

U.S. companies feel otherwise, but even they realize that a trade deal will not resolve the deeper bilateral tensions evident every day. Those tensions, especially over technology, won’t easily disappear. They will continue to shape commercial interaction and the global supply chain even if a deal is signed. Read more

Dr. Song Gao Co-Founder, PRC Macro

PRC Macro is a China-based economic and financial information services platform that fills the gaps that exist with respect to analysis of China’s economy.

Three China-US experts assess what happens next after Osaka 1

President Xi and Trump shared a common interest in temporarily de-escalating trade tensions, in order to deal with more urgent domestic issues.

However, they both made very vague commitments in Osaka and when the trade talks restart, both parties will walk into the room with different assumptions regarding where the starting line for the negotiations actually is.

Once they realize that this line has shifted backwards, and that their expectations towards the negotiations continue to diverge, we may, at the very best, see “downgraded” trade talks focused on narrow issues, versus a comprehensive and positive resetting of the China-US relationship (which would be benefit private businesses on both sides). Read more

Douglas K. Barry Director, Communications and Publications, US-China Business Council (USCBC)

The USCBC is a trade group of approximately 200 American companies that do business with China. Its mission is to expand the US-China commercial relationship to the benefit of its membership and, more broadly, the US economy.

Douglas K. Barry Director, Communications and Publications, US-China Business Council (USCBC)

USCBC members, many of whom have been in China for decades, are increasingly pessimistic about the current state of the China-US relationship. These and other US businesses need to be in China to remain globally competitive, and China needs them to stay and to prosper.

Therefore, USCBC members are hopeful that trade negotiators will lift tariffs and finish a trade agreement that’s been coming together in fits and starts for months. The focus should be on resolving the basic fair play issues that were captured in the Section 301 investigation concerning China’s trade practices, in a measurable and enforceable way. Addressing these issues would also be in China’s best interests, aiding its private sector—the biggest source of job creation and innovation, now and in the future.

The urge to conflate the current negotiations with Huawei, other blacklisted entities, cyber and other kinds of espionage, and questions about who if anyone should dominate emerging technologies must be avoided. Rather, these challenges should be treated with equal concern and urgency, but managed on parallel tracks, applying the rule of law, adhering to precedents established under the WTO and other international institutions, and involving the concerns and interests of other countries whenever possible. Read more

Additional reading

Three China-US experts assess what happens next after Osaka 2

Developing China: The Remarkable Impact of Foreign Direct Investment

In 2015, the Hinrich Foundation commissioned Professor Michael J. Enright to lead a major research project identifying the impact of foreign direct investment on China’s economic development. Using economic impact analysis and econometric models, the resulting research showed that the impact was far greater than generally understood, and that most multinational companies vastly underestimated their own impact on China’s economy.

Three China-US experts assess what happens next after Osaka 3

Hinrich Foundation White Paper: A Profitable Partnership Under Stress: Why it makes sense to ratchet-down US-China trade tensions

In 2017, we interviewed MNC executives doing business in China and analyzed publicly available financial data for 22 MNCs with substantial operations in China to review the benefits of China-US trade for US companies. Our objective was to provide a firmer factual basis for a discussion of the US-China economic relationship. The paper concluded that the likelihood for a period of trade turbulence between the United States and China was greater than any time in recent memory, but that the partnership between US companies and China has been on balance immensely profitable for both parties.