In the US–China relationship, the only certainty for the past few years has been tension and aggression. American President Donald Trump took office in 2017 and immediately set about upending the diplomatic and economic ties between them.

America’s Moves Against China

Since then, Washington has managed to turn the world against Chinese technology giants Huawei and ZTE and to threaten Chinese social media apps WeChat and TikTok.

In short, the US approach toward China has been entirely, relentlessly opposed to all things Beijing. What began as a trade war with tariffs slung as ammunition, has devolved into a mission to cripple Beijing at every opportunity.

As the US election draws nearer, China could be hoping for a respite under a possible Biden administration. However, the presumptive Democratic nominee is more likely to continue Washington’s assault on Beijing.

Changed Mindset?

Although it was only last year that presidential candidate Joe Biden said the Chinese are “not bad folks … they’re not competition for us,” Biden has since come around to a more opposition-minded approach to China, however, as Foreign Policy reported. In a Democratic primary debate, he called Chinese President Xi Jinping a “thug.”Furthermore, an advisor said the candidate would maintain US sanctions that were leveraged as a response to Beijing’s takeover of Hong Kong.

In truth, the recent clampdown on democracy by Xi has likely altered Biden’s approach to China. Whereas Biden was a member of the first American delegation to Beijing in 1979 after the relationship was normalized, the status quo has changed considerably in the decades that have followed. 

The Fate of US Tariffs on China Under a Biden Presidency

As Trump has already taken the fall for introducing tariffs, which have been a staple of Trump’s economic policies, Biden could walk into office in January and leave them in place, Don Lee suggested for the Los Angeles Times. In doing so, the new president could use them as leverage to bring Beijing to the bargaining table. 

Biden, as a career politician and former vice president, would sport a more diplomatic tone than Trump. The change would be a welcome one for Beijing, which has been subject to the president’s bullying on issues ranging from 5G networks to the coronavirus.

“Their stylistic differences are so great. It will certainly seem different,” said James Mann, a China expert and fellow at Johns Hopkins University School of Advanced International Studies. “It will still be conflict-ridden, maybe at times confrontational, but certainly ridden with conflicts in ways that either weren’t there or were downplayed a decade ago.”

In the past, Biden has criticized Trump’s use of tariffs, complaining that they exacerbate the economic problem between the two states. However, even if he does roll them back — either in part or whole — Biden will certainly take China to task in other ways. 

One such way might be to renegotiate the Trans-Pacific Partnership. Devised by former President Barack Obama, the policy would have brought together 12 nations within the Pacific. At the time, it failed to come to fruition because Democrats wouldn’t support it. However, times are different and both parties are unilaterally opposed to Beijing on nearly every issue: security, democracy, and human rights, to name a few.

‘A Special Challenge’

In an editorial for Foreign Affairs, Biden specifically mentioned China as one of the greatest threats to the US and identified ways he would handle it.

“China represents a special challenge. I have spent many hours with its leaders, and I understand what we are up against. China is playing the long game by extending its global reach, promoting its own political model, and investing in the technologies of the future,” Biden wrote.

“The United States does need to get tough with China,” Biden noted, further adding that “if China has its way, it will keep robbing the United States and American companies of their technology and intellectual property.”

The best way to do that would be to “build a united front of US allies and partners” to take on Beijing, according to Biden. A new TPP would be a solid start in that direction. Trump has actually laid the footwork for coordinating allies against China by courting Australia and the UK to its cause. Adding global pressure to Washington’s rage could stir China to reverse its ways in terms of human rights, but economically, it will take more.

Focus on Supply Chain

While the Trump administration has been concentrated on cutting China off from the US, a Biden presidency would be more focused on building a supply chain independent of China, the Brookings Institution concluded in an analysis. That remains the missing piece from Trump’s plan for China. While some manufacturers have left China for other Asian states, there has not been a concerted effort to bring companies to the US.

Biden has made rebuilding US supply chains for critical products such as pharmaceuticals and personal protective gear a platform issue, Axios reported. While the COVID-19 pandemic has certainly highlighted the urgency for self-reliance in terms of medical products, Biden’s policy could translate to a long-term effort of shifting away from China.

Although Biden will undoubtedly reintroduce a more tactful voice to the Oval Office, his presidency would still need to maintain pressure on China. However, Biden would likely find other ways of doing that instead of tariffs and executive orders. By establishing meaningful relationships with allies and implementing domestic policies geared at increasing production, a Biden presidency could tackle the China issue more effectively than Trump.

L'articolo What Would a Biden Presidency Mean for China? proviene da InsideOver.

Oil tariffs may soon be coming from the Trump administration. On Saturday, US President Donald Trump said tariffs are one of the options he is considering to rescue the American oil industry that has seen its revenues free-fall.

“I am a big believer in our great energy business, and we’re going to take care of our energy business,” Trump said at a press briefing on Saturday. “And if I have to do tariffs on oil coming from outside, or if I have to do something to protect — or thousands and tens of thousands of energy workers, and our great companies that produce all these jobs — I’ll do whatever I have to do.”

Tariffs are not the first option Trump has tried. According to his tweets, he spoke with Saudi Crown Prince Mohammed bin Salman (MbS) and felt confident they would negotiate a production and price truce. Trump also claimed MbS spoke with Russian President Vladimir Putin and he too was onboard with the idea. That was last week. The next day, both nations denied such a deal was in the works. However, Saudi Arabia called an OPEC meeting, which has since been postponed, in an attempt to mitigate the oil glut.

During Saturday’s press briefing, Trump railed not only against Saudi Arabia and Russia, who have directly pushed the global oil supply to an extreme amount of reserves, but OPEC as well.

Trump: ‘They Are Going to be Destroyed’

When asked about the situation, Trump said,” Well, OPEC can do whatever — look, I’ve been against OPEC all my life, because what is it?  It’s an illegal — you could call it a cartel, you could call it a monopoly.  You have a lot of different names for it.  But it broke down very violently.  Very violently.

“So I don’t care about OPEC. I really don’t. I couldn’t care less about OPEC.”

The problem, if OPEC doesn’t work it out as Trump said it would, would be resolved regardless. Trump believes the American oil industry can outlast Russia and Saudi Arabia who are “going to be destroyed” if they don’t find a solution.

Trump has a long history of criticizing OPEC’s role in determining global oil prices. In 2012, he said it was “robbing our country blind.” Since taking office, he has accused the cartel of manipulating supplies to artificially raise global prices. If Trump has a credible record of any merit by which to hang his hat on, it is that under his administration the American oil industry became the largest producer in the world. Although the feat was achieved with massive rollbacks in environmental protections, it established the US as a dominant player in the industry, one worthy of Russia sinking oil prices to take it down.

Another Tit-for-Tat Game?

Saudi Arabia and Russia can produce oil at lower production costs, however, and Middle Eastern crude is heavier, which American refineries need. Placing tariffs on imported oil may help some domestic producers, but it could hurt others.

The American Petroleum Institute and American Fuel & Petrochemical Manufacturers penned a letter to Trump on Wednesday to that effect. Furthermore, although low prices hurt American oil companies, they are great for buyers, including businesses abroad that prefer lighter American crude.

Although the worldwide demand has plummeted due to COVID-19, eventually the virus will run its course and the world will be back to needing oil, especially as Asian factories ramp up production once again. Low prices and high supply can be mitigated after the pandemic passes, but trade wars are much harder to overcome.

Consider the tit-for-tat trade war between Beijing and Washington. It still hasn’t officially ended, only on pause due to the coronavirus. While the comparison is not perfect, Saudi Arabia isn’t a major trading partner with America like China, it could have other consequences. The oil-rich kingdom can easily exert its will on OPEC in its entirety. If Trump leverages tariffs against it, the entire whole could take reactionary measures. These could include tariffs on American goods and diplomatic breakdowns.

Saudi Arabia is a strong military ally and one of the top-spenders on US weapons. These defense contracts would be prime targets for retaliation.

Tariff Talk

While Trump may be talking tariffs, that may be all it is: talk. In order to impose them without Congressional approval, he would need to justify them as a matter of national security. He has done this before with Canadian steel so it would not be unordinary for him to try it again with oil.

This year, 140 American energy producers are at risk of filing for bankruptcy, Rystad Energy reported, if the price remains at $20 a barrel. Another 260 would file in 2021. The condition of US energy markets has not been this dire since the Great Depression.

While Trump mentioned tariffs as an option, they are not universally desired and far from the only option. Saudi Arabia and Russia could cut their production levels and let prices float back up, as Trump hopes will happen. The US government could bail out oil companies as it is doing with other industries affected by Covid-19, although the average American may not support the idea of using tax dollars to do so. 

Trump met with industry executives on Friday, but no developments came from the meeting. With the OPEC+ emergency meeting postponed, Trump appears to be leaving the first move up to Saudi Arabia and Russia. 

L'articolo Could Oil Tariffs Save American Producers? proviene da InsideOver.

Even before his White House ambitions, Donald Trump had marketed himself as a master deal-maker and campaigned on the promise of negotiating a fairer deal with China, calling the former setting “the worst ever”. 

A year into his presidency, Trump predictably unleashed his wrath on China, imposing tariffs on a hefty amount of imports from the country, which were immediately retaliated against. What followed was a full-blown trade war which gripped markets around the world in uncertainty. 

However, last week gave a ray of hope as the two countries finally signed the much-awaited phase one of the deal after a fair bit of stalling. At its core, the agreement addresses the massive trade imbalance that has existed in favour of Beijing – which Trump has long portrayed as a defeat – by getting China to buy more US goods. 

The Science of the Deal

The 96-page document is comprised of eight chapters that begin with intellectual property rights and then discusses technology transfer, trade in food and agriculture products, financial services, macroeconomic policies and currency, expanding trade, and dispute resolution. 

As per the details, China will now be required to push up its imports of goods and services from the US by an additional $200 billion from its 2017 levels (when it was worth $130 billion) over the next two years, giving the US president another thing to boast about in his upcoming election campaign. 

The commitment related to raising these purchases, in essence, captures the key achievement of the new agreement as it puts the target at an ambitious, possibly to the extent of being unattainable, level. China is expected to increase its imports of certain goods and services from the US by $76.7 billion in 2020 and $134.2 billion in 2021 from the pre-trade war volume of $134.2 billion in 2017. 

In 2017, China imported some US goods and services worth a total of $185.8 billion, which means that $51.6 billion of American exports are not covered by Phase 1 of the trade deal. 

The bulk of that committed increase is supposed to come from the manufacturing sector at $77.7 billion, with China required to buy at least $32.9 billion from the US in 2020 and $44.8 billion in 2021. Energy products are the next in line value-wise, with the agreed amount of imports over the next two years supposed to be no less than $42.4 billion. Finally, services imports have to be increased by at least $37.9 billion over the same timeline. 

Beginning with the chapter on intellectual property rights – a long-standing irritant that has irked Washington, and across partisan lines – the deal requires China to publish an action plan on how and when the country will implement its IP obligations. 

The two sides agreed “to ensure effective protection for trade secrets and confidential business information and effective enforcement against the misappropriation of such information.”

Confidential business information, as defined by the two, relates to not only trade secrets but processes, operations or even styles of work, production and source of income among other things, covering a broad range of areas. 

One major feature from this chapter is the burden of proof in trade secrets-related civil proceedings has been shifted to the accused. The party charged with misappropriation of a trade secret shall be required to produce the evidence, provided that the original holder can demonstrate certain conditions. 

Further, it lays out a series of areas where China is supposed to strengthen its IP regime, including the threshold for initiating criminal enforcement, criminal procedures and penalties, while making a specific mention of the pharma industry. 

The second chapter takes head-on the issue of technology transfer, a practice China forced upon companies and joint ventures entering the country. As per the agreement, no party shall subject market access, formally or informally, to the transfer of technology, be it in acquisitions, joint ventures or investment transactions or have any similar licensing requirements in place.  

Agriculture is the topic of discussion in the third chapter and it mandates China to pump its imports from the US in the sector by $32 billion cumulatively in 2020 and 2021, leading to an average annual total of $40 billion of imports. It also eliminates the Chinese non-tariff barriers and deals with issues related to standards, detailing into specific products such as pet food or dairy products. Consequently, both ensure greater market access for the US. 

Chapter four deals with the financial services and aims at reducing some barriers to entry for the US firms. For example, overseas assets of an American financial institution will now be taken into consideration when looking at asset requirements. 

On the other hand, the US has promised to acknowledge current pending requests by the Chinese institutions – specifically naming the CITIC Group, saying these will be considered expeditiously. 

In Macroeconomic Policies and Exchange Rate Matters and Transparency, the text states that both parties should follow a market-determined exchange rate and avoid manipulating its currency. 

Finally, the seventh chapter is about the dispute resolution mechanism, laying down a clear tiered process. Any issues relating to the agreement will be first consulted bilaterally at working-level groups and then rising through the ranks with Trade Representative and Vice Premier as the US and Chinese higher-most authorities, respectively. Both parties will have a Bilateral Evaluation and Dispute Resolution Office to the same end. 

If these talks fail to produce a consensus, then it lays down a process to follow, which includes appeals, for imposing tariffs and other penalties. 

But as far as tariffs are concerned, the deal gives little reprieve. While those meant to be effective from Dec 15 – on $160 billion of Chinese goods along with the retaliation on autos – have been withdrawn, the 25% tariff on $250 billion worth of Chinese goods will remain in place. Meanwhile, the September 1 tariffs on $120 billion of Chinese goods have been slashed by half to 7.5%. 

Now with the specifics addressed, let’s get to the finer details. Phase 1 of the deal touches upon some long-standing areas of dispute, in particular, the US trade deficit with China and the latter’s disregard for the former’s intellectual property. 

However, one area where it mostly emphasizes on is the increased imports. With a committed $200 billion of additional imports from the US, China has a monumental task at hand, which becomes even more difficult when one looks at its recent economic performance. The double-digit growth of the 2000’s is gone as the country’s GDP rate rose by 6.1% in 2019 – slowest in 29 years. 

In addition to an already slowing economy, China is still faced with steep tariffs from the US, which are hurting its exports and consequently, further denting the GDP growth rate. In such an environment, Beijing is supposed to increase its US imports by as much as 55%. 

Therefore, many believe that the desired targets would come through trade diversion rather than trade creation. What that means is that instead of importing a certain good from its current trading partner, China will shift the purchases towards the US to get to the agreed numbers. That would result in a managed trade framework where imports will be made by the origin of the country and not based on price, which any market mechanism should mandate. 

Take agriculture for example, where the average import value for the next two years should be $40 billion. However, details reveal that even when US agricultural exports to China peaked, in 2013, their value was $29 billion, well below the level mandated under the latest agreement. 

Other aspects of the deal, though just finalized and now to be boasted by Trump, had been in the offing for a while. For example, in November end, the Communist Party introduced new protections for copyrights and intellectual property. Similarly, a little while back, Washington had also un-designated Beijing as a currency manipulator. 

Whether there is going to be a second phase of this deal depends largely on China’s ability to manage the import targets, as on the rest of the issues, it had been converging, albeit gradually, for some time now.    

L'articolo The Science of the Deal: US-China Phase-One Agreement proviene da InsideOver.

A year after expressing his inability to attend the Republic Day parade in the Indian capital, the US President Donald Trump will be visiting India in February to sign a short term trade deal, paving the way for a longer-term agreement on a later date. Officials from New Delhi and Washington are working out mutually convenient times for the US President Donald Trump’s visit to India.

According to trade observers, Trump wants to counterbalance China with India, which has a considerable market and offers high potentials for US investors. The US, which is a prominent supplier of arms to India, is keen to have greater access to the vast Indian consumer market. The trade agreement with India will be an essential achievement of the Trump administration with the US President seeking a second term in November. With the Modi government, struggling with a slowing Indian economy and keen to attract investment to revive it, a trade package with the US. would facilitate better market access to both countries.

During Prime Minister Narendra Modi’s visit to the United States (US) in September 2019, President Donald Trump had made an appearance at the “Howdy Modi” event in Houston, and a trade deal was expected to be announced by the two leaders. But, the two sides differed on some issues before that landmark trip ended. The two sides have been in talks to resolve trade differences, and Trump’s visit could pave the way for an ambitious Free Trade Agreement.

Why the relationship soured

The deal will help to expand India’s exports, especially if the Generalised System of Preferences (GSP) is revoked. Tensions over trade tariffs surfaced last year when the Trump administration hiked tariffs on imports of steel and aluminum from several countries, including India. Then, in May 2019, Trump abolished the trade privileges under the US Generalized System of Preferences program, claiming India is not allowing “equitable and reasonable market access” to American goods. India struck back two weeks later, hiking tariffs on 28 items imported from the US worth around USD 220 million.

It may be recalled that since India opened up its economy in 1991, the US-India bilateral trade has grown at a spectacular rate. India- US bilateral trade has increased significantly in the last decade, and it touched approximately USD 160 billion in 2019. The US is also a prominent investor and a significant source of FDI. If the trade deal is concluded, then an investment deal can follow. Mike Pompeo, the United States Secretary of State on a short visit to New Delhi in 2019, said American investments worth trillions of dollars are waiting to be invested in India. Trump followed that up in Osaka by promising India “huge things… in terms of manufacturing, in terms of trade,”- without providing details. India needs to increase employment which only manufacturing can provide, and an increase in exports is a must for it.

The United States and India consider one another as critical strategic partners to advance common interests regionally and globally. The two nations are keen to transform the long friendship between two of the largest free and open democracies into a global strategic partnership. With India’s growing integration in the worldwide economy, the deal is likely to be a win-win position for both the nations, with India getting access to markets where China was the dominant player.

L'articolo Donald Trump to Visit India in February to Sign a Trade Deal proviene da InsideOver.

The trade war lasted for almost two years. Now, the world’s two largest economies have found common ground with the first part of a major trade agreement between the United States and China, which is expected to be signed on January 15. No further punitive tariffs will be introduced for now. However, lasting economic peace between the two nations is unlikely, due to their respective diametrically opposed interests. 

Rumors about a breakthrough had been circulating through Washington since October. The signing of the agreement will take place in the White House with a delegation from China. Xi Jinping will not be present, however. Nevertheless, President Trump was satisfied and wrote on Twitter that a “very large and comprehensive” trade deal had been concluded. The second phase of the agreement would be signed in Beijing at a “later date.”

The trade war between China and the US has taken its toll on the global economy and, for the first time, has had China’s economy stagnating. Phase one of the trade deal is supposed to mark a paradigm shift towards de-escalation. Nonetheless, President Trump has, expectedly, made concessions towards China. During the trade war, he had continuously insisted that he would only agree to a complete trade agreement with China. Beijing called his bluff and offered step by step process with the newly agreed-upon first phase, while Trump recanted his original stance.  

However, eleven months before the election, the primary concern for Trump and his team is to sell success – and like most other leaders, Trump will present himself as the winner of the dispute. The likely results will confirm his claim. With the agreement in place, the economy will continue to grow while the stock market should see a positive impact also – for Trump, who has put most of his jetton on the economy card, a fantastic result. 

The exact content of the first phase has not yet been communicated. However, what the public knows so far is that China is committed to increasing its US imports by $200 billion over two years. Of this, at least $40 billion a year is expected to benefit US farmers, an essential group for Trump and his reelection campaign. Moreover, the agreement will set parameters on technology transfer, exchange rates, and intellectual property.

In return, the United States waived new punitive tariffs on consumer goods such as laptops and smartphones worth around $150 billion in December and the lucrative Christmas period. However, the 25 percent import fees imposed on goods worth $250 billion, which have been imposed since 2018, are supposed to remain unchanged. Additional tariffs of 15 percent on Chinese goods worth around $ 120 billion are to be halved. 

It is still unclear whether the first phase agreement provides for monitoring and enforcement mechanisms. Should China fail to fulfil its promises, both sides would likely have to begin from scratch. However, the latter will be an issue for the man sitting in the Oval Office in January 2021. It is also the timeframe by which the second phase of the agreement could be finalized, as several complex issues remain that have not been addressed in the current agreement. 

Trump originally started the trade war out of frustration that China was exporting significantly more to the US than vice versa. Inter alia, Washington called on Beijing to open its highly restrictive financial market, fight against copyright theft, and reduce government subsidies. In light of his base, Trump was also particularly concerned about boosting the sale of agricultural products such as corn and soybeans to China.

The agreement now is far from being a surprise but an inevitable result. With the election looming, and the fact that the trade war had begun to impact the American economy negatively, Trump had to make a deal. Otherwise, with a slumping economy, his reelection would have been in real jeopardy. After all, it is “the economy, stupid!” which has historically had the power to make or break a presidency. 

Naturally, President Xi Jinping is cognizant of the pressure Trump is facing, and even though he himself witnessed a stagnant economy, in China for the first time and detrimental to the country’s big plans, Xi Jinping has significantly more leverage than Trump since the former does not have to be democratically legitimized, but simply dictates.

Even if Trump can and will sell the deal as a great success, it is nothing more than a temporary fix. In the long run, the two countries will not be able to avoid conflict, as the US attempts to maintain its hegemony, and China seeks to rise to it.

L'articolo A Temporary Fix? The US And China Agree On A Trade Deal proviene da InsideOver.

Japan’s refusal to continue with the Regional Comprehensive Economic Partnership (RCEP) under the possibility that India will not be a participant brought serious doubt to the whole agreement. Both China and Japan are looking to break into the Indian market. Which country will pay the largest price for this opportunity?

The text of any full version of the RCEP has not been made available to the public. Nevertheless, the comments released by country leaders point that its main direction is to decrease tariffs between signatory countries.

Japan and China are the two different manufacturing leaders of Asia. Japan, with its manufacturing know-how built in the 20th century, is competing with the fairly recently leading manufacturing prowess of China. The two manufacturing leaders of the continent are also dissimilar because of the size of their labour forces (China’s 805M  to Japan’s 66M), exports per capita ($1,696 to $5,090), and innovation (GII rank 14th to 15th).

Although dissimilar on many grounds, businesses and governments of both countries are actively searching for new and bigger export opportunities. India, and its 860M working-age consumers, are a very attractive option to both China and Japan’s exporting businesses.

Current trilateral relations between China, Japan and India are focused on increasing trade, competition for trade access; and territorial disputes. Japan-India are a natural exception, as they don’t share a border. As for China-India and China-Japan, territorial disputes have been souring the relations between countries for many years.

Alliances based on mutual non-financial benefits have been established (China’s and India’s defence, Japan’s and India’s science and technology). The alliance between Japan and India is currently the most stable and has delivered positive change to the countries including joint infrastructure and business initiatives. India’s relations with Japan and China are inevitably different because of the presence, or a lack of territorial disputes.

India’s decision to pull out of the RCEP is mostly an internal issue.

However, there is more at play here. India’s foreign relations are better with Japan than with China, and both countries are looking for better export opportunities to India. Delaying any action on the RCEP then allows India not only to appease internal opposition but also to gain bargaining power over other diplomatic disputes. Amending the agreement to suit the needs of a country of a billion, then also becomes an easier task.

Trade, and the structures of the economies of the three countries, are a major influence on the relations between China, India, and Japan.

For Japan, India offers a suitable exports destination. Some of the top exports from Japan, in 2017, have been machines (36% of all exports), metals (8.3%) and chemical products (8.3%). India’s top import categories are similar to Japan’s top exports. Out of the top 5 imports, three of them correspond directly to the three aforementioned product categories.

For China, India is a nearly perfect market. Not only the cheaper Chinese goods segment would find a large consumer base in India (an opposition to this move has already formed in India). Improving trade ties would allow China to harness more power in any diplomatic disputes.

Closer trade ties brought on by the lowering of tariffs would likely bring a better perception of both countries, in case of increasing exports. It could be an advantage in any territorial dispute talks – concerning contested territories by China and India.

Indian economy and its consumers are not the last in the list of concerns for China and Japan. Both China and Japan have similar trade and economic goals in India. Yet, the benefits offered by the Indian economy to the East Asian countries are different.

India offers the completion of these goals for China: a growing market for low-cost producers and a market for high tech exports (a good boost to “Made in China 2025”).

For Japan, better trade conditions with India could deliver the very needed boost for manufacturing output, and a surge in economic activity and new businesses.

These benefits and goal completion would occur both because of the present conditions of the Indian economy, and its future trajectory. The future growth or the direction of development of India could change. Yet, the present conditions India offers to Japan and China are already very attractive.

India disagreeing to enter the RCEP puts the whole process on hold and diminishes the benefits offered by the deal to China and Japan. Both countries already have trade agreements with the ASEAN (the original initiator of this deal). India’s decline to enter the agreement then makes the RCEP a far less useful tool to Japan and China. Better trade conditions won’t make up for the fact that the most promising market for the two East Asian countries is out of the deal.

Japan and India have signed a comprehensive agreement in 2011. On the other side, the issue of a China-India FTA was most recently raised again in 2018. China would gain more from the RCEP with India in it. For Japan, the benefits would be smaller, as it already has signed a comprehensive agreement with India. The agreement has contributed to the abolishment of the majority of tariffs previously imposed by the two countries.

Increasing trade is often a precursor to warmer relations between nations. For China, better relations with India would allow them to exploit the South Asian nation’s geographic location for trade. The Hindustan peninsula offers wide access to routes to Africa and the Middle East.

Moreover, compared to China, India’s access to the Indian Ocean, and the Arab Sea, allows ships to bypass South East Asian nations and the Strait of Malacca when travelling west. With China’s infrastructure interests directed at western locations (Nepal railway project, Belt and Road), India’s location would fit in with current infrastructure plans of China.

India’s geographic location, and opportunities offered by it, are less beneficial to Japan. 79% of Japan’s exports go to other countries in Asia (mostly East Asia), or eastwards to USA. Hence, there’s a smaller incentive to develop a better relationship with the country due to its geographic location.

The main direction of India benefiting from the competition for the access to this market is by growing its negotiating power. Whether it is in territorial, or trade negotiations, India will be able to take a stronger stance. After all, the two manufacturing superpowers are likely to try to match the demands of a growing market. Also, to work hard for the benefits lower trade barriers would offer.

The clearest direct benefit of China and Japan competing, to India, is the financial support that will be granted to the country. There’s already precedent to this: China has given $31.65B of aid in the period of 2000 – 2014, according to AidData. Japan has been providing financial assistance to India since the mid-20th century.

Japan has provided assistance to India in areas which benefit Japan strategically, as argued in Japan’s development assistance to India. If the Japanese government will perceive India not being in the RCEP as a threat to the country’s strategic interests, then more assistance could be expected.

Japan and China have many different reasons to compete for the Indian market. The two manufacturing powerhouses would flourish in the Indian market with lower trade barriers. Secondary reasons for the push for India to sign the RCEP agreement stem from benefits for foreign relations India’s entry would bring. The country that needs India’s market for immediate growth, will pay the highest price to ensure India’s signing of the Regional Comprehensive Economic Partnership.

L'articolo China, India and Japan: Who Will Pay the Largest Price? proviene da InsideOver.

From the US, policy of no limit to prosperity and broadly shared prosperity to the era of import tariffs imposed by US President Donald Trump on China, Brazil, and Argentina indicate that the US is hell-bent on rattling the global economy for its benefits. US President Donald Trump announced that a trade agreement with China might have to wait until the US presidential election in November 2020, which means the trade war could drag on until 2021. The US president’s quote “I have no deadline” has dashed all hopes of a solution to the trade dispute that has severely impacted the global economy. In the hope of a deal, investors pumped billions of dollars in the share market, but Trump’s quote came as a rude shock to the investor’s community across the globe. With Trump’s comments, European share prices, US stock futures, and the Chinese Yuan currency fell, causing jitters in the business community.

According to some economists, Trump’s comments might be a ploy to gain an upper hand in the negotiations and compel China to toe the US line. Reportedly, China and the US have made progress in the trade deal, but the deal is stuck on whether existing US tariffs will be removed and over the quantum of Chinese purchases of US agricultural products as part of a “phase one” trade deal. The Chinese side believes that President Trump needs an agreement before the end of the year due to the presidential election.

Impact of the trade war

Both developed and developing nations are feeling the pain of the trade war. A developed economy, such as Iceland, which is dependent on tourism, is witnessing a drastic reduction in tourist arrival since the crisis. European countries that are open to trade and rely on exports are feeling the heat of the trade war.

The German economy, which gains maximum from exports, is on the verge of recession. Uncertainty in the business community is prevailing across the globe. Many companies are scaling back their investment plans, something that will have repercussions for years to come.

Trade links between countries have led to prosperity and a more peaceful world. Even the United States hasn’t been immune from the impact of the trade wars. American farmers have been hurt by Chinese retaliatory tariffs on US agricultural products, compelling the Trump administration to shell out billions for farmers’ aid. According to economists, businesses in China have passed on almost all tariffs’ costs to American importers. But retailers in America are absorbing at least some of the duties, rather than passing the entire cost on to their customers. It shows that American businesses have had less success in passing on the values of tariffs to Chinese importers because of the types of goods being sold. The types of specialized consumer goods, like laptops and smartphones, that China exports to the United States are difficult to substitute, while China can easily swap Brazilian soybeans for American ones.

On the flip side, the trade war has resulted in gold prices going up with investors reposing faith on safe-haven assets. The trade tensions are helping the African nations to create a more self-reliant continent. India has emerged as a frontrunner for US giants, such as Apple and Microsoft, to expand their bases due to growing pressure on US companies to shift their headquarters from China. The trade war has also offered India an opportunity to lure firms to use the country as an exporting base.

Talking to InsideOver, Dr SP Sharma, Chief Economist, PHD Chamber of Commerce and Industry (PHDCCI) said that the trade war has impacted 0.8 per cent of the global economy, i.e., USD 700 billion, and the trade war should end at the earliest. Dr Sharma added that the U.S. President Trump’s quote is merely an election gimmick. Elections are around the corner in the US; in the tussle with China, Trump would not like to do anything that would harm the US or the global economy. Other economists, too, echoed the same opinion and added that in cases of dialogues with North Korea and Taliban, Trump earlier had rebuked both of them but later on joined the negotiation table.

L'articolo How Will a Trade Deal after the US Presidential Election Affect Global Trade? proviene da InsideOver.

The United States-China trade war caused global markets to rise and fall based on the rumour of the day. One moment US President Donald Trump praises the process and tweets that a deal is imminent, the next he forecasts doom. After an October meeting between the two negotiating teams, a “phase one” deal seemed imminent, at least according to American officials. Yet on Dec. 3, Trump conveyed an alternate story, this time that an agreement could be pushed back until 2021. 

Markets React

“I have no deadline,” Trump said, speaking from London alongside NATO Secretary-General Jens Stoltenberg. “In some ways, I like the idea of waiting until after the election for the China deal.”

Both European and US markets tumbled with Trump’s comments with the Dow Jones industrial average sliding 400 points a mere two hours after the opening bell. Similarly, Asian markets declined with the Hong Kong-based Hang Seng down 1.3 per cent, Shanghai Composite 0.2 per cent, and Japanese Nikkei 255 closing down 1.1 per cent. 

Initially, both sides set a deadline of having a deal in place mid-November, but the month passed without one, offering only conflicting accounts on the status of negotiations. On Dec. 15, the Trump administration is set to leverage more tariffs on $160 billion worth of goods, this time on shoes, televisions, and laptops. Whether or not that happens is left to Trump’s mood on Sunday. He has shown in the past that he is willing to delay tariffs as he uses them as bargaining chips. However, China would need to offer a concession in return, which it might have done Friday. 

The Chinese Ministry of Finance said it would reduce the 25 per cent tariffs on American soybeans and pork. American farmers have endured the brunt of damage from the trade war with a 44 per cent drop in shipments in 2019 compared to the previous year. Although US farmers have increased sales to other markets, global sales are predicted to be 22 per cent lower than in 2017.

Overpaid

Washington approved $28 billion in bailout for the agricultural industry to offset lost revenue and the actual effect could net farmers more than the decreased sales. 

“It’s clear that the payment rates overstated the damage suffered by soybean growers,” said Joseph Glauber, the US Department of Agricultural’s former chief economist. “Based on what the studies show, the damages were about half that.”

Even though Glauber’s assessment paints a more optimistic view of the situation, the future is less clear. Farmers may be satisfied with the bailout now, but what happens next year when they are in the same position? Does the US government issue another round of bailouts? 

China’s concession to reduce tariffs on soybeans and pork was met with praise from agricultural associations, but without a longterm trade agreement, those tariffs could rise as quickly as they fell. In October, China pledged to buy more agricultural goods, but it has been known to renege on those sorts of promises before. Beijing’s trustworthiness is one reason why American farmers continue to stand with Trump even as his policies hurt them. 

Blame Game

“The Chinese do not play by the rules,” an Illinois farmer said. “They cancel shipment orders that are not in their favour. They continue to steal our patents. Only President Trump has tried to stop these unfair trade practices.”

Farmers also recall the mad cow scare of 2003 when China cancelled all imports of US beef for 14 years. In short, farmers generally hold a negative view of China, even before the trade war began. On the other hand, it is a market too large for them to ignore. To them, Trump represents the kid in school who is willing to stand up to the bully even if he is hurt himself. 

The US presidential election is only 11 months away and under normal circumstances, it would make sense for an issue of its magnitude to be a central point of debate between Democrats and Republicans. The topic of China is unique in American politics, however, as both sides agree something must be done to counter Beijing. Both parties overwhelming supported the Hong Kong freedom bill and agree that China must do more to curtail intellectual property theft.

Although Beijing hoped hurting farmers would turn some of them from Trump, whom they immensely supported in the 2016 election, that desired effect has been limited in scope. In an August poll, Reuters/Ipsos found half of rural Americans approve of Trump, which was above the national average of 41 per cent. 

From a certain standpoint, the US is doing well economically with a 3.5 per cent unemployment rate and increased hiring in November. When farmers hear of record stock performance, even if their financial situations are weaker, how can they blame Trump? It is easier and more convenient to blame Beijing. In this way, Trump supporters can escape holding themselves responsible for electing a president who has hurt them. 

The stock market performance is the main reason why Democrats cannot leverage the trade war against Trump in the election. Although the economy has risen linearly since the 2008 recession, the fact remains that Trump is leading America during one of the most prosperous periods in US history, prosperous at least for American big business. Then, there are a host of other issues which are easier to hit Trump on, such as Russian ties, the Ukraine scandal, deregulation of industries, healthcare, and Iran. 

Trump floating the idea of waiting until after the 2020 election for a trade agreement allows him to use it as leverage. He can sell himself to voters as the only leader who can seal the deal and advertise how he has China on the ropes, but just needs a little more time. And there is truth to the fact that Trump was the only American leader to take on China economically. A trade deal, much like negotiating with North Korea, is no longer a priority, but simply a card Trump can play when it is most convenient.

L'articolo China Eases Tariffs, but Trade Deal Possibly Delayed Until 2020 US Election proviene da InsideOver.

Negotiations between Washington and Beijing send the US stock market soaring one day and falling the next. On Nov. 15, the Dow Jones Industrial Average peaked at 28,000, it’s highest point ever, amid positive news on the on-going discussions. This week was a different story, however, as news broke that the trade deal could be delayed until next year causing the stock market to back down. Further complicating matters, the US Congress passed a near-unanimous bill in support of Hong Kong protestors. 

Optimism

After Chinese Vice Premier Liu He held a phone call with US Treasury Secretary Steven Mnuchin in Washington Nov. 15, both sides expressed optimism in the talks.

“We’re getting close,” said Larry Kudlow, White House economic advisor. “The mood music is pretty good, and that has not always been so in these things.”

The discussions followed an October truce whereby both states agreed not to levy more tariffs while a “phase one” deal is ironed out. The Chinese Ministry of Commerce said “constructive discussions” took place during the phone call, but a final agreement is unlikely to be signed before a critical Dec. 15 deadline which would see a new round of US tariffs imposed on consumer goods such as smartphones and laptops. 

Sticking Points

Both sides are finding difficulty agreeing on several issues. For the US, intellectual property protection. The forced transfer of technology is another key point Washington would like Beijing to concede on. 

For China, current tariffs are the issue. In the days leading up to the phone call between officials from both states, China declared that tariffs should be cancelled before a deal is reached.

After US stocks peaked Nov. 15, they slid the following week, ending six weeks of gains. Technology stocks were the hardest hit – Advanced Micro Devices fell 3.6 percent and Lam research 3.5 percent. Oil also posted a loss with Brent crude futures LCOc1 down 0.5 percent and Texas Intermediate crude CLc1 falling 0.6 percent. 

Hong Kong

Another element to the US-China trade war is Hong Kong protests. Until this week, the US government has refrained from taking official action on the civil unrest in Hong Kong, perhaps out of fear of retaliation by Beijing or disruption to the trade talks. After legislation designed to safeguard human rights in Hong Kong passed both the US House of Representatives and Senate, Beijing issued a heavy condemnation. 

“The Hong Kong Human Rights and Democracy Act interferes in China’s domestic affairs,” said Geng Shuang, Chinese Foreign Ministry spokesman. Shuang emphasized that the protests are considered internal affairs and the US should hold back from meddling. 

A government spokesman went a step further and said the legislation “will also harm the relations and common interests between Hong Kong and the US.” 

US President Donald Trump has given no indication whether he will sign the bill, which would be the final step toward making it law. The act would force Washington to confirm that Hong Kong’s trade and export controls are managed separately from mainland China on an annual basis. Furthermore, it would authorize the US government to sanction Hong Kong officials accused of human rights violations. 

New Opportunities

A prolonged trade war could have an impact beyond China and the US. At the East Tech West conference in Guangzhou, China, Ben Harburg, managing partner of Beijing-based MSA Capital, argued the trade war could expedite China’s push into Africa and the Middle East. 

“China (has) an e-commerce penetration rate of around 30%. In the Middle East today it’s 2%,” said Harburg. “(It’s) hugely attractive to walk millions of people online and find them a place in e-commerce that’s mobile-first.”

Harburg’s firm recently partnered with Al Salam Bank to create a $50 million fund for Chinese business expansion into the Middle East. By being forced from a solid business alliance with the US, Beijing has looked elsewhere for opportunities. US businesses have largely neglected the Middle East and Africa, leaving the door open for China. 

L'articolo China Trade Talks Push US Stocks to Record Highs Before Bringing Them Down proviene da InsideOver.

China, alongside 14 other Asian nations, agreed on the Regional Comprehensive Economic Partnership (RCEP). The ten-member Association of Southeast Asian Nations (ASEAN) gathered Monday for the beginning of its summit in Bangkok, but prior to that, it held an RCEP conference. While the 15 states must still iron out the details of the agreement, the fundamentals of the deal are reported to be accepted by all of the signatories, which are expected to sign it early next year. 

Largest in History

At its core, the RCEP is aimed at setting uniform tariffs across the region while simultaneously opening services and investment markets. The endeavour for an Asian economic pact began in 2012 when the ASEAN set out to create a unified trade bloc. After 28 rounds of negotiations in those seven years, negotiators believe they have an economic accord all members are in agreement on. In essence, the RCEP would foster trade by gradually moving countries down to zero tariffs within 15 years. 

Until the ASEAN Summit, India was set to be included in the RCEP, but it withdrew at the last minute. Estimates before India left the pact indicated that the deal would include 3.5 billion people accounting for 30 per cent of the global GDP. Even without India, the RCEP would still be a mammoth size – China and Japan are both parties to the accord and boast the second and third-largest economies in the world, respectively. 

Indian Concerns

Going into the ASEAN Summit, India carried with it some long-standing concerns about the RCEP. In particular, the manufacturing and agricultural industries argued against the deal that it could negatively impact them. 

India posts a significant trade deficit with several of the RCEP states including China and Japan. Its combined total deficit with the ASEAN consortium plus China, Japan, South Korea, Australia, and New Zealand was $54 billion from 2013 to 2014 and doubled in from 2018 to 2019. Half of that is exclusively with China.

With reduced tariffs – and zero tariffs in 15 years – Indian manufacturers and farmers would be threatened by an even larger influx of foreign goods. Even so, economic analysts have calculated that the nation is better off joining the RCEP than holding out. One forecast published in The World Economy predicted a 0.06-percentage GDP gain from the deal versus a “marginal fall” if it does not agree to it. Moreover, if the RCEP signatories were to wait until successfully negotiating a deal with India to sign off on it, the global GDP would lose an estimated $17.7 billion with RCEP members losing $19.6 billion worth of GDP should its implementation be held off until 2020, which already seems likely even without bring India back into the fold.

India’s exclusion may be only temporary. After the RCEP negotiations, both China and India indicated they would work to find a solution. 

“We must, together with India, work hard to solve these problems. And India must decide on the basis of this resolution whether to enter into the agreement,” said Wang Shouwen, vice-commerce minister for China. 

Piyush Goyal, India’s commerce and interior minister, echoed that sentiment. 

“If the 15 nations make a sincere effort to resolve our concerns, to give us confidence, and help us balance the trade inequality, then I think every nation should talk with their friends,” he said. “We are not about making enemies with anybody – relations are strong with all the countries involved.”

The economic power and scale of the RCEP cannot be understated. The Australian government published a report highlighting the importance of the trade deal for Australia. The island nation is a standout in terms of economic growth. Among developed nations, its economy has grown for the past 27 years at an average pace of 3.2 per cent. Free trade agreements are a hallmark of Australia’s success – it has 11 of them including every RCEP member except South Korea.  

From 2017 to 2018, nearly two-thirds of its trade was with Asian nations for a total of $362 billion. The Australian government believes that strong regional growth in Asia combined with free trade will be a boost for its economy, not only in trade but also in foreign direct investment (FDI). Compared with FDI from the United States, the Asian states have invested three per cent more per years over the six-year period from 2011 to 2017. While the US may still be the largest economy in the world, Australia’s future benefits more from Asian states. 

Implications for America

For Washington, the RCEP has virtually no upside. The deal will introduce possible trade barriers, and certain incentives not to trade with the US. Furthermore, it would give China strong leverage over the region, more so than it already has, including key US allies such as Australia, South Korea, and Japan, according to a report by Takashi Terada, professor of international relations at Doshisha University, for the National Bureau of Asian Research.  

While US President Donald Trump has already generated significant diplomatic and economic challenges to trade, not only with Asia, the RCEP would solidify a deal which the US must contend with for decades to come. Trump’s policies, including the US – China trade war, could be rolled back by a successor, but the RCEP will exist outside American control. Limiting access to the fastest-growing global economies is a major victory for China. There simply is no positive spin on the RCEP for the US. The only solution is for 

L'articolo Asian States Agree to RCEP Terms While India Backs Out proviene da InsideOver.