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Cooperation key to resolving differences

By Ma Li | China Daily | Updated: 2018-12-04 08:01
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China and the United States agreed to avoid raising trade tariffs after President Xi Jinping and his US counterpart Donald Trump reached a consensus over the issue at the G20 Summit in Buenos Aires, Argentina, on Saturday. The US agreed to not raise the tariffs on $200 billion of Chinese imports to 25 percent on Jan 1, 2019, and instead leave them at 10 percent. The two presidents also agreed to "step up negotiations" to fully eliminate all additional tariffs.

That such an agreement was reached after a nearly one-year-long bitter tariff conflict shows Beijing and Washington can find ways to end any bilateral row if they pay attention to each other's core concerns.

The fact is that China and the US both have benefited enormously from bilateral trade. The US has exported large amounts of agricultural goods, raw materials and hightech products such as chips that have fueled China's economic growth and created jobs while expanding the market for US products. On the other hand, US consumers have benefited greatly from the large quantities of inexpensive but good quality goods China has exported to the US.

The two economies are interdependent

Such a bilateral trade relationship is indeed a win-win arrangement and beneficiary to consumers, investors and workers in both countries-and this is the core of China-US trade relations. It is impossible for China and the US to decouple their economies, because doing so would bring both sides unbearable losses.

Despite this simple fact, why are some people still not optimistic about the future of China-US trade talks?

First, because by focusing on the seeming incompatibilities between China and the US, they fail to see their high degree of convergence on matters of core and essential interests. In any bilateral negotiations, both sides pursue their own interests, which are built on multiple issues rather than one single issue. So in many bilateral talks, one party gains more on one issue while the other gains more on another. Which means one side cannot always be the winner.

In most cases, however, both sides can benefit from negotiations and one side's concession on one issue is built on the expectation that it would be rewarded on another issue.

China and the US share the same interests on many issues. China has a strong demand for such primary commodities as soybean, oil and natural gas which the US is willing to sell to China. China's suspension of these products' import therefore should be seen as nothing but a short-term negotiation tactic aimed at finding a better cost-effective alternative.

Similarly, many kinds of manufactured goods and components China exports to the US are also the most cost-effective to US consumers. The fact that many US importers are willing to share with Chinese companies the additional 10 percent tariff imposed by the US government on Chinese goods and continue or even accelerate Chinese imports is a strong indication that Chinese products are less likely to be replaced in the US.

China is committed to further opening-up

As for the US expectations that China further promote economic reform by opening up some of industries to foreign investment and strengthening intellectual property rights protection, China has already taken targeted measures to gradually resolve these issues through deepening reform. So, any Sino-US talks on such issues are surely to be win-win.

Second, many people focus on the "right and wrong" in the China-US "war of words" and Washington's seemingly uncompromising threats, but ignore the importance of their interwoven interests, which will make them respect each other.

In recent months, the US has repeatedly accused China of unfair trade and economic policies, claiming many US companies have fallen victims to such policies. But almost all such accusations are double-edged swords. For example, the US has accused the Chinese government of granting subsidies to its companies, but has conveniently forgotten the fact that it too provides substantial subsidies to American businesses.

In fact, many governments committed to promoting their countries economic development use subsidies to regulate domestic economic activities-the difference is only in how much subsidy they offer to a particular industry. So where is the question of right and wrong? That such a question is always raised by the US, but not China, as a bargaining chip gives the false impression that the US is always right.

Compared with Chinese officials' restraint when speaking on China-US trade talks, US officials usually make threatening remarks. This too has made some people pessimistic about the future of China-US trade ties. For example, on the eve of the G20 Summit in Argentina, top White House economic adviser Larry Kudlow said he was doubtful of China and the US reaching a "ceasefire" in the trade conflict. And many other senior US officials threatened to decouple the Chinese and US economies if the two presidents couldn't reach an agreement.

However, the agreement reached between Xi and Trump shows that such threats are only part of the US' negotiation tactics. As a matter of fact, many cases indicate oral threats are not always conducive to striking a deal, and even less conducive to achieving a win-win solution. In contrast, China's restraint shows its interests-based negotiating approach can help strike mutually beneficial deals.

Third, due to doubts over China's intrinsic economic problems, some people tend to be pessimistic about the future of China's economy. Even though China's economic development has had problems, the extensive discussions within its political, business and academic communities about the economy have helped the government to resolve some of its economic issues. Accordingly, the authorities have made endless efforts to resolve one economic issue after another over the past decades.

Healthy economy vital to success abroad

China knows that managing its domestic affairs well is the key to gaining success in talks with other countries. But the US' "condescending" attitude has prompted many in China to believe that China needs the US more than the other way round. This is not the case.

In negotiations where win-win outcomes can be achieved, both sides want something from each other, because failed negotiations will hurt both sides' interests.

Still, the possibility of the US continuing to use trade threats against China cannot be ruled out. But since such threats failed to affect China in the previous round of talks, they are likely to fail in the future talks too. The best way the two sides can meet their respective interests is by using a cooperative approach to resolve the bilateral issues.

The author is a professor at the Guanghua School of Management, Peking University.

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