US decides to further escalate trade war with China on two fronts
The US is planning to bar Chinese firms from acquiring advanced western tech companies and enforce new reforms at China at the World Trade Organization
Geneva: The US has decided to further escalate its trade war with China on two separate fronts involving restrictions on Chinese companies for acquiring advanced western technology companies, and forcing new reforms targeted at China at the World Trade Organization, according to people familiar with the development.
After a reset in the strained alliance with the European Union last week, the US signalled its new strategy to intensify the trade battle indefinitely. US Trade Representative Ambassador Robert Lighthizer gave an early indication on 26 July that “it could take years to resolve trade problems with China, suggesting that escalating tariff battle could continue indefinitely,” according to the Washington Trade Daily (WTD). He informed the Senate Appropriations subcommittee on commerce, justice, science, and related agencies that “global tariffs are the only way to ensure that Chinese steel does not come into the US market through other countries,” according to WTD.
The US has also struck a chord with the EU on 25 July for intensifying the war with China. It agreed to a comprehensive framework involving market access for US agricultural products and services. The EU which had all along maintained it will not negotiate with “a gun to our head” finally secured a ceasefire of sorts with US President Donald Trump by agreeing to buy soybeans and LPG in return for Washington’s assurance not to proceed with its proposed 20% unilateral tariff on auto imports from the Europe while talks to resolve all other issues proceed.
President Trump and EU’s Jean-Claude Juncker announced a temporary truce that would keep the Trans-Atlantic alliance intact and avoid any further escalation of a trade war.
The US and the EU will hold further discussions over how to bring down tariffs and other trade barriers related to industrial goods, except cars, and pursue a joint action plan to reform the WTO to contain China, said a western trade envoy who asked not to be named.
Coincidentally, the US mounted its aggressive campaign against China at the WTO’s general council meeting before members proceeded for summer recess. “China’s disruptive economic model” posed the greatest threat yet to all other members, US trade envoy Ambassador Dennis Shea charged, on grounds the costs Beijing “extracts”, and “the benefits that China receives” are staggering.
Ambassador Shea left no stone unturned by suggesting on 26 July that China’s Communist party runs, directs, and dictates its mercantile trade policy in violation of Beijing’s multilateral trade commitments. He elaborated on “non-market oriented conditions set by the [Chinese] government and the[communist] party,” “non-market allocation of resources” by China’s administration, including setting industrial policies, and “costs to WTO members [due to] China economic model” such as non-reciprocal and protected market, excess capacity, and forced technology among others.
The benefits seized by China, particularly between 2005 and 2016, include real GDP growth rates of 9.5% coupled with sudden transformation “from the fifth-largest to second largest economy” in the world, the US envoy said.
At the meeting, the EU and Japan joined the US in sharing Washington’s consensus against China, with the EU suggesting a comprehensive reform of WTO rules to bring about new industrial subsidies that would address the “trade-distorting” practices of the Chinese state-owned companies.
China hit back against the US’s accusations telling Washington to set its fiscal house in order by generating enough domestic savings to contain its trade deficits.