Greetings from Singapore, where it’s a relief to be able to get in a taxi again without the driver asking some variant of the question, “Who do you think is going to win?”
In this part of the world, the conventional wisdom is that once installed in the White House, Joe Biden will give everyone a breather with a calmer and more predictable approach to foreign affairs, even if in substance he will be about as tough on China as President Donald Trump was.
But before Trump exits the political stage, pursued by an agent from the Internal Revenue Service, it is worth asking whether his approach to China on trade issues — as ad hoc and chaotic as it often appeared — might not, in fact, be a useful template as a Biden administration tries to repair relations on a range of other bilateral fronts.
It is hard to imagine now, but it was only last year that trade was arguably the most difficult issue dividing the two geopolitical rivals. Yet, somehow, a veteran Chinese state planner — Vice-Premier Liu He — and a career trade lawyer determined to dismantle many of the defining elements of Chinese “state capitalism” — US trade representative Robert Lighthizer — managed to forge a productive relationship and turn trade into what is now arguably the most stable plank in the two countries’ otherwise extremely fraught relationship.
This is the subject of our main piece, while our Policy watch looks at how Joe Biden’s US election victory and Irish roots could make a difference to the heated realpolitik of Brexit talks. Chart of the day, meanwhile, highlights how listed European companies that have more women at senior levels have benefited from strong share-price performance, according to analysis.
Respect and trust paved the way to a deal
When confronted by a good cop and a bad cop, one usually does not establish a rapport with the bad cop.
That is precisely what Liu did as he steered China-US trade negotiations from the brink of a total breakdown in May 2019 to the conclusion of a “phase one” agreement in January. The vice-premier, also President Xi Jinping’s principal economic adviser, was supposed to bond with Steven Mnuchin, Trump’s Treasury secretary and conduit to Wall Street, where he once worked for Goldman Sachs.
Senior Chinese officials have a long history dealing with Wall Street executives, who became their favourite interlocutors and back channels to Washington power brokers. They have much less experience dealing with the likes of Lighthizer, an Ohio native who predicted China’s 2001 entry into the World Trade Organization would be disastrous for America’s industrial heartlands.
Over the course of almost two years of negotiations, neither man could get what he really wanted: cancellation of punitive US tariffs on Chinese exports for Liu, real reform of the financial and industrial subsidies that buttress China’s state companies for Lighthizer. The deal they eventually forged focused instead on increased Chinese purchases of US exports, especially agricultural and energy commodities, and more openings for foreign players in China’s financial sector.
“Of course, they both batted for their own side, but like all good pragmatists they also tried hard to give the other one something when they could,” one person close to the negotiations says. “Liu He and Lighthizer respect each other, trust each other and believe that the other person is trying as hard as he can. And if they can’t deliver, they’ll be candid with each other about what the reason is.”
Implementing the “phase one” agreement was going to be difficult in the best of circumstances, let alone in the midst of a global pandemic that erupted out of central China the same week that the trade deal was signed, sinking Trump’s surging economy and ultimately costing him the White House. Yet according to people close to both men, Liu and Lighthizer both realised throughout this difficult year that the best way to move forward to negotiations for a “phase two” agreement was to implement the phase one agreement as best they could.
Even if the pandemic does magically subside as Trump repeatedly promised it would, China will still struggle to meet its two-year purchase commitments. Indeed, even counting its progress towards those commitments is not easy.
Officials in Washington naturally look at US customs records capturing China-bound shipments of various commodities, tot up the shortfall and shake their heads. Chinese officials counter that it is not easy to track orders from thousands of companies — both state-owned and private-sector ones that they do not necessarily have much insight into — which have been placed but not yet cleared US and Chinese customs. Then there are goods shipped via third countries. In this regard, “keeping score” is a lot more difficult than most people appreciate.
It remains to be seen whether Biden will want to affirm Trump’s phase one trade deal with Xi and pursue a phase two agreement after he assumes office in January.
But whoever he appoints as his trade representative, she or he could do worse than try Lighthizer’s approach. The same applies to other Biden representatives tasked with repairing everything from China-US technology disputes to communication issues between the two countries’ militaries. As the China Daily newspaper noted optimistically in the wake of Biden’s victory, trade is “one of the last threads linking the two sides”.
Stroke of luck for China
During the course of this year’s bitter US presidential campaign, Trump liked to say that China was rooting for Biden.
That assertion was debatable. In one important respect related to trade, a Biden presidency will be about as welcome a prospect for China as America’s entry into the second world war was for Germany.
Japan’s attack on Pearl Harbor gave rise to a transatlantic alliance powerful enough to defeat both the Nazis in Europe and the Japanese imperial army in the Pacific. Something similar may be about to happen with regards to global trade.
China’s biggest stroke of luck in its trade war with the US was Trump’s utter lack of interest in forging any sort of united front with European and Asian allies against Beijing. Instead, the US president relished picking simultaneous trade fights with China, South Korea, Japan, Canada, Mexico and the EU.
Biden has made it clear that he will try a different approach, by seeking a broader alliance with European, North American and Asian allies as he confronts China on trade issues. It is a prospect that may well have Xi hoping Trump will in fact be able to engineer a reversal of this month’s election outcome either when electoral college electors formally choose America’s next president on December 14, or during ratification of the result by Congress on January 6.
Women used to be largely absent from the higher echelons of the corporate sector. As recently as 2005, fewer than 10 per cent of board members at Europe’s top 600 listed companies were women. Now that figure is more than 30 per cent. But has this made a difference? Listed European companies that have more women at senior levels have benefited from strong share-price performance, Goldman Sachs has found by crunching data for the Stoxx 600 companies since the 2008 financial crisis.
Ireland forecast that Biden’s election victory would prompt Downing Street to “pause for thought” in Brexit talks as Micheál Martin, the Irish prime minister, called the incoming US president a “stalwart friend and supporter” of the country.
Biden is but the latest in a long line of American leaders with old family links to Ireland, a legacy of the country’s long history of emigration, but Martin said he would be the “most Irish” president since John F Kennedy, more than half a century ago.
It is in the heated realpolitik of Brexit that Dublin believes the president-elect may make a difference, as the endgame approaches in fraught EU-UK trade talks. Biden’s opposition to Brexit stands in contrast to Trump’s support, and he has described Boris Johnson, Britain’s prime minister, as “a physical and emotional clone” of the incumbent in the White House.
Johnson must now deal with a president-elect who warned during the election campaign that Britain could forget any prospect of a US-UK trade deal if it made Northern Ireland “a casualty” of Brexit.
Brussels will hit US products, ranging from sugarcane molasses to spirits, with punitive tariffs in the transatlantic dispute over aircraft subsidies, even as it looks forward to better relations with the US following Biden’s victory. Valdis Dombrovskis, the EU’s trade commissioner, said Brussels would use retaliation rights awarded last month by the World Trade Organization to target US imports into Europe with additional duties. The measures take effect on Tuesday.
One in seven Spanish workers are in businesses at risk of collapse, according to research by the European Central Bank, excluding those who work for financial companies. This is the highest rate of all large eurozone economies, and comes despite the country’s national furlough scheme.
Weaker pork prices helped push China’s consumer price inflation to its lowest level in 11 years, adding to concerns over the strength of household spending during the country’s recovery from the coronavirus pandemic. The consumer price index rose 0.5 per cent year on year in October, official data show, lower than economists’ expectations of 0.8 per cent. That compares with a 1.7 per cent rise in September and 2.4 per cent in August.
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Hong Kong manufacturers are bracing for an uncertain future as their exports are labelled “Made in China” from Tuesday, according to a US government order in response to the city’s national security law.
To get US-China relations back on track, Biden should recalibrate the narrative to reflect that China’s technological rise had more to do with its own strengths and the open economy encouraged by the US, writes Nina Xiang.
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