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Editorial: Despite US, China signing trade pact, ‘crux’ of conflict still remains

  • January 20, 2020
  • , The Mainichi
  • English Press

The governments of the United States and China signed a trade deal that would require the Asian giant to largely increase its imports of American agricultural and industrial products, while the U.S. would be required to roll back some of its tariffs on Chinese goods.

 

The world economy was thrown into chaos when two of the world’s superpowers started a trade war, imposing high tariffs on each other’s products. China’s growth in 2019 was the lowest in 29 years, and the economies of Japan and Europe, whose exports to China declined, also stagnated.

 

The signing of the trade accord can be said to have put the brakes on the U.S.-China conflict, at least for now. But it is impossible to say that the cloud hanging over the world economy has been lifted.

 

First, the U.S. strong-armed China into an import goal of a whopping 22 trillion yen. U.S. President Donald Trump, who began the tariff war, is trying to claim it as a major achievement of his as he seeks re-election in the upcoming presidential poll.

 

Despite the massive size of the Chinese market, most observers say that in order for China to fulfill this promise, it must decrease its imports from other countries. This means Trump’s selfish “America First” policy may have an impact on Japanese automobile exports to China.

 

What’s even more serious is that the “crux” of the U.S.-China conflict still remains.

 

The problem is the Chinese government supplying corporations with massive subsidies. For China, it is a matter of state-led economic growth, which comprises the basis of Communist Party rule. It is something the Chinese government cannot compromise on and was shelved in the latest round of negotiations.

 

The U.S. has criticized China for illicitly raising its export competitiveness. Trump has indicated that he wants to discuss such structural issues as soon as possible. In the meantime, the president has not rolled back many tariffs so that he can keep applying pressure on Beijing. Depending on his prospects in the upcoming presidential election, Trump may shift to a more heavy-handed stance.

 

China is now supporting its economy with such measures as increased public spending. If the economy worsens further due to tightened sanctions, there is a risk China will depend even more on fiscal spending and put off structural reforms. That does not bode well for the U.S.

 

Meanwhile, Japan and Europe also see China’s subsidies to its corporations as problematic. Unless China undertakes reform, it will invite heavy-handed measures from the U.S., igniting another conflict between the two global giants.

 

In their latest agreement, the U.S. and China decided to set up a framework in which Cabinet members and others would regularly check and discuss whether the agreement is being followed. The U.S. appears to have additional sanctions in mind if it determines that China’s actions are insufficient.

 

As superpowers, the U.S. and China have a responsibility to try to maintain international order. Even though their systems may be different, the world expects them to forge a stable relationship. Using the signing of the trade agreement as a foothold, they should make the effort to normalize their trade relations.

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