The Xi-Trump Rendezvous, Did it strike the right notes?

On April 6-7, Chinese President Xi Jinping and his US counterpart Donald Trump held their first-ever meeting at the Mar-a-Lago resort – dubbed the “Southern White House” – in the US state of Florida. Stakes were high as given its potential impact on the world trade and the bilateral relationship of both the countries, the world media was spotlighting this meet, terming it the most historic. During the rendezvous, the two heads of state carried out in-depth, friendly and longtime exchanges in the forms of formal meetings and manor walks. Although it is true that not every problem in the bilateral relations was solved, the two leaders have developed several communications mechanisms between their respective countries for the near future.

Both China and the United States have termed the Xi-Trump meeting as positive and fruitful. It is being said that both the leaders gained better understanding of each other, cemented their mutual trust, scored many major consensuses, and built up a good working relationship. The meet is expected to strengthen China-US relations, and to chart the course of bilateral relations in the new era.

A Look into the Past

A closer look at the details coming out suggest that during the meeting, geopolitics cast its full shadow over the economic agenda.

This scenario had evolved after December 2016 when State Councillor Yang Jiechi visited Trump Tower and spoke about Chinese core interests. A day later, Trump talked on the phone with Taiwanese President Tsai Ing-wen and suggested that decades-old One-China policy could be used as a bargaining chip.

After a bilateral rhetoric tit-for-tat, Washington and Beijing began efforts to reduce tensions and a complementary channel was opened by China’s US ambassador Cui Tiankai with Jared Kushner, Trump’s son-in-law and trusted senior adviser. In February, these efforts led to Trump’s re-affirmation of the One-China policy and in March Secretary of State Rex Tillerson’s Beijing visit where he described the basis for US-China ties as “non-conflict, non-confrontation, mutual respect, and win-win cooperation.” While Democratic and Republican critics saw it as a sign of appeasement, optimists saw it a new bilateral opening.

Trump’s Rhetoric Cools Down

Trump’s populist electoral victory was in part due to the way he spoke against China’s trade and industrial success which he said was at the expense of American workers. During the election campaign, Trump referred to China as having ‘raped’ America’s industrial jobs with its trade practices and as a currency manipulator. He had threatened to impose high tariffs on imports of Chinese goods to protect US jobs.

In the first two months of the Trump presidency, as he struggled on issues that earlier consumed him – the immigration ban on Muslims and the Obamacare repeal-and-replace move – Trump was unusually quiet on the trade and economic issues with China.

Failure and cooler minds might have been in play in toning down Trump’s mercurial rhetoric toward China and trade issues. The failures might also lead to new strategies within the Trump government. Moreover, traditionally, disconnect exists between electoral campaign rhetoric and the realities of governing. Criticizing policies that outsiders talk about is always easier than governing. As reality sets in, caution with adjustment becomes essential and critical to success.

The Newfound Rapport

Media reports suggest that the first meetings between US President Donald Trump and Chinese President Xi Jinping have been positive and fruitful as they marked a new starting point for the world’s most important bilateral relationship, which will not only benefit the two countries but also the world at large. The historic meeting has enthused both leaders as well as their respective nations about their newfound rapport. It also underscored that the two countries are trying to avoid strategic misjudgment and are supportive of steering the relationship in the right direction. In all, from Mar-a-Lago, both leaders have sent a clear-cut message to the world that the two largest economies can become great cooperative partners despite their differences.

Starting Trade Negotiations

The prospects for a positive relationship can be seen in a news briefing by US Commerce Secretary, Wilbur Ross, who said that Chinese officials had agreed to a “100-day plan” on trade between the two countries, an unheard of development because trade discussions usually span several years. While the details of the plan are still being worked out, they are likely to include a range of sectors, from agricultural imports to foreign investment, with the goal of increasing US exports to China and reducing the $347 billion trade deficit in goods.

Ross added that Chinese officials had agreed on the need for a more balanced trade relationship in part because of the concern about dangerous financial imbalances. “They expressed an interest in reducing their net trade balance because of the impact it’s having on money supply and inflation,” Ross said.

Boost to Dynamism in US-China Ties

President Xi said, “We have a thousand reasons to get the China-US relations right, and not one reason to spoil it.” The Chinese leader went on to emphasize that cooperation is the only right choice for the two countries, and that China and the US have the capability of becoming great cooperative partners. President Xi also underlined the role of four newly-established high-level mechanisms, which will focus on areas of diplomacy and security, economy, law-enforcement and cybersecurity, as well as social and people-to-people exchanges, designed to help pave the way for a clearer flow of dialogue and cooperation between the two countries.

The Florida meeting serves as an indicator that the China-US relationship is still very much on course since the Trump administration took office in January. Although the early days of the Trump administration transition was regarded with great uncertainty, it seems that both countries have understood the importance of how essential a better relationship between the two trade giants needs to be.

Toward Bilateral Investment Treaty

One possible scenario that has been discussed during the meeting involves Chinese investment in US infrastructure, including bridges, roads and airports. Beijing is interested in such prospects, but the Trump administration would still have to reconcile such ideas with its “Buy America” doctrines.

While the BIT would certainly facilitate investments in the two nations, it would support Trump’s infrastructure initiatives. Nevertheless, the Trump administration would have to portray it as a trade pact that would not result in US jobs being offshored to China.

A Compromise Trajectory

Before the Summit, the White House hoped President Xi would in some way address Trump’s concerns about the US trade deficit with China. For instance, Beijing has pledged to reduce overcapacity in steel, but the central government has not yet engaged in broad plant closures. Reportedly, the Chinese negotiators have reassured the Trump advisers that broad-scale plant closures are in the agenda but that likely to ensue only after the Chinese politburo summit in the Fall.

Tough economic reforms require political consensus in both China and the US.

The 100-day plan to improve strained trade ties and boost cooperation between two nations is also a welcome step. China is expected to offer better market access for US financial sector investments, while ending the ban on US beef imports that has been in place almost 15 years. While Washington would like Beijing to lower the 25% tariff on automotive imports, Beijing would like Washington to relax restrictions on advanced technology sales to China. Meanwhile, the Trump administration is preparing an executive order that would probe dumping from foreign companies and could result in tariffs, while steel and aluminum will be targeted.

Dialogue Matters

Before the Trump-Xi Summit, some felt it was premature and could undermine recent progress in bilateral relations. Others saw the meeting as a window of opportunity that should not be missed – as happened in 2013 in Sunnylands, California, when Obama rejected Xi’s offer of “new type of major power relations.”

The simple reality is that, without efforts at stabilization in the US-Sino relationship, aggressive bilateral rhetoric could derail more than four decades of bilateral normalization.

That’s where the Trump-Xi Summit did succeed – it paved way for a sustained dialogue and potential compromise trajectories, despite differences.

Significance of US-China Economic Relationship

In the last four decades, China’s economic growth changed not only the country itself but also, albeit to some extent, the world and the United States. Before Trump’s election, the volume of trade and capital flows as a result of the globalization in trade, investments and labour migrations have already risen to massive levels.

The volume of two-way trade between China and the US is the largest bilateral trade relationship of any two countries. China-EU trade is almost of the same scale.

Add the trade of the countries in East Asia with China – Japan, ASEAN, and South Korea and the total trade accounts for around half of world trade.

The fact is, China, Japan, ASEAN and East Asia are part of the big supply chain of industrial production (for instance, the digital electronics industry) that supports trade. A large part of this production was destined for the US market in the form of imports.

Therefore, should China and the US be brought to a trade war of retributions and high tariffs, the world economy could go into a tailspin. Those economies caught up in the interdependence would be affected adversely.

Failure or Success?

Though the meeting was mainly a get-to-know-each-other encounter, the two leaders did talk issues of substance and even made some decisions on work to be done: on cyber security, law-enforcement, and a code of safe conduct affecting naval and military encounters. The two leaders also agreed on a 100-day plan to address the trade issue, as President Trump wanted. President Trump wants to make deals and believes he can. He thus accepted President Xi’s invitation to visit China in the Fall.

The pragmatic approach of both countries has now signified a new level of progress among powerful nations intent on maintaining relationships. Respect, better communication and minimising harm on issues where they diverge have helped boost a traditionally complicated relationship.

All of this suggests a good beginning, which is what the meeting was supposed to be. Results to follow…

A ROUNDUP OF KEY HIGHLIGHTS

New Friendship

Political watchers said this was the biggest achievement at the summit. Mr Trump told reporters: “We have made tremendous progress in our relationship with China and that “[t]he relationship developed by President Xi and myself I think is outstanding…”

China Daily reported that both parties appeared “equally enthusiastic about the constructive relationship they have promised to cultivate”.

Grandchildren Diplomacy

The bonhomie extended behind closed doors, where Mr Trump’s granddaughter Arabella and grandson Joseph, aged five and three, sang a traditional Chinese ballad “Jasmine Flower” to Mr Xi and his wife Peng Liyuan, and recited poetry in Mandarin.

The Syrian Shadow

Mr Trump upended the summit by ordering the launch of cruise missiles at Syrian targets on April 6, just before Mr Xi’s arrival in Florida. It was his first military strike on a state target – Syria. Mr Trump personally informed Mr Xi of the strikes as their dinner concluded on the first night of the summit. That’s when 59 Tomahawk missiles were winding their way to the Shayrat airbase in Syria.

100-Day Plan

Both leaders agreed on a 100-day plan for trade talks aimed at boosting US exports and reducing China’s trade surplus with the US, but revealed little detail on the plan.

President Xi promised a package of Chinese investments aimed at creating more than 700,000 American jobs. In return, Mr Xi hoped to obtain assurances from Mr Trump on punitive tariffs and the delay of an American arms sale to Taiwan.

Lack of Specific Agreements

The two presidents appeared to have achieved little in the way of concrete agreements. “We had a long discussion already. So far, I have gotten nothing. Absolutely nothing,” Mr Donald said to laughter from the delegation on the first day of the talks. At the close of the summit, there was still a lack of anything substantial.

North Korea

On North Korea, an issue where the two leaders have different positions, Mr Xi agreed to increase cooperation in reining in Pyongyang’s missile and nuclear programmes. But he did not offer any new formula for cracking the North’s defiant attitude.