Things to clarify before taking last step in China-U.S. talks

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Editor's note: This article is an edited translation from a Chinese story originally published in the WeChat official account of Bullpiano.

Facing the negotiation of far-reaching significance and the unprecedented trade war, there is not much time left for China and the United States. Indeed, different interpretations of the possible outcomes will occur with possible misunderstandings and noises.

But from the standpoint of China, three issues must be clarified.

The consequences of not signing MOUs

It was widely expected that the China-U.S. trade agreement will be reached in the form of Memorandum of Understanding (MOU), and the recent negotiations between the two sides should also be carried out around its specific articles.

However, despite the delicate planning, things changed fast. According to media reports, on February 22, Trump set the tone at the White House: It's an agreement, not an MOU!

This has raised worries of many people as the United States is really careless. Some question whether the U.S. is trying to drive a harder bargain.

U.S. President Donald Trump speaks during a meeting with Chinese Vice Premier Liu He in the Oval Office of the White House in Washington, DC, February 22, 2019. /VCG Photo

Such concern is warranted. After all, Trump's style is a bit different from his predecessors. But the content will still be the same regardless of how you name the document.

“From now on, we're not using the term memorandum of understanding anymore,” Robert Lighthizer, U.S. Trade Representative, said, “We're going to use the term trade agreement. We'll have the same document, but it's going to be known as a trade agreement.”

The reason why the MOUs were adopted in the first place was that the legal systems vary from different countries.

In some countries, trade agreements only take effect after Congressional approval, and it may risk falling into lengthy legal processes. MOUs circumvent these problems relatively quickly and are considered an international practice.

Now, no more MOUs, but the text remains the same with another name－Agreement. As for the real impact on China, it should be stressed that the content is still the same and talk will go on regardless of the terminology issue.

Chinese Vice Premier Liu He (R) speaks during the trade meeting in the Oval Office of the White House in Washington, DC, U.S., February 22, 2019. /VCG Photo

Soybean at the heart of China-U.S. talks

Negotiations are still in progress, and some substantive content is gradually being revealed.

For example, U.S. Secretary of Agriculture Perdue said on Twitter that China is committed to buying an additional 10 million metric tons of U.S. soybeans. He is happy for American farmers. Trump immediately forwarded this tweet.

Many people must be baffled when seeing this news as in the previous China-U.S. trade war. Soybean was China's “weapon” against the United States. Now it promises to purchase so much. What is China thinking?

Soybean has been the strategic leverage at the heart of the China-U.S. trade war. When the trade war first broke out, China needed leverages. So it decided not to buy American soybeans.

China needs soybeans more than oil. After all, China has a supply shortage of more than 90 million tons a year, and 90 percent of soybeans are imported.

After stopping buying soybeans from the U.S., China turned to countries, such as Brazil, but the price spiked as a result. Therefore, importing soybeans from the United States is at the best interest of China.

A soybean farmer holds soybeans from his farm outside Baton Rouge, in Erwinville, Louisiana, U.S., July 9, 2018. /VCG Photo

Not importing U.S. soybeans was a decision made to counter the U.S. offensive, but now making the promise to import U.S. soybeans is a measure not only to show goodwill and sincerity but also to meet China's own needs for soybeans.

Thus, it is unnecessary to question China's imports of U.S. soybeans.

Of course, if the United States reneges, China will certainly take a tougher stance by not importing U.S. soybeans anymore.

Different from industrial products, agricultural products are difficult to repurpose. If you can't sell them, they will spoil. By that time, the Americans will be more pissed off.

Who wins and who loses at last?

Common sense is that there is no winner in a trade war. As long as China and the United States reach an agreement on the premise of equality, mutual benefit, mutual respect and collaborate to solve problems, both sides can be regarded as winners. Otherwise, both sides are losers.

It is recognized that there will be people who will check the final agreement and calculate how much concessions the United States and China have made respectively, and then sum them up to see which side wins.

U.S. President Donald Trump (L) speaks during the meeting with Chinese Vice Premier Liu He (R) with attendance of other U.S. officials in the Oval Office of the White House in Washington, DC., February 22, 2019. /VCG Photo

But the first thing to do is to identify China's greatest interest.

First of all, Trump's greatest discontent is with China's annual trade surplus of hundreds of billions of dollars. Is it a good thing or a bad thing for China to import more American products that China needs?

Secondly, people who have been to the United States know that the goods are cheap there, whether it is beef or pork, clothing or footwear, the same brand product only cost half of that in China.

If Chinese consumers can buy the same goods at home at the same price as in the U.S., is it a good thing or a bad thing for China?

Thirdly, in a market economy with fair competition, the entry of low-priced, high-quality goods from the United States will inevitably put pressure on Chinese companies, prompting them to lower their prices and improve their competitiveness. Is this catfish effect a good or a bad thing for China?

From a longer-term perspective, this challenge is pushing China to readapt to the trade rules much like the challenges China faced when first joining the WTO.

We can regard this as a challenge, as a crisis, but we must also see the historic opportunities it brings about.

Of course, certain principles must be abided by in cooperation. If the U.S. pushes too hard and drives a hard bargain, China will have no choice but to push back.

(If you want to contribute and have specific expertise, please contact us at opinions@cgtn.com.)