Fast talks come to a shaky finish

Editorial | Mary Ma 2 Aug 2019

It was apparent that US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer hastily wrapped up their first round of trade negotiations since May with their Chinese hosts in Shanghai.

Although both sides managed to shake hands to give out positive vibes, it was impossible to miss the heavy feelings.

The photo opportunity initially planned for 2.15pm on Wednesday was brought forward to 1.37pm - meaning their talks with Chinese vice-premier Liu He and Commerce Minister Zhong Shan were shorter than intended.

Although remarkable progress resulting in breakthroughs within shorter times may also explain a swift conclusion, this probability can be ruled out, as far as this round of negotiations was concerned.

More than likely, the Americans and Chinese were so far apart that they found it pointless to stay glued to the chairs, just to use up the time allotted to them.

If somebody already had low expectations for the Shanghai talks, they should still be disappointed.

Small wonder stock markets crashed.

At the end of the latest encounter, the White House said the talks were "constructive" over "forced technology transfer, intellectual property rights, services, non-tariff barriers, and agriculture," and both sides would meet again in Washington in September.

Meanwhile, Chinese state-media, Xinhua, said both sides discussed increasing Beijing's purchase of US agricultural products, based on China's needs and favorable conditions to be created by the Americans.

On a brighter note, both attempted to maintain a positive note in their respective statements.

On a darker sign, their commitment to meet again a month later in September rather than in a fortnight were far from assuring to financial markets. Either the Chinese or Americans - or both - were in no mood to step hard on the accelerator.

Behind the handshake in Shanghai was something else. To what extent did hardliner Zhong influence the way the talks were conducted?

Just as the trade talks were about to start, US President Donald Trump tweeted an outburst, accusing Beijing of employing delaying tactics in order to wait until after the US presidential election in 2020. His outburst basically summed up the situation.

Pressure was on China in the early stages of the trade war, when Beijing came under the gun to reach a deal to stop factories relocating away from the mainland to places like Vietnam, Taiwan, Bangladesh and South Korea.

Now that some production lines have already been lost, a trade deal at this advanced stage would offer little help to avert the movement.

As for Trump, pressure is building on his side as time is running out in his re-election bid. Beijing policymakers are aware that while a Democrat in the White House would also be unfriendly to China, that would still be the lesser of two evils. Better the devil you know than the one you don't, as the old saying goes.

Giving Trump a trade deal would greatly enhance his chances at winning a second four-year term.

As an impasse can be imagined, will Trump make good his threat to levy tariffs on the rest of Chinese-made goods?

Investors had better prepare for the next shock.

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