American business community in China lacks confidence in ‘phase one’ trade deal, AmCham chief says

Catherine Wong

The American business community in China is generally happy with the efforts being made to resolve the trade war but is less confident an interim deal will resolve the structural problems associated with China’s economy, a US business leader said on Saturday.

Tim Stratford, chairman of American Chamber of Commerce in China, said he believed the “phase one” deal currently under discussion could prevent a further “downward spiral” in the dispute but feared the US did not have enough leverage to push Beijing into restructuring its state-led economic model.

With an election coming next year, US President Donald Trump might be more interested in using the deal to support his political ambitions than resolving the systemic issues that worry the American business community, he said.

“Of course, it’s helpful for the farmers and I’m glad to see farmers benefit, but that’s not really what we’re looking for,” the former US assistant trade representative said on the sidelines of a business forum organised by the Center for China and Globalization in Beijing.

“It seems to fit the political goals of the president,” Stratford said. “But it’s not addressing the systemic trade issues that the business community would be concerned about on a long-term basis.”

Tim Stratford is chairman of American Chamber of Commerce in China. Photo: Reuters

After trade negotiators from the US and China met in Washington last month, Trump said they had made good progress and were working on the text for a “phase one” agreement. It was later announced that the deal would be signed by Trump and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation summit in Chile later this month, but that event was cancelled last week due to the ongoing violent protests in the host country.

The phase one deal is expected to include China buying more agricultural products from the US, and taking steps to further open up its financial services markets to American firms.

For its part, Beijing wants the US to cancel a new round of tariffs – on a range of Chinese goods, including laptops, smartphones and toys – that is scheduled to take effect on December 15.

White House economic adviser Larry Kudlow told reporters on Friday that the two sides had made “enormous progress” towards completing the deal.

Stratford, however, does not share Kudlow’s confidence.

“To be honest, it’s hard to be terribly optimistic between now and the presidential election,” he said.

“I think the presidential election is going to put some uncertainty into the process. If you’re President Trump, do you want to start retaliating against China again because we’re not making progress on phase two? If so, then that will undermine agreements that were made in phase one.”

Stratford said there had already been lots of opportunities to reach a consensus on the key issues.

“If we’re not able to solve that in phase one, after 13 or 14 rounds at the ministerial level, why should we be optimistic that we’ll be able to solve it in phase two?”

In an interview with Bloomberg News, US Commerce Secretary Wilbur Ross expressed optimism on Sunday that the US would reach a deal this month and said licenses would be coming “very shortly” for American companies to sell components to Huawei.

Trump on Sunday told reporters at the White House that a trade agreement, if one is completed, would be signed somewhere in the US. “First of all I want to get the deal,” he said after returning for a trip to New York. “The meeting place, to me, is going to be very easy.”

Ross said Iowa, Alaska, Hawaii and locations in China were all possible. He called the agreement “particularly complicated” and said the US was “making sure that each side has a very correct and clear, detailed understanding of what each side has agreed to.”

Beijing has been working hard to counter the global narrative that China is not a good place to do business, and to woo foreign investors with the promise of a more even playing field through initiatives like the foreign investment law, which takes effect in January and promises to reduce red tape.

But Stratford said that was not enough, as Beijing had not made any real effort to tackle the systemic issues that were of the greatest concern.

“For every government policy in China, there’s a contradictory policy,” he said. “The government says, ‘OK, we’d better do a bit more to help the foreigners’, but does that change industrial policies? Does it change that the state sector is dominant? No,” he said.

“As long as they have plans that Chinese enterprises should have more and more market share in China, in their sector and globally, we know that they will welcome us, but only with conditions,” he said.

“We [US negotiators] have to be very, very cautious and measured because they [the Chinese negotiators] will be cautious and measured in the way that will help us,” Stratford said.

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