Stephen Olson

Opinion | China and the US need new rules of engagement, not just a trade deal

Any agreement reached in renewed talks between the two is likely to be short-lived, as the cooperation that once underpinned deeper economic integration has been replaced by outright rivalry. The relationship must be redefined

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US President Donald Trump and Chinese President Xi Jinping meet on June 29 while attending the G20 summit in Osaka, Japan. The US-China trade relationship has crossed the Rubicon and, irrespective of any short-term trade deal that might be reached, it will not revert to the status quo. Photo: Xinhua

Stephen Olson

Published: 1:30am, 2 Jul 2019Updated: 5:14am, 2 Jul 2019

Meeting on the fringes of the G20 summit in Osaka, US President Donald Trump and Chinese President Xi Jinping have reached an agreement to resume trade negotiations that were suspended in early May in response to what the US characterised as backsliding on the part of China.

As part of the agreement, the US will refrain, at least for the time being, from applying tariffs on the roughly US$300 billion in Chinese imports not yet subject to punitive measures. Previous tariffs will remain in place. The US will also grant a partial reprieve to Huawei, removing some of the curbs on US equipment sales. China, for its part, committed to an unspecified amount of US agricultural purchases.

As negotiations recommence in earnest, what are the key dynamics likely to shape how the discussions unfold from here?

The Chinese government recognises that at least some of the dubious policies and practices it was able to “get away with” in the past are no longer tenable in the current environment. Some concessions will be necessary to forestall a further deterioration in the bilateral trade and investment relationship, and the painful disruptions that would result.

Some of these concessions – such as additional purchases of US soybeans or liquefied natural gas – will be relatively easy, provided the volumes are within reason. And even in the more difficult areas, such as technology policies, China understands that it will have to make at least some adjustments on the margins.