This story just in from The New York Times
· May 16, 2019
BEIJING — China’s leader, Xi Jinping, seemed confident three weeks ago that a
yearlong trade war with the United States could soon subside, handing him a
potent political victory.
He even made a speech saying China would protect
intellectual property, encourage foreign investment, and buy more goods and
services from abroad — all changes the United States had been demanding as the
countries tried to negotiate a deal.
But just a week after that speech,
Chinese negotiators sent the Americans a substantially rewritten draft
agreement, prompting President Trump to accuse Beijing of reneging on terms
that had been settled.
That has left hopes for a historic
breakthrough in tatters.
In
China’s top-down political system, where President Xi has amassed formidable
power, it’s unlikely that anyone else would have had the authority — or, for
that matter, the nerve — to fundamentally alter the emerging pact at this late
date.
Having apparently made that decision,
it is clear that Mr. Xi misjudged Mr. Trump’s eagerness for a deal and how far
he could push the American negotiators, according to more than a dozen people,
including current and former officials, researchers, lawyers, and trade experts
familiar with the deal and how it fell apart.
Now Mr. Xi risks being backed into a
corner, unable to compromise between his own positions and Mr. Trump’s.
A key issue was the United States’
demand that the agreement bind China to setting some of the changes in domestic
law. For Mr. Xi, such a move could be seen at home as a sign of caving in.
Mr. Xi’s frenetic schedule and highly
centralized style of policymaking may also have delayed decisions in the
Chinese government about the prospective deal until dangerously late, said a
former official, academics and trade group representatives.
“No
doubt Xi has tightened the overall policy atmosphere so few want to voice
opposition,” said James Green, who was the top trade official at the United
States Embassy in Beijing until last August and is now a senior adviser at
McLarty Associates, a Washington consulting firm. “And that doesn’t leave much
room for the negotiators.”
Seasoned political insiders have been
astonished by the whiplash reversal in the trade talks between the world’s two
biggest economies.
Now, China’s leaders risk prolonging
tensions with the United States by defending their decisions with combative,
nationalist rhetoric that could narrow the room for a compromise, experts from
both countries said.
“You’ll
need a strong political decision to accept any compromises now,” Tao Jingzhou, a business and dispute resolution lawyer
in Beijing, said in an interview. “The propaganda could turn up nationalist
feeling that could further narrow the margin for negotiations.”
‘A Sea
of Red’
Chinese officials were not alone in
thinking a deal was not far-off.
The United States Treasury Secretary,
Steven Mnuchin, said late last month that talks were “getting into
the final laps.” Chris Coons, a Democrat senator from Delaware who visited
Beijing at that time, said Chinese officials had all said they wanted an
agreement on the trade dispute.
“One of the things that was impressive
was the extent to which every single person we met with delivered the same core
message points on a few key themes,” Mr. Coons said in an interview in Beijing
soon after his meetings with officials. “And the message on trade was, ‘We are
making our best efforts to hear you and to reach an agreement.’ ”
But
by May 1, Mr. Xi had demanded a substantial recast of the embryonic agreement
that his chief negotiator, Liu He, had been haggling over for months with Mr.
Trump’s team, people close to the negotiations said.
Several sources said the changes were
discussed with other Communist Party leaders, which brought into focus worries
that the proposed deal could make Mr. Xi and the party look as if they were
bowing to pressure.
Soon after, the Chinese negotiators
sent their American counterparts a version of the draft agreement in a
Microsoft Word document, speckled with cuts and changes.
The
revised document sent from Beijing was a “sea of red” revisions, said Christopher K. Johnson, a senior adviser at the Center
for Strategic and International Studies in Washington, and a former senior
China analyst at the Central Intelligence Agency.
The exact reasons Mr. Xi and other
leaders waited so long before presenting the Trump administration with a new
negotiating position are unclear.
Mr. Johnson and other American and
Chinese experts offered differing views on what drove Mr. Xi to push for the
changes.
Mr.
Xi may have assumed, some said, that Mr. Trump was so eager for an agreement
that American negotiators would swallow the last-minute changes.
Or, others said, Mr. Xi may have
belatedly concluded that changes to Chinese laws demanded by the United States
would be an affront to national honor. Some said Mr. Xi might have felt he had
to act after the clauses drew criticism from party leaders who had not been
briefed earlier.
Some experts believe China’s leaders
may not have formally considered a full Chinese-language translation of the
draft agreement — which had been negotiated using an English-language text —
until later on.
“The devil is in the detail, especially
for lawyers,” said Mr. Tao, the Beijing lawyer. “When you translate an
agreement into an official text, there can be a lot of room for different
interpretations.”
The leadership may also have misread
the political landscape in the United States and guessed that Mr. Trump was so
eager for an agreement that it was time to press for an advantage.
“The most likely explanation is
insufficient policy coordination, not an intentional effort to deceive the
Americans,” said Scott Kennedy, a
senior adviser at the Center for Strategic and International Studies in
Washington who researches Chinese economic policy.
“The
impression that Trump wanted a deal for the stock market may have given them
some comfort and space, that they thought they could push back,” he said.
‘Small Complications’
The
Trump administration had demanded stronger penalties for violating foreign
patents and tighter laws to prevent the Chinese from demanding that foreign
businesses transfer critical technologies. And the administration sought
changes to cybersecurity laws that China’s national security establishment saw
as interference.
These changes would require
authorization from China’s national legislature.
“These conditions that the Americans
raised for an agreement, at least from the political point of view, are
extremely difficult to accept,” said Cui Liru, a former president of China
Institutes of Contemporary International Relations, a prominent state research
group. “It is almost asking the change of China’s political system.”
The American negotiators read China’s
refusal to enshrine its commitments in law as an indication that the Chinese
were making promises they did not intend to keep.
China’s request that the United States
remove all new tariffs as part of a deal was also difficult to accept.
The 25 percent tariffs imposed last
summer on $50 billion a year of Chinese goods cover some categories deemed
critical to national security, such as nuclear reactor parts used by the United
States Navy. Democrats and Republicans alike have been leery of scrapping these
tariffs, which they hope will prevent critical suppliers from moving to China.
The speed with which the two
governments descended into verbal mud-wrestling and new tariffs and counter-tariffs surprised even
seasoned analysts.
After
the negotiations broke off on Friday and Mr. Trump announced a fresh round of
tariffs on China, Mr. Liu, China’s chief negotiator, appeared to hesitate
between tough talk and mild words.
Speaking to Chinese journalists in
Washington, Mr. Liu laid out “matters of principle” for Beijing that he said
must be respected in the talks. On the other hand, Mr. Liu said the differences
were small and nothing unusual.
“I
think these are small complications that are normal in bilateral
negotiations,” Mr. Liu said. “I’m
cautiously optimistic about the future.”
‘An All-Out Bully’
As the deal unraveled, Communist Party-run
media outlets flipped from muted restraint about tensions to daily salvos
rebuking the United States and dismissing any criticisms of China.
The official Chinese news media has
described the United States this week as an “all-out bully,”
a “paper tiger” and
a schemer who, as
in an ancient Chinese tale, entraps a guest by inviting him to a banquet.
Xinhua, the official news agency,
suggested that the United States was acting like a deluded colonialist
holdover.
“If
anyone today regards China as the China of old, prey to dismemberment, as a
‘soft persimmon’ that can be squeezed at will, their minds are stuck in the
19th century and they’re deceiving themselves,” Xinhua said in an editorial on the breakdown in
trade negotiations.
“The Chinese government is preparing
the public for a protracted and costly trade war, while remaining open to a
face-saving deal,” said Jessica Chen Weiss,
an associate professor of government at Cornell University who studies
Chinese foreign policy and public
opinion.
The combative words threaten to
complicate and prolong the trade dispute, even if Mr. Trump or Mr. Xi desires a
truce.
Mr. Xi’s strategy of engaging in a war
of words against other countries has often overreached. In a dispute with South
Korea over Seoul’s decision to let the United States deploy an antimissile
system, China struck a hard line against the country — only to find itself a
year later in a losing position with limited options.
“It could need a good six to 12 months
before we get back to a serious deal in the works,” said Mr. Johnson, the
analyst at the Center for Strategic and International Studies.
Still, the Chinese government seems to
be leaving some room for flexibility. The editorials generally avoid personal
attacks on Mr. Trump. And Mr. Xi has not publicly commented on the trade
tensions, leaving room to subtly shift his demands.
Mr. Trump said Monday that
he would meet Mr. Xi during a Group of 20 leaders meeting in Osaka, Japan, next
month. But such a meeting would probably at best pave the way for more talks.
“It
is very hard to think China will cave in or surrender to these pressures,” said
Wang Yong, the director of the Center for International Political Economy at
Peking University. “Public opinion definitely matters.”
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