On July 19th, the first round of U.S.-China Comprehensive Economic Dialogue (CED) was held in Washington. The leaders of the dialogue were U.S. Treasury Secretary Steven Mnuchin, U.S. Commerce Secretary Wilbur Ross, and Chinese Vice Premier of the State Council, Wang Yang. Since the CED forum was launched in April, the two sides held more than 60 rounds of consultations as they worked on an initial 100-day plan to prepare for the meeting.
Anticipation for specific outcomes were high, especially for market access opportunities that could reduce the U.S. China trade imbalance. Earlier in the 100-day plan, China granted more access to U.S. beef exports. Bloomberg reported that following the talks, the U.S. can now ship rice to China. However, after the Chinese and U.S. sides cancelled the press conference to announce outcomes, many observers came to the conclusion that the talks fell short of expectations. Xinhua (link in Chinese) didn't explain any specifics outside of the two sides agreeing to continue meeting to discuss industries for further mutual investment, especially "high-tech" products.
What stalled the talks? Many credited the Trump administration's threat to use the trade "nuclear option," a threat to impose tariffs on steel imports to the U.S. in the name of national security, under a seldom used section of a 1962 trade act. According to The Financial Times, the fear was that this move "would open the door to retaliation from U.S. trading partners such as China, the EU, Japan, and South Korea and set off a trade war." Additional concerns were that it could lead to a spiraling series of counter reactions from countries invoking similar national security exceptions ind global trading rules, and thus "open a protectionist Pandora's Box that would undermine the current system built around the World Trade Organization."
International trade experts were dubious of the legality of invoking this law. NYU Law professor Robert Howse, told Axios: "Trump made a big mistake by identifying 'dumping' as his basis for imposing retaliatory tariffs on national security grounds." Not everyone agrees, though. A group of metal-based manufacturers and agriculture organizations in support of Trump's defensive trade stance wanted Ross to move ahead with strong action on steel and aluminum imports. A letter from the Coalition for Prosperous America said Ross should be undeterred by "vague speculation about trade retaliation."
The overall logic of invoking Section 232 is further brought into question when one considers that China doesn't even make it into the top ten of sources for U.S. steel.
For the latest issue of China This Week, an exclusive weekly review and analysis of major trends and developments impacting the China-U.S. relations, please visit here.
