US-China Trade War Could Halt After G20 Without Resolving Long-Term Differences

© REUTERS / Jason LeeA US 100-dollar banknote with a portrait of Benjamin Franklin and Chinese 100-yuan banknotes with portrait of late Chinese Chairman Mao Zedong are seen in the picture illustration in Beijing, China
A US 100-dollar banknote with a portrait of Benjamin Franklin and Chinese 100-yuan banknotes with portrait of late Chinese Chairman Mao Zedong are seen in the picture illustration in Beijing, China - Sputnik International
MOSCOW (Sputnik), Tommy Yang - The US and China could reach a temporary agreement to put the trade war on hold without addressing the long-term fundamental causes of bilateral trade frictions following the scheduled meeting between Donald Trump and Xi Jinping during the upcoming G20 summit later this month, experts told Sputnik.

Leaders of the two countries agreed to hold a bilateral meeting on the sidelines of the G20 summit in Argentina, following a phone conversation in early November, amid escalating trade tensions that led to both sides introducing steep reciprocal tariffs on each other in recent months.

Chinese and US flags. (File) - Sputnik International
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China has reportedly sent a written response to the United States to address US demands on trade-related issues, US media reported last week. US Trade Representative Robert Lighthizer issued an update of the Section 301 investigation on Tuesday, saying that China has not "fundamentally altered its unfair, unreasonable, and market-distorting practices that were the subject of the March 2018 report."

The Chinese Foreign Ministry also expressed hope for both sides to reach an agreement during the upcoming G20 summit.

"We hope that the US side could follow the consensus reached by the two heads of state during their recent phone call, focus on cooperation, remove disturbances, and engage in serious consultations on issues of mutual concern with good faith on the basis of mutual respect, reciprocity and mutual benefit so as to reach a proposal acceptable to the two sides and bring into reality the aspiration of ensuring sound and steady development of China-US relations and expanding bilateral economic and trade cooperation," Chinese Foreign Ministry Spokesperson Hua Chunying said during a regular press briefing last week.

Short-term Solution

Despite the hawkish stance US trade representative Lighthizer expressed on Tuesday, the two countries are likely to reach an agreement that could temporarily suspend bilateral trade tensions, without resolving fundamental disputes in the trade frictions, Chinese economists suggested.

"In the short-term, the new statement [from Lighthizer] can be used as a bargaining chip during the G20 summit to seek more concessions from China. From a long-term perspective, this new report indicates that even if both sides reach a temporary agreement during the G20 summit, it doesn’t mean the bilateral trade war is over. The best outcome of the G20 summit is a short-term reconciliation," Cheng Dawei, a professor of economics at Renmin University in Beijing, who specializes in international commercial diplomacy and WTO related studies, told Sputnik.

READ MORE: China Cuts US Bond Investments by Almost $14 Bln Amid Trade Row — Report

The expert stressed that the outcome of the G20 summit depends on what the United States decides to do.

"China sincerely hopes both sides can reach an agreement during the G20 summit. The report on Tuesday could be part of the bargaining strategic from the United States to put more pressure on China before the meeting. That’s why it’s possible for an agreement to be reached during the summit," she said.

The expert believes both countries are likely to only agree to avoid introducing new tariffs on each other, without lifting the tariffs that have already been implemented.

China Catching up

Delegates listen to opening remarks by China's State Councilor Yang and US Deputy Secretary of State Burns at a session of the S&ED in Washington - Sputnik International
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China’s industrial policy, known as "Made in China 2025", has always been the focal point of what the United States describes as "unfair trade practices." In the updated Section 301 report, the United States continued to accuse China of continuing to implement the same policy, despite mentioning its nameless in official rhetoric.

"In the period following the publication of the Section 301 Report, China has deliberately downplayed the importance of and reduced official media attention on the Made in China 2025 policy … Despite this transparent attempt to deemphasize Made in China 2025 in public, China continues to implement this industrial policy on a large scale," the report said.

The Section 301 report released in March explained why China’s new industrial policy could hurt US business interests.

"Newer plans such as the Made in China 2025 Notice and the various plans focused on information and communications technologies call for a wide array of Chinese government intervention and financial and other support designed to transform China into a world leader in technology. While these policies and practices are not necessarily new, their actual and potential effects on foreign companies and their technologies have become much more serious … a key part of China’s technology drive involves the acquisition of foreign technologies through acts, policies, and practices by the Chinese government that are unreasonable or discriminatory and burden or restrict US commerce," the report said.

READ MORE: Vice President Pence: US Won't Lift Tariffs Until ‘China Changes Its Ways'

However, Chinese economists argued that this Chinese industrial policy is targeted because the United States is worried that China could soon catch up with it.

"It’s impossible for China to cancel or give up on the Made in China 2025 policy. The real complaint [on this policy] came from US concerns that China could soon catch up with it. The excuses they found are that China has used ‘illegal and unfair practices’ to catch up. But the fundamental issue is the United States is not happy and has become worried that China could soon catch up with it. But we can’t resolve this problem. If you don’t want us to catch up, we just need to give up? Why is that?" Tu Xinquan, the dean of China Institute for WTO Studies, the University of International Business and Economics in Beijing, told Sputnik.

Philippine President Rodrigo Duterte waits on stage to pose with other leaders for a group photo before the start of the ASEAN-Plus Three (APT) summit on the sidelines of the 33rd Association of Southeast Asian Nations (ASEAN) summit in Singapore on November 15, 2018 - Sputnik International
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To address US complaints that Beijing took advantage of unfair trade practices to catch up with the United States, China could revise the industrial policy to level the playing field for foreign companies, the economist suggested.

"We can revise this policy or propose a new one that stresses on ‘opening up’ toward foreign companies. Even if Chinese government offers subsidies to a certain industry, foreign companies should be eligible to enjoy the same benefits. In this way, you [the United States] can’t complain anymore," he said.

To ease similar concerns of China’s rise among other countries, Chinese authorities could work on proving to the world that other nations can stand to benefit from China’s rapid development, the expert added.

"The competition [between the United States and China] is unavoidable. But we need to make sure the method we used to compete can win approval from other nations. We need to convince other third parties, including European countries and Japan, that China’s development is beneficial to everyone. The problem today is that some countries have issues with the Chinese way of development and its impact on other countries. For China, we can’t resolve concerns from the United States completely. But we can try to reassure other nations that China’s rise is beneficial to the world," he said.

READ MORE: Trump Hopes US Won't Have to Impose More Tariffs on China

The expert believes that it is possible for China to completely lift the requirement of forcing foreign companies investing in China to set up joint ventures with local Chinese companies in the future.

The views and opinions expressed by the speakers do not necessarily reflect those of Sputnik.

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