EconoChina

A blog on Chinese economy & society

What have the US-China talks achieved?

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The so-called Sino-American Strategic and Economic Dialogue has been properly wrapped up, with a plethora of agreements signed. But what has it actually achieved? Probably not much, as usual.

Rmb revaluation has been relegated to the back burner, as expected. The two nations have agreed to:

  1. Balance their respective economies, with the US increasing savings (you don’t really think this is going to happen, do you?) and China increasing consumption (even if they do succeed, this will be a decade-long project at best).
  2. Fair trade. The US has promised to consider recognizing China as a market economy, and China is to give equal access to foreign companies (presumably in government purchases). This is potentially the most important result coming from the talks, and I’ll come back to this later.
  3. Some sort of vague cooperation in the financial field.
  4. blah, blah, blah
  5. They agree to talk some more in the future.

That’s about it in trade related results. There are some other stuff regarding new energy and geopolitics etc.

On the fair trade agreement, what the US has promised potentially has important impact on many anti-dumping cases where “Chinese real wages” are often imputed from other economies as China is currently not considered a market economy. If this is to be implemented, Commerce Dept. will have much higher burden of proof in anti-dumping cases that it initiates. Is this likely to happen? I’m not holding my breath. The current economic environment really is not exactly conductive to lessening trade tensions. Unless the US is thinking about imposing overt tariff, it is not likely to weaken the power of its anti-dumping mechanism. The keyword in the agreement is “promised”. It’s going to be a long and convoluted way to actual implementation, if at all.

On the Chinese front, it’s all promises as well. US companies have protested vehemently about China’s “indigenous rule”, devised to promote domestic technologies. Since China has never signed up to the WTO treaty that gives equal access in governmental access, the US has to use other leverage. China has since modified the rule, but the devil is in the details. Since China sees creativity, or rather the lack of which, as a national, strategic issue, I doubt it’s going to backtrack on the core pieces of the new rule. An official has clarified earlier this week that only value-added portions carried out within China by a foreign company will be considered as national in doling out governmental purchases. In other words, if you want to be considered a domestic company, you need to manufacture and carry out key R&D in China.

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Written by Cindy Luk

May 26, 2010 at 3:31 am

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