Trade tensions between the US and China continue to escalate. Illustration: iStock
Trade tensions between the US and China continue to escalate. Illustration: iStock

He has been branded China’s ‘hawk in the room’ with close connections to President Xi Jinping.

Brought in as commerce minister in 2017, Zhong Shan has been credited with articulating a new hardline stance when it comes to Sino-US trade talks.

“We need to do a good job in handling the trade conflicts between China and the US,” he told the state-run People’s Daily.

“The US has started this economic and trade dispute with us in violation of the principles of the World Trade Organisation – a classic example of unilateralism and protectionism,” he added.

His comments earlier this month in the official newspaper of the ruling Communist Party were part of a nationwide debate instigated by Xi into the broader issue of “political loyalty” to the CCP.

“We must make the best of the spirit of struggle, and stand firm in defending the interests of our country and the people, as well as the multilateral trading system,” Zhong, who worked under Xi during his time in Zhejiang province, said.

With discussions resuming this week in Shanghai, the battle lines have already been drawn.

The United States increased the pressure at the end of last week when it called for a “substantial reforms” to the World Trade Organisation within 90 days and threatened to scrap China’s “developing nation” status.

Core elements

In a memo by President Donald Trump to US Trade Representative Robert Lighthizer on Friday, he argued:

“The United States has never accepted China’s claim to developing country status, and virtually every current economic indicator belies China’s claim.”

Later in a tweet, he reiterated the core elements of the memo.

“The WTO is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment. NO more!!!” Trump tweeted.

On Monday, the war of words escalated when China’s official news agency Xinhua waded into the row, insisting that the move was nothing more than a “new bargaining chip” in the year-long spat between Washington and Beijing.

Still, despite being the world’s second-largest economy and a global powerhouse, China retains its “developing nation” status, allowing the country to protect certain industries and maintain heavy subsidies.

Other benefits include a longer timeframe to implement free-trade commitments.

“The tactic of imposing pressure is nothing new to China and has never worked,” Xinhua said in a commentary. “[This attempt] to coerce the WTO is destined to hit a wall of opposition.

“It will bring controversy and chaos, putting new obstacles in the way of WTO reforms,” it added.

Amid an atmosphere polluted by rising rhetoric, Lighthizer and US Treasury Secretary Steven Mnuchin will sit down with their team for talks with Beijing’s top trade negotiator, Vice-Premier Liu He and his delegation.

The chances of making significant progress appear to be slim.

Talks stalled

So far, the conflict has revolved around a barrage of tit-for-tat tariffs after discussions stalled over crucial “issues” such as excessive state subsidies to China’s corporate juggernauts, intellectual property rights and cyberspying.

Last month, the fallout from the dispute saw Washington more than double duties to around 25% on Chinese imports worth US$200 billion.

In response, Beijing increased tariffs on US products worth $60 billion before a ceasefire was put in place after the tête-à-tête between Trump and Xi at the Group of 20 gathering in Osaka on June 29.

Significantly, that came after repeated warnings from the International Monetary Fund that trade tensions were having a major impact on global economic growth.

To illustrate how polarised trade talks have become, Trump believes Beijing will delay hammering out a deal until after the 2020 US presidential election in the hope he fails to win a second term in office.

“I think that China will probably say ‘let’s wait,’” he told a media conference last week. “‘Let’s see if one of these people who gives the United States away, let’s see if one of them could get elected.’”

Beijing is certainly digging in for a protracted battle over the detail of any potential agreement. Hawk Zhong will see to that.

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