Prospects for U.S.-China Relations in 2019

Op-Ed in Project Syndicate

President Donald Trump and President Xi Jinping in China

(Official White House Photo by Shealah Craighead / Flickr)

The following is an excerpt from an op-ed by ASPI President Kevin Rudd that was originally published by Project Syndicate on December 14, 2018.

China's leaders will attempt to re-stabilize bilateral ties and ease tensions in its non-U.S. relationships. At the same time, they are likely to use the next year to form a deeper judgment about the future of U.S. politics and foreign policy.

Throughout 2018, much of Asia has been shaken by the new and increasingly unpredictable dynamics in Sino-American relations. One year ago, U.S. President Donald Trump returned from Beijing after his “state-plus” visit, which China hoped had finally laid his anti-Chinese campaign rhetoric to rest. Twelve months later, China and the United States are caught in an unresolved trade war, and Trump’s administration has replaced U.S. “strategic engagement” with China with “strategic competition.”

One year ago, moreover, the U.S., European, and Chinese economies and markets were roaring. Now, there is deep instability in financial markets, with growth slowing in China and Europe, and higher interest rates beginning to bite in America. Uncertainty over the future of the North Korean nuclear negotiations is also darkening the picture.

So what are the prospects for U.S.-China relations in 2019? It’s probable that by March there will be an agreement on reducing the bilateral trade deficit and the import decisions that China will make to see it through. An agreement on tariff reductions by then is also possible, although its complexity may lengthen the timeline. A tariff-by-tariff approach could take a year. But if Chinese economic reformers take a more dramatic approach, by committing to zero tariffs over time and challenging the Americans to reciprocate, it could be concluded more rapidly. But this would run counter to decades of Chinese trade bureaucrats’ training to give away little, let alone be seen as giving away everything at once.

The reform of so-called forced technology transfer should be relatively straightforward. Nonetheless, reform is different from how contractual arrangements may be interpreted in practice, even in the absence of any specific technology transfer provisions.

Intellectual property protection, however, is deeply problematic. Previous agreements reached under President Barack Obama’s administration could be reconstituted. But the jurisdictional enforcement of breaches is still hopeless. One possible mechanism is to subject relevant contracts between Chinese and foreign firms to international commercial arbitration bodies located in Singapore or Switzerland, designed to deal specifically with the enforcement of IP protection.

If China objected, it might be possible to develop China’s own domestically based international commercial arbitration system. But the country would need to appoint qualified foreigners to its panel of arbitrators to build international credibility. No one has any confidence in China’s commercial courts. For its own domestic reform needs, China needs to move toward fully independent commercial and civil divisions of its court system, even if the criminal division remains subject to political control.

Read the full article.