Commentary: Huawei charges are killing prospects of a US-China trade deal

Commentary: Huawei charges are killing prospects of a US-China trade deal

This perfect storm will evoke bitter memories for China’s top negotiator as he arrives in Washington, says one observer at the Financial Times.

A woman walks past a Huawei shop in Beijing
A woman walks past a Huawei shop in Beijing, China, January 29, 2019. (File photo: REUTERS/Thomas Peter)

BEIJING: Fool Liu He once, shame on you. Fool him twice? How dare you!

Such is the outrage that erupted in Beijing just hours after the Trump administration decided to issue criminal charges against Huawei Communications and its former chief financial officer, Meng Wanzhou, on the eve of a possibly make-or-break round of trade negotiations between the world’s two largest economies. 

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A PERFECT STORM

Vice Premier Liu, President Xi Jinping’s lead trade negotiator, is due to sit down with US trade representative Robert Lighthizer on Wednesday for two days of talks aimed at reaching a trade war settlement by Mar 1.

If an agreement cannot be reached by then, President Donald Trump has said he will more than double the punitive tariffs currently assessed on about half of all Chinese exports to the US. 

The chances of reaching an agreement just got a lot worse, in part because the perfect storm Mr Liu has just flown into in Washington will bring back bitter memories of his last trip to the US capital. 

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BAD MEMORIES

The last time the vice premier was in Washington, in mid-May last year, he and Treasury secretary Steven Mnuchin both said they had agreed, at least temporarily, not to raise tariffs on each other’s exports.

Within days of Mr Liu’s arrival back in Beijing, Mr Trump embarrassed him by contradicting that assertion. 

The lack of trust this episode engendered was the main reason Mr Liu waited so long before agreeing to go back to Washington for substantive trade talks. It will also make it much harder for him to agree to difficult “structural” economic reforms that Mr Lighthizer is demanding, but are viewed by Chinese officials as potentially threatening their famously successful development model.

CATCH-22

US officials argue that their criminal case against Huawei, which erupted when Ms Meng was detained by Canadian officials late last year, and the trade talks are on two separate tracks and have nothing to do with each other. 

The US did indeed have to formally notify their Canadian officials of their intention to proceed with Ms Meng’s extradition by the end of the month, which raises the question why either side thought Jan 30 to 31 was a good time to schedule this critical round of trade negotiations. 

READ: Don’t expect a reprieve as China comes down hard on Canadian drug suspect, a commentary

Mr Xi, Mr Liu and other senior Chinese officials won’t be inclined to view it as a coincidence. To them, it is further evidence that a “China hawk” faction in Washington is intent on constraining Beijing’s emergence as first-rank technological power. 

They will also be sorely tempted to walk away from this week’s scheduled talks. 

But they also know that would probably kill any hopes of reaching a trade agreement by Mar 1, which is exactly what many China hawks want. 

© 2019 The Financial Times Ltd.

Source: Financial Times/sl

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