Tuesday, April 10, 2018

China Announces Plan To Ease Tariffs And Investment Restrictions

In what some may interpret as a small victory for President Donald Trump's trade policy, President Xi Jinping announced that China will reduce its tariff on imported autos and pursue a number of other policies to ease restrictions on imports and foreign investment. Rather than a breakthrough, however, Xi's remarks reflect a continuation of policy that was planned before President Trump's tariffs were announced.

“China's door of opening up will not be closed and will only open wider,” Xi said.

Xi's remarks came during a speech a day after President Trump tweeted that the disparity in tariffs between the two countries represented “stupid trade” rather than free trade.

“China relied in the past on creating favorable policies for itself,” Xi told investors per NPR, but added that in the the future “to rely more on improving our investment environment, we will increase our alignment with international rules and our intellectual property protection."”

“Human society is facing a major choice to open or close, to go forward or backward,” Xi said. “In today's world, the trend of peace and cooperation is moving forward and the Cold War mentality and zero-sum-game thinking are outdated.” Xi did not refer directly to President Trump or the United States.

President Trump has long criticized China for both its tariffs on American imports and for the alleged theft of US intellectual property. An investigation into Chinese trade practices by the US Trade Representative last year found that theft of trade secrets costs the US “between $225 billion and $600 billion” annually.

At first glance, Xi's policy proposals may seem like concessions, but Xinhua reported last November that China planned to loosen trade restrictions in the near future. The plans included easing access to banking, securities and insurance as well as “gradually and properly” reducing automobile tariffs. The article also noted that restrictions on foreign ownership would be lifted in utility and “new energy” vehicle markets on a trial basis in free trade zones by June 2018.

On the same day that Xi delivered his speech, China filed a complaint with the World Trade Organization over the new US tariffs. China's complaint alleges that the US tariffs on steel and aluminum violate the General Agreement on Tariffs and Trade and the Agreement on Safeguards. The US filed a WTO complaint against China in March over intellectual property theft.

Financial markets reacted positively to Xi's speech, but it is not clear that the emerging trade war has been averted. China has previously pledged to respond in kind to President Trump's new tariffs. It is possible that China's relaxed trade restrictions could be limited to other trading partners if the US and China cannot reach a deal to avoid the new US tariffs.

CNN noted that the Chinese Communist Party newspaper denied a link between Xi's policy proposals and the the spat with Donald Trump. “These measures are based on our consistent policy and stance, our own development and our own pace,” the People's Daily said in an online commentary. It called “linking China's strategic choice to the current China-US trade frictions” a "baseless interpretation.”

Originally published on The Resurgent

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