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Could elusive US-China trade deal be dotted before G-20?

US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are scheduled to begin in Beijing on Thursday a new round of trade negotiations with China. While a deal is still by no means guaranteed, there are growing incentives for both sides to cut an agreement at or before June's G-20.

US President Donald Trump said Tuesday that "probably one way or the other we're going to know over the next three to four weeks", with both sides poring over a reportedly 15-page document they are working on that Mr Trump said will be an "excellent" deal. So this could potentially mean a conclusion before June's G-20 and a Trump-Xi meeting in April or May, given that the US president has a penchant for ego-boosting summits and is known to ideally want to seal any deal face-to-face with his Chinese counterpart.

What Mr Trump also wants - building on the recent diplomacy with President Xi Jinping over North Korea - is sketching out the beginning of a wider grand bargain with the Chinese leader, extending beyond the economic arena to security issues too. A big agreement of this kind could also have a broader positive effect on international relations, helping underpin a renewed basis for bilateral relations into the 2020s.

The most recent stimulus for a positive conclusion of trade negotiations is the Mueller report's conclusion last week which is perceived in many world capitals to have placed Mr Trump in a stronger domestic political position. With the charge of collusion with Russia (but not "obstruction of justice") apparently found wanting, the report is neither the complete vindication for Mr Trump that the White House suggests, nor the worst-case scenario. In this context, the billionaire's prospects of winning a second term are widely seen in Beijing to have risen, thereby providing more incentives for Chinese policymakers to double down now in the trade negotiations.

The formal conclusion of the Mueller report also gives the president more potential political space to focus squarely on 2020 and seek in the coming months to try to fulfil his "Make America Great Again" agenda. This programme includes seeking to reduce the US global trade deficit and cracking down on trade practices perceived to be unfair.

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The Trump White House still has Beijing squarely in its sights here as signified, for instance, by the signing of legislation last year requiring the US Commerce Secretary to deliver a "Report on Chinese Investment in the United States" to Congress and the Committee on Foreign Investment in the United States every two years up to 2026. The bill singles out Chinese investment as a security threat and zeros in on Beijing's "Made in China 2015" plan. So much so in fact that some in Beijing perceive the new US legislation as just the latest part of a wider, grand strategy under Mr Trump to thwart the nation's rise as a global superpower.

This sentiment underlines that, while hopes of a trade deal are rising again, bilateral tensions have by no means disappeared and still have the potential to severely disrupt what is probably the world's most important economic and political bilateral relationship. It is important to note here too that Mr Trump is also under political pressure from some Democrats over the terms of any trade deal.

Take the example of Senate Minority Leader Chuck Schumer who said last week that Mr Trump should not "back down" and take a deal based largely on Beijing's purchases of US soyabeans and other goods. The long-time China hawk, now one of the most powerful Democrats in the nation, also tweeted that "Now's not the time to drop US$200 billion in tariffs just because China's close to a deal".

All of these factors, alongside the complexity of the agreement currently being negotiated, is one reason why progress has been slow after Mr Trump had set a tentative deadline of this month to try and reach a deal. And in this still-uncertain context, Mr Xi is unlikely to want to travel to the United States for (or host in China) a high-stakes foreign summit with Mr Trump unless a deal is more or less completely brokered beforehand.

This is especially so after the US-North Korea summit last month in Vietnam ended in a diplomatic disaster, after months of painstaking negotiations were expected to yield a deal, when Mr Trump "walked" out from talks with Kim Jong-un. The mercurial nature of the US president is widely recognised in Beijing as a relevant factor in any negotiation end-game as, while economic and security fundamentals will largely determine the course of ties in coming years, personal warmth between the two leaders could also be key.

During the Obama presidency, the fact that bilateral relations remained generally cordial reflected, in significant part, the personal commitment of Barack Obama and Mr Xi to stability. Both recognised the super-priority of the relationship, and Washington pursued a strategy that promoted cooperation on softer issues like climate change, while seeking constructive engagement on vexed, harder issues such as South China Sea tensions.

Meanwhile, Mr Xi has outlined his desire to fundamentally redevelop a new type of great power relationship with the US to avoid the conflictual great power patterns of the past. This is an audacious goal, which still lacks any detailed definition, and it is not certain how long the pledge will remain in place if Mr Trump returns again to his previous bellicosity towards China.

Should talks break down in coming weeks, despite the presently positive mood music, Beijing will know there remains the possibility that Mr Trump's rhetoric will get very hostile again, as during much of 2016 and 2017. He had previously asserted that "China…has been very tough on our country…We probably lost last year US$500 billion in trade to China. Think of it: 500 billion". And it is this narrative that Mr Trump may yet return to this year if he judges it again in his political interests to do so.

Taken overall, both sides now have growing incentives to conclude a trade deal this Spring. However, talks could yet break down again as soon as April and any final breakthrough may require the personal intervention of Mr Trump and Mr Xi at the G-20, or at a special summit beforehand in China or the US.

  • The writer is an Associate at LSE IDEAS at the London School of Economics

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