The U.S. May Have Snubbed a Critical Dealmaker in China Trade Talks
Trying to follow the U.S.-China trade war and negotiations is like watching a fast-moving tennis game with the summer sun in your eyes. And the U.S. team may have just sent a ball hurling into the net.
On Friday came a report on an attempt by China to schedule a call between Vice President Pence and Wang Qishan, vice president of the People’s Republic of China, according to multiple sources speaking to Bloomberg. A Pence spokesperson told Bloomberg the Chinese never requested a call and there was no plan for one.
Harald Malmgren, a former trade advisor and representative for the Johnson, Nixon, and Ford administrations, asked on Twitter whether anyone in the Trump administration was aware that “Wang is Xi’s ultimate decider on PRC-US negotiating details.”
What caused an apparent major flub in the negotiation process could be a fundamental mismatch in the negotiation tactics and strategies of the two national governments.
The U.S. seems to be using “a decentralized approach to trade negotiation” and “they’re managing it by committee,” said Nicole Lamb-Hale, managing director of risk management firm Kroll Associates and a former assistant commerce secretary in international trade administration during the Obama administration.
Such people as Director of the National Economic Council Larry Kudlow, U.S. Trade Representative Robert Lighthizer, Secretary of Commerce Wilbur Ross, and Treasury Secretary Steven Mnuchin all seem to have a voice. But, ultimately, the one opinion that matters is Donald Trump’s. “It seems to be driven by the way a president feels on a given day about a situation,” Lamb-Hale said. “The President is very involved, it seems, in some of the minutiae of this and I think it creates some confusion with China and with our allies. Who’s in charge here and can the word of a U.S. official stand as gospel or is it going to change next week?” Trump will meet with another country’s leader, and make decisions. ” A tweet comes out and it seems the experts are playing catch-up,” she said.
In China, the situation is almost entirely flipped, with high-level control making use of focused experts. “The Chinese communist party has what’s called leading small groups—LSGs—for all important policy matters,” said Elizabeth Larus, a professor of political science and international affairs at the University of Mary Washington and expert in the politics of China. “Xi Jinping is the leader of most of these leading small groups.” Xi also happens to be the president of the PRC and the general secretary of the Communist Party of China.
But Xi relies on others for the actual negotiations. Vice Premier Liu had been the top Chinese negotiator for the trade talks but the discussions ended in May with no resolutions and it appeared that Xi might have lost faith in him. “Wang Qishan has a long history of being a really tough negotiator and being close to Xi Jinping,” Larus said.
Trump and Xi are both expected at the G20 talks at the end of June in Japan. “Trump wants to meet Xi Xhingping at the G20 at the end of the month,” Larus said. “There’s a possibility that Trump does not want a flurry of activity before he meets Xi. That would be consistent with his habit of meeting with top leaders and trying to get some kind of deal with the top leaders and then you have the officials work it out.”
Unfortunately, it’s completely contrary to how trade is usually negotiated between countries. “What typically happens in these negotiations is that by the time the presidents get involved, the deals have already been struck,” Lamb-Hale said. “President Trump has put his thumb on the scale too early.”
The result might be no meeting with Xi, no agreement, the imposition of 25% tariffs on many Chinese goods, as Fortune has reported.
In other words, get ready for a hot summer.
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