US and China Testing Each Other’s Patience

The United States is revealing the outline of its trade policy with China .

In a speech last week at the Center for Strategic and International Studies, United States Trade Representative Katherine Tai presented the Biden administration’s basic framework for its trade policy. She criticized the first phase of the U.S.- China trade agreements, noting that it was properly implemented during Donald Trump's administration and adding that the U.S. plans to use all available means in addition to dialogue to carry out the trade agreements. She also raised the issue of China’s overproduction of steel and solar products and suggested that cooperation among allies be strengthened to promote fair competition.

Although it has been almost one year since Tai was named the first Asian American U.S trade representative, she has been seen as having achieved little, except for emphasizing environmental and labor-centered trade policies. It is evident that in giving this presentation, Tai is working hard to build a stronger image.

During January 2020 talks, China agreed to purchase $76.7 billion in U.S. goods in 2020, and an additional $123.3 billion in 2021. However, only 59% of the plan was implemented last year. Although it has not been officially disclosed, it appears that China is being investigated for imposing subsidies, accepting industrial support and infringing intellectual property rights under Section 301 of the U.S. Trade Act. If China’s practices are found to be unfair, the U.S. may retaliate at will against all Chinese imported goods.

Many experts were hoping for a phase two of U.S.-China trade agreements or for news that the U.S. would rejoin the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Contrary to expectations, the U.S. government focused on how well China would implement the first phase of the trade agreements. And, because the CPTPP is defined by past negotiations, and now that the reality and challenges are different, the U.S. has said clearly it has no intention of rejoining the CPTPP. With China’s opposition to the sanctions that were imposed by the U.S., it is expected that a sharp battle between the two sides will ensue. As a result, there is a possibility that every issue between the U.S. and China will have to be renegotiated from the very beginning.

Currently, the U.S. is cooperating with its allies to contain China. Last month, the U.S. and European Union launched the Trade and Technology Council. Although, superficially, it is meant to work together to address unfair trade practices and strengthen cooperation on technology issues such as artificial intelligence, the true intention of the TTC is to prevent China's technological expansion and control supply chain imbalances. In addition, under the pretext of establishing a digital network with the Association of Southeast Asian Nations, the United States is promoting the expansion of its influence in ASEAN by promoting the Trade and Investment Agreement.

The U.S. has also partnered with the United Kingdom and Australia in a trilateral security pact called AUKUS. Moving away from the framework of Trump’s Quad and the past confidential information alliance, Five Eyes, it appears to be an initiative for a new military security system. By cooperating with its allies economically and with regard to security as a way of exerting pressure, the U.S. is making it very clear that it is pursuing recoupling, not decoupling, with China. Even after decreasing its dependence on China and its preoccupation with gaining an advantageous position in the global supply chain, it seems like the U.S. will not give up targeting the Chinese market.

The U.S. rose in favor as a result of the successful Korea-U.S. summit and the bold $40 billion investment plan made in May 2021; however, should the U.S.-China conflict intensify, there is a strong chance that it will impact South Korea the most.

The fragmentation of the global value chain, the worsening of the U.S.-China trade war, and the growing trend protectionism in the U.S. show no signs of abating. In addition, international politics, diplomacy, and military issues are also complicating matters and creating pressure. Now is the time to come up with a comprehensive trade strategy, including countermeasures.