Trade talks seen as unlikely to mend US-China divide

Fears over Chinese state interference in its economy have changed how Washington views Beijing, in both Democrat and Republican circles. (AP)
Updated 17 September 2019

Trade talks seen as unlikely to mend US-China divide

  • China’s Communist Party will mark 70 years of ruling the country on Oct. 1

BEIJING: US and Chinese officials will restart trade talks this week, but any agreement between the two is expected to be a superficial fix.

The trade war has hardened into a political and ideological battle that runs far deeper than tariffs, experts in both countries say.

China’s Communist Party (CCP) will not budge on US demands to fundamentally change the way it runs the economy, while the US will not backtrack on labelling Chinese companies national security threats.

The conflict between the two could take a decade to resolve, White House economic adviser Larry Kudlow warned on Sept. 6. Yu Yongding, an influential former policy adviser to China’s central bank, told Reuters that China was in no rush to make a deal.

Presidents Donald Trump and Xi Jinping may hammer out an agreement in October to soothe markets and claim political credit.

But any final agreement is “extremely unlikely to meaningfully address Chinese structural reforms” sought by the US and others, said Kellie Meiman Hock, a former US Trade official and managing partner with McLarty Associates.

Negotiators have made little progress on points of disagreement since talks broke down in May, sources suggest.

Beijing is unwilling to address its support for state-owned companies, they add. The US continues to label Chinese tech company Huawei a national security threat, and to threaten new trade tariffs.

“The result of talks must be the dropping of all tariffs,” said He Weiwen of the Chongyang Institute for Financial Studies. “This is the baseline for China.” 

Since trade negotiations between the world’s largest economies collapsed in May, both have also broken promises and traded public insults. The mood is upbeat, but a single Trump tweet could turn that around, analysts say.

“They’re locked in this uncomfortable embrace,” said William Reinsch, a former senior Commerce Department official. “Both presidents undercut their negotiators and neither side can rely on what the other has said.”

Trump’s “tough on China” stance has swept in a new way of thinking about Beijing in the US, despite his personal unpopularity. Congress, bitterly divided along partisan lines on most issues, is united about the need for Chinese reform.

Democrats running against Trump are unlikely to repair the relationship if they take the White House in 2020. Presidential candidates have used terms like “corruption” and “theft” to discuss China’s trade practices.

“There’s been a tectonic shift,” said Warren Maruyama, former general counsel for the US Trade Representative’s office and partner with law firm Hogan Lovells.

“The old idea that China was in the middle of free market economic reforms that would lead them our way is effectively dead. There’s bipartisan support for a tougher China policy.”

Lawmakers are responding, with China-related bills in Congress, from legislation punishing Beijing for human rights abuses against Muslims in Xinjiang to support for protesters in Hong Kong.

The 2020 National Defense Authorization Act, or NDAA, could include provisions targeting China on issues ranging from technology transfers to synthetic opioids.

Trump faces a worsening economy at home, thanks in part to his tariffs, but key constituencies have stood by him. US executives in China say Beijing is miscalculating if it thinks the trade war will undermine Trump’s support.

“The problems are deep and structural,” said Craig Allen, who now heads the US-China Business Council. The countries’ high-tech sectors may be permanently decoupled, he said, over concerns about Chinese espionage, hacking and intellectual property theft.

The CCP also faces a slowing economy as it prepares to celebrate 70 years of rule.

Many in Beijing believe that Trump has provided Xi with convenient political cover, allowing him to blame tariffs for the slowdown.

In a throwback to the Mao Zedong era, Xi said this month there must be a “resolute struggle” against  challenges to the party’s leadership, the country’s security and anything that threatens the country’s core interests.

India probes Flipkart, Amazon discounts after retailers complain

Updated 15 October 2019

India probes Flipkart, Amazon discounts after retailers complain

  • Products on Amazon, Flipkart listed at steep discounts in sale
  • Trader groups allege firms violating foreign investment rules

NEW DELHI: The Indian government is looking into whether hefty discounts offered on Walmart-owned Flipkart and during their online festive sales violate foreign investment rules, a commerce ministry official told Reuters.
India introduced new rules in February aimed at protecting the 130 million people dependent on small-scale retail by deterring big online discounts. The rules forced e-commerce firms to tweak their business structures and drew criticism from the United States, straining trade ties between New Delhi and Washington.
While Amazon and Flipkart say they’ve complied with the federal rules, local trader groups say the two companies are violating them by burning money to offer discounts — of more than 50 percent in some cases — during the ongoing festive sales.
Reuters reviewed emails and internal training material from Flipkart showing the company is in some cases offering to reduce, or forfeit, its sales commission from sellers that offer discounts.
The commerce ministry official said the government was reviewing complaints and evidence filed by the Confederation of All India Traders (CAIT), a group representing some 70 million brick-and-mortar retailers, alleging Amazon and Flipkart were violating the foreign investment rules.
The official declined to comment on possible action, but executives from Amazon and Flipkart were summoned to meet commerce ministry officials last week to discuss the matter.
Flipkart in a statement said it had a “good meeting” with government officials and it was “deeply committed to doing business the right way in India.”
Amazon said it had an “open & transparent discussion” with officials and has a high bar for compliance.
Seeking to attract shoppers around the key Hindu festival of Diwali, both retailers have placed full-page advertisements in top national daily the Times of India to showcase discount offerings stretching from Samsung and Apple phones to clothing and diapers.
“Customers are going online because of the unbelievable discounts. Because of this sales at offline businesses are down 30 percent to 40 percent this month,” CAIT’s secretary general Praveen Khandelwal said.
Two emails received by Flipkart sellers in September, just days ahead of the inaugural phase of the festive sales, showed it offering to partly fund discounts.
The company would “burn” 3 percent of the discount if a seller lowered a product price by 15 percent, or 9 percent if the seller discounted by 30 percent, said one of the emails.
In training material posted on Flipkart’s restricted website for its sellers, seen by Reuters, the company asks them to prepare for the festive season by saying “nothing is bigger than this” and explaining how they can benefit by discounting products for Flipkart’s premium customers.
“We want to ensure that you fetch as much profit from it as possible ... whatever the discount you are offering, half of that will be reimbursed to you by Flipkart,” a post said.
A Flipkart source said the incentives were compliant with Indian regulations and were aimed at promoting sellers’ earnings by effectively reducing the commission they pay.
All India Online Vendors Association, whose 3,500 members sell products on various online platforms including Flipkart, in a statement said fewer than 100 of its members benefitted from Flipkart’s partial discount funding, giving some sellers an unfair advantage.