Explaining the Asymmetry in the Rank of the U.S.-China Trade Deal Signatories

By Canghao Chen —

President Donald Trump greets Vice Premier Liu He of the People’s Republic of China during trade negotiations. Source: PAS China’s flickr photostream, image in the public domain.

On January 15, 2020, the governments of the United States and the People’s Republic of China (PRC) signed a phase-one trade agreement. The asymmetry in the political rank of the two signees is extraordinary: on the U.S. side stands the president, while on the Chinese side there is only a vice premier. Although Vice Premier Liu He, who made an enormous contribution as head of the Chinese negotiation team in framing this agreement, is totally qualified to be the Chinese signee, the fact that President Donald Trump far outranks Vice Premier Liu still deserves explanation. Leaders in both the State Council of the PRC and the Chinese Communist Party are extremely cognizant of an interlocuter’s rank and they would usually demand ranking equivalency when conducting diplomacy. Beijing’s decision to send Liu was deliberate. Thus this mismatch in the standing of signatories indicates differences in the attitudes of the two governments towards the agreement and carries implications for the enforcement and the prospect of a phase-two trade agreement. This article fleshes out three theories to explain Beijing’s decision: a strategy to mitigate against President Trump walking out on negotiations, insurance against uncertainties in the U.S. impeachment proceedings and upcoming election, and a compromise between the hawks and doves inside Zhongnanhai.

The first theory takes note of Trump’s walk-out during his Vietnam summit with the leader of North Korea. Beijing was obviously worried by this precedent. Right after this event, a Chinese article published in the Hong Kong Economic Times warned that a similar scenario could happen in the U.S.-China trade negotiation. As a result, Beijing strategically sent Liu in order to avoid another Trump walk-out: even had Trump made a last-minute demand which Beijing could not accept, there would be no direct embarrassment to President Xi Jinping. If President Xi made the visit and Trump walked out, there would be no diplomatic space for continued talks. Under Chinese political culture, the breaking-off of negotiations between the top leaders would be interpreted as the end of peaceful solutions and that the conflict between the two parties would be irremediable. Therefore, this explanation implies that the uncertainty in finalizing the trade agreement lasted up until it was signed. As this uncertainty is associated with Trump’s personal style, it will continue to exist in phase-two trade negotiations, should they progress.

The second theory suggests that the Chinese took U.S. domestic politics into consideration. The signing came in an election year when Trump was facing an impeachment trial. The fact that Beijing was willing to sign a partial agreement at such a sensitive moment suggests that the Chinese leadership anticipated that Trump would survive the impeachment and likely win a second term. Nevertheless, sending a comparatively low-ranking official could serve as insurance against uncertainties. The trade agreement could stop the vicious tariff cycle triggered by the trade war, but in case a new U.S. president emerges after the election, Xi still holds on to the option of simply abrogating the agreement and replacing the old negotiator with a new one to start another round of negotiation. If Xi had signed the agreement by himself, there would be no such easy option of abrogation and replacement.

The third theory argues that the decision to send Liu is a compromise between the hawks and doves inside Beijing’s highest decision-making circle. Since the text of the trade agreement was revealed, many conservative Chinese scholars have complained that this deal is a one-sided concession. From their point of view, China promises to amend its intellectual property regulations and to purchase an additional $200 billion in goods and services from the United States, while Washington does not even lift all the tariffs it imposed. After the signing ceremony, Yan Xuetong, Dean of Institute of International Relations at Tsinghua University, posted three questions on his social media account asking whether the trade war is ended, whether the enforcement is feasible, and whether the U.S. government would reduce the restrictions it imposed on Chinese technology companies? These doubts are likely shared by the hawks in Zhongnanhai. Sending Liu He, a Harvard-educated pro-reformation economist widely seen as the head of the dovish faction, signals that significant opposition exists inside the Chinese leadership. Under this logic, in order to appease the hawks, Xi chose not to sign the deal by himself. The resentment over a one-sided agreement could diminish China’s willingness and capability to faithfully enforce the agreement because hawkish bureaucrats and cadres in the system may procrastinate or balk at swift implementation. Moreover, the resentment could also forestall further concessions from China during the following negotiation, which suggests limited space for Liu and renders any grand demand by the U.S. government, such as China’s elimination of state subsidies, a mission impossible.

Additionally, the story on the U.S. side is also noteworthy. Some advisers must have reminded President Trump of the mismatch in standing and suggested that United States Trade Representative Robert Lighthizer or Secretary of Treasury Steven Mnuchin would be a more appropriate signee on behalf of the U.S. government. President Trump must have made a conscious decision to sign the deal in order to personally brand the trade agreement, and this achievement could then be presented as a win in his re-election campaign.

In conclusion, the asymmetry in the rank of the two trade agreement signatories implies a lack of trust between the two parties, especially on the Chinese side. Though neither government currently has the incentive to deviate from the phase-one trade agreement given their respective domestic situations, the lack of trust means that tremendous difficulties lie ahead before resolution of deeper disputes might be achieved.

Mr. Canghao Chen is a research intern with the Simon Chair in Political Economy at CSIS.

Share

Leave a Reply

Your email address will not be published. Required fields are marked *