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Ongoing USA & China Trade Negotiations: A Shranner Analysis to Possible Reconciliation

Oct 11, 2019

Deputy-level trade talks between the US and China designed to lay out the groundwork for high-level negotiations later in the week failed to yield any potential progress on pressing issues. 

During the discussions on Monday and Tuesday in Washington, the Chinese refused to talk about specific issues concerning technology transfers. Many hot topic issues such as human rights violations, tariff increases, and state subsidies were not discussed as previously anticipated.

President Donald Trump agreed in September to postpone an increase in tariffs on $250 billions of Chinese goods from 25% to 30% until October 15. President Trump also agreed to halt tariff increases until after the holiday season for the sake of consumer shopping. 

 

Beijing has shown few signs it is willing to make any of the concessions such as reforms to subsidies and China's state-economy model. These hot topic issues have been taken off the table even as President Trump and his team are signaling that these issues must be addressed by China’s top negotiators. 

 

Trade talks collapsed in May as the US accused China of backtracking on its previously agreed commitments while China criticized that the US for making excessive demands. This deadlock has led to market slow down and rampant unease throughout both countries as citizens turn to their leaders for reassurance. 

 

Think Different: 

As both nation states look towards a possible solution, the pressures to view opposing disputants through a narrow lens is great for short-term success at home. The United States and China are faced with a complex trade dispute whereas the situation is difficult to comprehend. When looking at the current climate between both countries, specific focus must be made on the vast power dynamics, longevity of tariff increases, and outside influences. In negotiations several strategies may be needed to overcome a difficult impasse. 

 

Power Dynamics

As China and the United States try to leverage their own power during the negotiation, a vast attempt must be made to rise above differences in hopes of carving out a sustainable agreement. Throughout the 15-month trade dispute, both sides have failed to break the stalemate with a multi-pronged strategy. Initially the United States attempted to break concessions through a series of halting tariff increases. This was short lived as China moved forward with raising duties on US$75 billion worth of US goods, with plans for further tariffs on the 15th of December. Looking at the mixture of goal interdependence and distribution of power, specific regions of stimulus tend to influence how conflicts are perceived by both parties. Currently both nation states perception focuses on relative high power, competitive, and high interdependence, whereas specific issues such as dominance come into play. Currently both nation states are creating a climate of limited power. Current analysis showcases that both nation states have perceived their location in a particular region of the stimulus for over 15 months, therefore fostering a strong orientation towards a competitive mentality. In order to detach from this mentality, specific power neutrality strategies must be implemented. Creating an environment where power is expandable and resources are not limited, enables both parties to come to the table with a shared vision of finalizing a trade agreement between both nation states. Currently the power dynamics throughout the trade talks has been based on economic pitfalls, political influences, and domestic pressures for a hard ball approach. 

 

Political Considerations as a Timing Strategy: 

As Chinese officials try to leverage their power during the negotiation, 

China has kept a close watch on the move to impeach Trump in the US House of Representatives. This recent political development could factor in on how the trade talks progress from both sides. As impeachment talks are surfacing news outlets, timing of trade talks could possibly impact the power dynamics throughout and possibly hinder the overarching goal of the talks.

 

Creating Incentives to Cooperate 

The United States and China must be willing to share responsibility for the common goal of fair trade. Both nation states are currently fighting for perceived fairness in regards to global trade. One strategy utilized in highly intractable conflicts is utilizing concessions as means to building trust amongst both parties. Early in July China agreed to buy more agricultural goods from the United States, leading into a more constructive approach to the current climate. Offering concessions while keeping in mind reciprocity will be a vital tool utilized by both parties throughout the tail end of the negotiation. Creating longevity in the trade talks creates a roadmap for possible reconciliation in the future as negotiations continue. 

 

Currency Pact as A Possible Incentive 

Current talks include a previous discussion regarding a currency pact which focuses on stopping currency devaluations and targeted exchange rates. This pact was initially discussed during previous talks but was halted after trade talks crumbled. China sent markets into panic mode earlier this year after the nation state allowed the yuan to slip well below the 7 per dollar threshold. The effect of this caused the currency to weaken, therefore creating an attractive exporting market for international buyers. This specific pact could be an attractive tradeoff between the two countries.

 

Partnership 

Creating a partnership requires perquisites in order to create a roadmap where both parties are winners. Motives from both sides must be established accurately and effectively. As the United States and China come to the negotiating table with a mentality of cooperation, trust must be rebuilt. Rebuilding trust and creating trust amongst both parties can prove challenging. Research shows that many people have high levels of trust in new relationships with unknown but become skeptical as the relationship develops. This must be kept in mind as negotiations continue. Further, Negotiators who trust everything an individual says, is exposing themselves to possibly being taken advantage of. On the other hand, negotiators who tend to not trust anything said, will have a very difficult time reaching an agreement as trust is a main component of negotiations. Both nation states must focus on rebuilding trust in order to create a partnership. 

 

Setting a Deadline 

Imposing a deadline on trade talks between the two nation states will set a precedent of limited time. This strategy will enable concrete creditability amongst both nation states even if arbitrary. Both nation states in their search for commonality throughout this process must turn to time as a strategy to invoke productive and impactful decisions. As the trade talks have dragged on for 15 months, imposing a deadline puts both nation states on notice that it only has a limited amount of time to cooperate appropriately. 

 

Warning 

Creating a walk away point and following through on this strategy is key in trade negotiations. Further, following with a warning if limits are reached through a negotiation sets a precedent of a clear objective. A warning makes both sides of the negotiation understand the limits of the trade-talks and establishes clear guidelines. In reference to the United States and China, specific limits have already been expressed including intellectual property, human rights, domestic tariff control, and foreign operations opportunities. Sparking a conversation about what will happen if a deal is not reached, aids in creating a common road that both parties will find in fulfilling to their needs.

 

Avoiding a Dead-End During Negotiation

Pushing a negotiation partner into a corner creates an environment whereas they must use all resources to fight against the opposing party. The current trade talks have created hope that this would then allow further talks to take place on deeper issues such as intellectual property and technology. These specific issues have become major blocks in previous talks. Currently, it is not projected that a long-term deal will come from the two days of talks this week, however, creating a roadmap through the strategies previously discussed, will lead to a finalized agreement between the two countries. 

 

 

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