Could Infrastructure Help Strengthen U.S.-China Trade Ties?

On the campaign trail, Donald Trump pledged that his administration would take a close look at America’s trade and infrastructure needs. As president, he moved quickly to pull the country out of the Trans-Pacific Partnership. So far, his infrastructure reforms have stalled. Both trade and infrastructure are key issues in the Sino-American relationship. On Monday, the Center for China and Globalization (CCG) and the China Society hosted a panel of speakers to discuss developments in the trading relationship between the two countries and the opportunities and challenges the new administration poses.

“I am involved in the China Society because I know that the bilateral relationship between these two countries is the most important in the world,” said China Society Chairman of the Board John Dickson. “When these two societies work together, there is no problem that cannot be solved.”

Infrastructure is one key area where the U.S. and China may find common ground. In 2013, China introduced the One Belt, One Road initiative, a development strategy that focuses on connectivity and cooperation between Eurasian countries. The past three years have seen China making large investments in infrastructure, including roads and bridges, railroads, and power grids along several corridors connecting China to broader Eurasia.  The size of the project dwarfs Trump’s proposed infrastructure spending: China is planning to spend $1 trillion on the initiative.

All that spending should result in dramatic improvements to transportation and trade in the region. Still, the idea that Chinese foreign aid could influence global attitudes towards the country continues to worry some American observers. Katherine Wu, of the U.S. Office of Trade and Regulatory Reform at the U.S. Agency for Professional Development, says that this could actually be a benefit for the U.S.

“The U.S. is the largest donor in the world,” she said, though cautioning that her remarks did not necessarily reflect formal policy. “Our foreign aid budget is $38 billion, not counting private sector donors, like the Gate Foundation. We are very good at the soft side of foreign assistance, things like growth, empowering women and disadvantaged, human development, and governmental reform. Having the Chinese do the infrastructure in places where there is a need, such as central Asia, would be a great opportunity.”

The focus on the two societies, rather than their governments specifically, was a theme shared by both Chinese and American experts. Since Richard Nixon first visited China in 1972, trade between the countries has grown in leaps and bounds. Last year, U.S. trade with China was just shy of $650 billion. In the past decade, trade between the U.S. and China grew 11 percent higher than the overall growth rate of world trade.

Despite their strong trade ties, relationships between the two countries retain a certain level of suspicion. In China, companies are eager to do business with the U.S., but find the layers of federal and state regulations difficult to navigate. Adding to the difficulties are what are deemed “non tariff barriers to trade,” regulations that impede foreign companies’ access to American consumers, without taking the form of a tariff.

“For the American side, you want to solve the problem by selling more and Chinese companies would like to import more, but there are taxes and controls that limit that,” said Zhenagge Zhao, the American representative at the China Council for the Promotion of International Trade.

These regulations include barriers to mergers with Chinese companies and restrictions on gaining proper licensing. The latter issue is of particular concern for Chinese banks, which are struggling to open branches in the U.S, said Gene Ma, chief China economist at the Institute of International Finance. In fact, some banks began looking at buying pre-existing American banks to gain a foothold, rather than attempting to navigate the regulatory process.

“As much as we all like free markets, government is right around the corner,” agreed Marc Ross, founder of Caracal Global, a communications, content, and commerce strategy firm. Despite the moves towards trade and cooperation undertaken by individual companies or industries, government continues to add barriers to the relationship.

Ross stressed that while companies may wish to do business in the U.S., government on all levels would likely step in to impede. He urged Chinese investors to focus on building relationships around the country, rather than limiting their attention to large coastal cities like New York and Washington.

This initiative would largely need to be taken up by companies themselves. Thus far, Chinese businesses have, to a large degree, relied on their embassies to make trade introductions. To expand further in their business relationships, these companies need to engage more directly with state governments and other potential partners, said Jorge Guajardo, Mexico’s ambassador to China.

“I do believe that there is a lot of value added that China brings the world in many areas, however, there is a political reality that China has to face,” said Guajardo, who explained that the Chinese embassy staff lacked the expertise and time to be the best advocates for Chinese industry. “China has to engage at the local level, at the state level, at the national level. Chinese companies can no longer afford to just come out on the merits of their product without building relationships.”

That was the reason behind the round table discussion. Although held in a formal hearing room in the Senate office building, Monday’s event was meant to be a discussion between the panelists and their audience, one of the people to people exchanges that several participants described.

“For U.S. and China investment, the engine of the dynamic part is from people to people, from the business sectors, not from government to government,” agreed Zhao.

While China pushes for increased access to America’s millions of consumers, what was notably lacking for the discussion was any mention of intellectual property rights or the trade concerns that America has taken before international arbiters in the last year. Although the desire for cooperation and trade exists, challenges still remain.

From Inside Sources，2017-10-4

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