How Xi Jinping's colleagues rejected an 'unequal' trade deal
A 150-page agreement was sent back to Washington, gutted and shrunk to 105 pages
https://asia.nikkei.com/Editor-s-Pi...g-s-colleagues-rejected-an-unequal-trade-deal
Early this month, the Chinese government sent the U.S. a trade deal draft that had been slashed from 150 pages -- painstakingly assembled by both sides over five months of negotiations -- to 105.
The move riled U.S. President Donald Trump and brought progress on the trade talks to a screeching halt, as Beijing surely knew it would.
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Voices within the Chinese Communist Party, growing louder day by day, were insisting that "an unequal treaty that codifies meddling in our domestic affairs into law is unacceptable."
These cries came not only from the party's conservative left but also from the rank and file -- from the core of workers and management at state-owned companies, from industries that rely on subsidies for survival and from the bureaucratic institutions that protect them. The proposed deal threatened their interests.
When modern China was established seven decades ago, the party denounced the "unequal treaties" China signed under imperial rule, exemplified by the 1842 Treaty of Nanking with Great Britain, which ended the First Opium War, and the 1895 Treaty of Shimonoseki, which ended the first Sino-Japanese war.
The Shimonoseki agreement forced the Qing dynasty to pay an indemnity to Japan and hand over Taiwan. The dynasty would not last two more decades.
Whether the proposed deal between the U.S. and China really qualified as an "unequal treaty" is debatable, but regardless, it cut to the communist government's heart. It would forbid forced technology transfers by a variety of both public and private means, theft of foreign technology or intellectual property, subsidies to state-owned enterprises and export subsidies given to all companies.
It is easy to understand the argument that the legal measures demanded by Washington were an unacceptable form of interference that violated China's principles.
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In late April, Xi was forced into an about-face in his negotiating tactics. The negotiating team, led by Vice Premier Liu He, one of Xi's close aides, had focused too much on reaching an amicable resolution and stepped outside the bounds of the discretion granted by party leadership.
But the Xi-Liu axis would never compromise on the most vital points -- those intertwined with Communist Party rule. This is "the last 10%" that U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin have said stood in the way of a deal.
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Yet the text went back to the U.S. gutted. From Washington's point of view, the agreement was now nothing more than 105 pages of words, with nearly all of the legal and other mechanisms to ensure compliance ripped out. It was proof that Beijing had given up on reaching a quick conclusion.
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Despite being positioned as the "core" of the party leadership, even Xi cannot overturn a collective decision without securing the consent of the party leaders.
The Xi-Liu duo, which has been leading the trade negotiations, was, in effect, shackled.
This is a sign that, seven years into his rule, Xi's political momentum is slowing. While garnering unrivaled power through an anti-corruption campaign that eliminated his rivals, the president has little to show the public in terms of economic achievement.
The credit of expanding China's economy into the world's second largest goes to Xi's predecessors.
When Liu appeared in Washington last week, he no longer had the title of being Xi's "special envoy." His sole mission was to convey to the world that negotiations had not collapsed and that they will go on.
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There is still time to talk, and Trump has said he will meet with Xi in Osaka, on the sidelines of the Group of 20 leaders summit. The two-day meeting begins June 28.
When the presidents sit down together, at stake will be the implementation of tariffs on all Chinese exports to the U.S.
The Chinese media is hardening its stance, pounding the argument that China can never compromise on principle issues.
Xi has no easy task.
