US, China may find only ‘tactical floor,’ ex-trade official says

US President Donald Trump poses for a photo with Chinese President Xi Jinping (File image)

Any US-China trade agreement could provide temporary relief to bilateral tensions but won’t change the trajectory of the world fragmenting into separate blocs, a former top US trade official said.

“A US-China deal, whatever it is ... will be at best setting a tactical floor for the moment,” said Charlene Barshefsky, who was the United States Trade Representative in the 1990s under former President Bill Clinton. “Strategically, it will not impact, I don’t believe, either the direction that China is going in or the direction the US is going in,” she said at the Bund Summit in Shanghai on Saturday.

Barshefsky negotiated the terms of China’s accession to the World Trade Organization more than two decades ago. She said she now expects an “organic evolution” in which the world becomes divided into three blocs, with the US leading its allies, China leading the Global South and potentially the Middle East and Russia, and another group of non-aligned countries including India.

Her comments came against a backdrop of ongoing US-China trade talks. Officials from both countries kicked off a new round of negotiations in Malaysia on Saturday, seeking to ease tensions ahead of an upcoming leaders’ summit.

Barshefsky echoed remarks by former International Monetary Fund Deputy Managing Director Gita Gopinath, who said last year that geopolitical fragmentation among the potential blocs could lead to significant losses to the world economy.

A number of speakers at the Bund Summit also called on China to rebalance away from export- and investment-driven growth to reduce its huge trade surplus with the rest of the world.

Yu Yongding, a former adviser to China’s central bank, said the US should take responsibility for its own failure to distribute the economic gains from globalization more fairly among its citizens, instead of blaming China. He added that China has in recent years worked to shift its growth model toward domestic demand.

Yu also defended China’s latest escalation of rare earth export controls, saying it was a response to US expansion of sanctions.

Responding to concerns that the move threatens to hurt other countries such as European nations, Yu said rare earth curbs were not targeted at Europe, and said there could be a “technical” solution to minimize its spillover impact.