US-China Talks Will Resume in London

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Bloomberg Jun 10 10:39 · 20.3k Views

Melanie Hart, Senior Director at the Atlantic Council's Global China Hub, weighs in on what to expect from a second day of trading talks between the United States and China. She discusses how these talks are being used to unravel things that agitated both countries after the tariff ceasefire back in May. Melanie speaks with Kailey Leinz and Joe Mathieu on Bloomberg's "Balance of Power."

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Transcript

00:00 Where should we be setting the bar of the outcome of a second day of talks
00:04 tomorrow?
00:04 Is it enough if they just walk away with a handshake and we agree not to escalate?
00:08 At least for now?
00:09 The bar should be pretty low.
00:10 You know, the goal for these talks is just to get back to where we were a couple of weeks ago
00:15 in May when the US and China negotiated tariffs ceasefire
00:19 to create a 90 day process to have deeper discussions.
00:23 You made a great point there.
00:24 This isn't exactly progress if we're just trying to get back to a point that followed
00:28 so-called Liberation day.
00:30 There's been this idea of relief though, that if
00:32 the rare earths and batteries come through on the China side of export controls are loosened on the
00:38 US side.
00:38 Maybe we have a deal.
00:40 But is that a fair deal and why is the US giving up more now?
00:44 So I wouldn't call it a deal necessarily.
00:46 It's an agreement to get back to deal making,
00:49 really.
00:49 We have a misalignment between the US and China.
00:52 And understanding coming out of the Switzerland meetings a couple weeks ago on what the 90 days was supposed to look like,
00:58 the US expected that China would be exporting and granting licenses for a rare earth magnets at a pretty quick clip.
01:05 But the licenses were pretty slow and that resulted in Ford having to shut down production, which is a big deal.
01:11 China was expecting the United States to withhold any measures on chip controls, but the US put out new export control measures on May 15th.
01:19 So this is really
01:21 an aim to unravel some of the things that agitated the two sides over the past couple of weeks.
01:26 Well, when we consider those export controls, this administration is frankly just continuing policy that we saw in the last administration as well.
01:32 They there is a concerted effort to restrain China's technological
01:36 capability.
01:36 If we're to unwind some of these export controls, what position does that put US National Security?
01:42 This is really problematic because when I'm sitting across the table from my Chinese counterparts, the argument I always make is when we put export controls in place, it's for solid national security purposes, and that's why we don't use them as leverage.
01:56 When you do it in rare earths, it's very clearly just a move to exert leverage over other countries because you turn them off and on at will.
02:03 This is really a bit unprecedented.
02:05 It's moving the US into the position where we turn our chip export controls off and on.
02:10 It will if that is indeed on the negotiation table.
02:13 That's a concern isn't how you treat a national security crisis, obviously.
02:17 What kind of chips are we talking about?
02:18 These aren't
02:20 H20 chips coming out from NVIDIA, right?
02:22 These are low, lower level semiconductors that we decided to pull back on.
02:26 The particular,
02:28 the particular measure that Beijing is really focused on is a May 15th
02:32 announcement from the United States.
02:34 That is a warning to other nations that if they are purchasing Huawei AI chips, the US considers those chips to likely contain export controlled material that wasn't licensed.
02:45 And thus the third country, the third country chips could face US enforcement measures.
02:49 So it's really a warning to other countries around the world not to buy Huawei AI chips
02:54 when we consider that these meetings are happening after an hour and a half long phone conversation between President Trump and Xi Jinping last week.
03:01 Are the incentives there for XI specifically right now to agree to meet with President Trump in person to show any kind
03:07 of faltering in China's stance
03:10 on this?
03:10 Or is it actually Trump that has the weaker hand?
03:13 China has more leverage than we do at this point.
03:15 Beijing has been working for at least a decade
03:19 to build up that leverage.
03:20 It's no accident that they control around 99%
03:23 of these rare earths magnets.
03:25 They built up that control on purpose for this moment, and now they're using it.
03:29 We don't have the same leverage.
03:31 That's why it's really important that whenever we apply
03:34 trade policy or export control measures on China, that they be policies we're interested to live with and that are in our own national interest.
03:42 Yeah, we're almost out of time.
03:43 I want to get back to the original premise here because it sounds like we're nibbling around the edges.
03:47 We have an August deadline for something bigger.
03:50 Should we be talking about a comprehensive trade deal, or is that truly years away?
03:54 I don't see a comprehensive trade drill that would be in U.S.
03:57 National interest.
03:58 There are other things we can do.
04:00 China could.
04:00 China has just demonstrated that they're very good at export control regimes for rare earths.
04:05 They could do the exact same thing for fentanyl.
04:07 There are things like that that should absolutely be on the table and that we could definitely agree to.