How the US and China can ensure their board of trade is effective

High on the list of deliverables agreed following the summit between Chinese President Xi Jinping and US President Donald Trump was the establishment of a board of trade, albeit with little detail on its mission, responsibilities or operations. The White House expects the board “to manage bilateral trade across non-sensitive goods” while China’s Ministry of Commerce says the board “will discuss issues such as tariff reductions”. While not contradictory, both formulations are vague and hint at bumps down the road. There are two important ways to avoid misunderstanding and make the board of trade an effective mechanism – not only for engagement but also for action. First, both sides should take the time to agree on a detailed mandate, rather than papering it over or leaving that discussion for another day. Second, the US should apply the lessons of what worked and what did not work in past bilateral economic engagement bodies, including the Strategic and Economic Dialogue and Joint Commission on Commerce and Trade. For its initial task, the US-China board of trade is expected to identify products in non-sensitive sectors thought to be worth around US$30 billion that could be subject to tariff reductions or elimination. This means products such as critical minerals, advanced semiconductors, chip equipment and even cars will be off the table. It is one thing to determine what falls into the basket of sensitive trade. It is a whole other thing to develop a list of non-sensitive sectors and products. Trade Representative Jamieson Greer has listed agricultural goods, aircraft and medical equipment as US exports that Washington would like to discuss with Beijing under the new trade board arrangement. Greer has also said the administration would seek public comment on which products should be considered as falling within the board’s mandate. Non-sensitive US imports of Chinese products could include consumer goods and low-technology items, he suggested. Beyond this limited tariff-cutting exercise, it is unclear whether the US and China see eye to eye on what other tasks the board would undertake and which tools, beyond tariffs, are on the table. The term “managed trade” has been used to describe US official thinking on the board’s work – as opposed to negotiating trade rules to level the playing field, which was pursued in Trump’s first term. As the US trade war on Japan in the 1980s and 1990s showed, tariffs are not the best tool with which to manage trade and can amount to de facto embargoes. Historically, quantitative restrictions – such as in the form of quotas, voluntary export restraints or orderly marketing arrangements – have been used extensively to attempt to limit trade flows. So far, we have not heard Greer talk about quantitative restrictions, but if this tool is of potential interest to the US as a means to manage high trade volumes, it is a conversation worth having now with Beijing when the initial parameters of the board of trade are still being hammered out. If China intends to also use the board as a forum to raise its concerns about regulatory and market access barriers, then it would be a function that harks back to previous bilateral economic dialogues such as the Joint Commission on Commerce and Trade. Before it was effectively suspended, the joint commission’s agenda for meetings included long lists of trade barriers to discuss – with few resolutions achieved. American businesses quickly learned that addressing one barrier did not necessarily result in access to the Chinese market. Rather, like peeling an onion, once one layer of barriers was removed, others quickly surfaced and were subsequently put on the agenda for future meetings. US frustrations mounted as a result and suspicion grew that the meetings provided an excuse for Beijing to keep talking instead of taking the needed market-opening actions. Solving problems should be a feature of the new board of trade and it may make sense to take deep dives into certain sectors so a whole range of barriers can be addressed in one fell swoop, rather than through a series of successive shots. Finally, the people appointed to chair the board and its establishment of potential subgroups require serious consideration. On the US side, as a respected and knowledgeable member of Trump’s economic team, Greer is the logical lead. He has a deep commitment to Trump’s quest for balanced trade, knowledge of Chinese regulatory and market access barriers, and a hardworking team that knows how to get things done. Conversely, the trade ministerial position in China does not hold the same clout. The US side should therefore consider pressing for a vice-premier to lead the Chinese side. It could even consider adding Treasury Secretary Scott Bessent alongside Greer if this is what it takes to get the Chinese side to elevate its representation. Sub-groups, perhaps at the vice-ministerial level, should be established to oversee the needed technical work of the body and ensure that political guidance is promptly turned into action. Depending on its mandate and composition, the US-China board of trade has the potential to become a venue of impact, optimising, managing and facilitating bilateral trade in non-sensitive sectors. But if both sides embark on this initiative without taking the necessary time to resolve differing views on what the group is to accomplish, the board could go down in history as a footnote, joining the list of other failed bilateral forums.

How the US and China can ensure their board of trade is effective

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Both sides need to learn from past failures, agree on a mandate and appoint officials with the clout to push decisions

Both sides need to learn from past failures, agree on a mandate and appoint officials with the clout to push decisions