Domestic concerns matter for Trump and Xi in Florida meeting

By Kevin Rudd

Originally published in the Financial Times, 5 April 2017

The world looks a different place depending on whether you sit in Washington or Beijing. Ahead of Thursday’s first working-level summit between President Donald Trump and President Xi Jinping, it is worth thinking about what is likely to be on both leaders’ minds as they wing their way to Mar-a-Lago.

The Chinese leadership were impressed by Mr Trump’s unexpected election victory in November. They are fascinated that an apparent rank outsider could make it to the top in the most powerful country on earth. So when Mr Trump walks into the room, he will do so with considerable respect from the Chinese side.

Mr Xi faces an election of his own this November, behind closed doors at the 19th Chinese Communist party congress. The stakes are high, as the outcome will determine who joins Mr Xi on the politburo, and particularly the standing committee, for the next five years. For this reason, he would prefer to have a quiet few months on the international scene in the run-up to November.

This brings us to the economy. China’s economy is faring better than most western analysts have thought. Growth remains reasonable with some signs of improvement. But economic reform has proceeded slowly. Political caution has prevailed. The leadership does not want to deal with the politics of large-scale unemployment in the country’s older industrial areas that would follow were state-owned enterprises to be thrown overboard in the next burst of market reform. Mr Xi does not want any economic surprises in the next six months, including a trade war with the US.

What about Mr Trump’s domestic political concerns? His message to the American people during the campaign was clear: America has been taken for a ride by the rest of the world, particularly China, and has suffered economically in lost jobs, dying industries and broken cities. Mr Trump wants a genuinely level playing field, particularly on trade, so that the yawning two-way $350bn trade deficit is closed. While analysts will debate the merits of the president’s overall arguments on trade, his views are deeply entrenched on the trade deficit, and form an essential part of his domestic political narrative from which he will not retreat.

Mr Trump also knows the pro-China lobby in the US is disappearing. Congress has long been sceptical about China, on issues from human rights to cyber espionage. American business believes they have been net losers on intellectual property theft, anti-dumping and Chinese restrictions on US exports. As for the US national security establishment, Chinese policies in the South China Sea have led to the conclusion that China is now expansionist. Of course, China rejects all this, but Mr Trump will not see much domestic downside in taking a hard line with Beijing. So given these differing domestic priorities, what can we expect from the talks at Mar-a-Lago? It may be possible, for example, for both parties to reach an agreement on the principle of “equivalence” on Chinese and American tariff and non-tariff barriers. It may also be possible for them to agree on equivalence of investment access, assuming the US is interested in a bilateral investment treaty by another name. A mechanism for managing down tensions on the South China Sea is not impossible, either. But the problem that dwarfs all these is North Korea. It is an infernally difficult one for both the US and China. In Washington, it is also the most urgent. Chinese and American assessments of when North Korea’s nuclear programme will cross a technical threshold on missile range, accuracy and nuclear warhead miniaturisation differ. They also have different views on the regime’s strategic intentions. But both are clear that Pyongyang’s technical progress is rapid and that the overall situation is worsening. For Washington, “business as usual” on North Korea is no longer viable. Current policy based on UN sanctions has failed. A new diplomacy is needed based on a joint US-China policy, not separate approaches. This would necessarily involve the cessation of North Korean testing; the verifiable destruction of existing fissile material and missiles; external security guarantees for the North Korean state; a formula for political re-unification; the conclusion of a peace treaty to replace the existing armistice; diplomatic recognition of Pyongyang by Washington; a Marshall Plan to rebuild the North; and an agreement on the future of US troops on the peninsular to assuage Chinese concerns. This will be too much for China in a single meeting. The North Korean question is a deeply sensitive one for Chinese politicians. Mr Trump’s challenge will be to nudge this door open so that substantive work could then begin. Because if diplomacy fails, the only remaining option in Washington’s view is unilateral military action. Accepting Pyongyang as a member of the international nuclear club just does not fly in Washington. In all this, it is important for both presidents to remember that each has his own domestic politics. Chinese political elites will not respond constructively if they see their leader publicly humiliated. In that respect, it is good that President Trump has taken the “One China Policy” off the table. “Face” matters in China, just as it does in the US. Both Messrs Trump and Xi are seen as strong leaders in each other’s political systems. It might just be that this can be turned to mutual advantage to resolve the emerging nuclear crisis. The writer is former prime minister of Australia and president of the Asia Society Policy Institute in New York

Brad NewmanDomestic concerns matter for Trump and Xi in Florida meeting