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Illustration: Craig Stephens
Opinion
Opinion
by Austin Lowe
Opinion
by Austin Lowe

The legal misunderstandings at the heart of the US-China trade war tensions

  • Washington needs to temper its unrealistic hopes that China can overhaul its legal system overnight, while Beijing must stop seeing all US legal action as top-down directives from Trump
At the heart of the recent tensions between the United States and China lies a fundamental misunderstanding of each side’s legal system. Just last week, a collapse in trade negotiations stemmed from unrealistic US expectations that China would adapt its laws in line with negotiators’ demands.

China, meanwhile, sees individual US law enforcement action by federal agencies as part of a government-wide conspiracy targeting the country and responds accordingly with arbitrary countermeasures. Both sides expect that the other’s legal system has the ability to sort things out, as long as the leadership has the political will.

If the legal realm will serve the next frontier in which the two countries must contend with each other, officials from both sides would do well to appreciate the different characteristics of each country’s respective system.

The US has increasingly turned to unilateral legal action to address its concerns vis-à-vis China, whether on trade, security, commercial espionage, or otherwise. The tool of choice for the Office of the US Trade Representative and the Department of Commerce has been the statutory authority derived from decades-old pieces of legislation that enable the executive branch to address unfair trade practices on a variety of grounds.

The Department of Justice has woken up to the threat of commercial espionage by Chinese nationals and moved forward with a series of related indictments. In Congress, lawmakers have turned to bills such as the National Defence Authorization Act and Taiwan Travel Act to shape US policy on China.

While these actions appear to be part of a coherent whole, precipitating a shift in the US approach to China, the reality is that they all originate from existing legal authority and intend to address discrete issues involving individual Chinese nationals or Chinese government practices.

The fact that they seem to be moving forwards in succession does not mean they comprise a whole-of-government effort to undermine or discriminate against China. The Chinese government and the ruling Chinese Communist Party, however, see them as just that.

Though Chinese officials may recognise that the US political system is comprised of three separate but equal branches of government, their responses to US actions suggest they see them as part of a top-down directive from President Donald Trump to target China.

Trump has not helped things by politicising and suggesting that he may intervene in the Meng Wanzhou case and previously implying that Taiwan could serve as a bargaining chip. Nor have the recent statements by State Department Director of Policy Planning Kiron Skinner.

But, ultimately, this misunderstanding results from China’s belief that the paramount leader has ultimate authority to dictate government actions and intervene where necessary — just as he does in China’s system.

US officials have also exhibited their misaligned expectations vis-à-vis China’s legal system during the course of recent tensions. China’s legislature – the National People’s Congress – effectively acts as a rubber-stamp parliament that takes its direction from the party leadership.

Ultimately, while NPC delegates will deliberate over specific legal provisions, any draft law will have been signed off by the top – that is, President Xi Jinping and the Politburo Standing Committee.

The passage of legislation in China is thus often a cumbersome process, but the Chinese government has recently taken significant steps to adjust its laws over the course of US-China trade negotiations – going as far as including specific language banning forced technology transfer in the recently fast-tracked foreign investment law.

Such amendments and legislation may have fallen short of US government and business community expectations, but they do show that US pressure has precipitated some previously unseen results when it comes to so-called structural reforms to China’s economic practices.

Negotiators should have noted the steps Beijing has taken to address US complaints through its legislative process in recent months and recognised that it was unlikely to go further in the near term.

Chinese Vice Premier Liu He (left) with US Treasury Secretary Steven Mnuchin and US trade representative Robert Lighthizer, following a meeting in Washington on May 10. Photo: Bloomberg

This is not to suggest they should have watered down their demands. But to realise only in the last week of negotiations that China would not commit to enacting specific legislative amendments to account for the provisions of a potential trade deal suggests US officials had unrealistic expectations.

China’s annual legislative session and bi-monthly NPC Standing Committee meetings are carefully coordinated endeavours involving little real debate and are in no way equipped to enact sweeping changes to legislation on an accelerated time frame – particularly in response to pressure from a foreign power.

It is important for each side to recognise these nuances. Chinese officials should appreciate that, despite recent indications to the contrary, the US abides by the rule of law and does not simply discriminate against Chinese nationals or entities on an ad hoc basis (Huawei, for its part, has seemed to appreciate the legal recourse mechanisms it enjoys in the US).

On the other side, while the ambition of US trade negotiators is admirable, they should recognise that China will not overhaul its legal system – and in turn, its economic development model – overnight.

Such an understanding on both sides will make for more candid and honest discussions around points of friction and prevent recent tension from spiralling into a long-term, tit-for-tat cycle of legal action and corresponding retaliation.

Austin Lowe is a Washington-based consultant and analyst specialising in US-China relations and Asia policy. The views expressed are his own.

 

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