Two Chinese Shipping Companies Designated by U.S. Last Week as Trade Talks Progress

The U.S. Treasury Department has placed designations last week upon two Chinese shipping companies due to their alleged assistance in violating sanctions on North Korea. Shipping industry sanctions on North Korea are related to concerns of materials reaching the North Korean nuclear weapons programs. China-US relations are characterized by strong economic interdependence as well as mutual distrust, the recent trade war is a core part of this relationship. China’s skepticism is rooted in concerns that US foreign policy decisions are too frequently unilateral. Last Thursday’s decision has been perceived in China as supporting this view. The US objects to China’s lose intellectual property protection.

Normalization of trade between the two countries only occurred in 2000 with the US’s decision to grant China ‘permanent normal trade relations’ (China Since 1949, page 111). Previous opposition to this decision were rooted in American concerns over China’s human rights record, including a lack of free speech, democracy, and the rule of law. Many of these concerns still exist and are still relevant to U.S.-China relations. How China and the U.S. relate to regimes with poor human rights records is important to how these nations are viewed around the world.

China has long responded with frustration to U.S. accusations of human rights abuses in China; China seeks to relate to the U.S. as between equals. Chinese critics of the U.S. have often cited the nation’s exceptionally high level of incarceration and its difficulties with racial justice issues. China’s rise has coincided with a decision to present itself as an emerging power which is committed to respecting the autonomy of other nations (China Since 1949, page 110). This decision could be seen as an attempt to replace the dominance of the West over global affairs; a dominance which has involved interventionism from major Western powers throughout the world.

China has objected to these new sanctions claiming that they follow all of the U.N. sanctions placed upon North Korea. Differences in economic philosophies between the U.S. and China are significant sources of potential disagreement over economic relations. China’s large state-owned sector, and its relative lack of intellectual property rights distinguish it from the U.S.’s free market capitalist system. Yet businesses have created a strong economic relationship despite these differences.

The perception that China’s economy is merely a manufacturing hub for the physical construction of Western technological ideas is untrue. China is increasingly focused on its own innovation, including mobile phone payment technology, artificial intelligence, and renewable energy. Sanctions on two Chinese shipping companies might be perceived as an example of China being made subordinate to the West.

China’s emphasis on technological innovation, its lack of obedience to Western standards, and its focus on economic growth shows that it is not seeking to play a passive or secondary role in the future; instead it is seeking to eclipse the leadership of the U.S. and the entire Western world. China’s persistent call for the United States to humble itself is exemplified in China’s objection to the sanctions.

A recent Brookings Institute article noted, “Over the past year, the U.S. has imposed tariffs on $250 billion worth of Chinese imports and China has retaliated, raising tariffs on U.S. exports” (1). According to U.S. government data in 2017 the total value of Chinese imports to the U.S. was slightly over 500 billion U.S. dollars (2). This means that the U.S. has in just the past year since last month imposed tariffs on roughly half of the financial value of Chinese imports from the United States two years ago. Clearly, this demonstrates the existence of tremendous tensions within one of the world’s largest economic partnerships.

The two Chinese companies blacklisted by the U.S. Treasury Department last Thursday are Dalian Haibo International Freight Co. Ltd., and Liaoning Danxing International Forwarding Co. Ltd. According to the Treasury Department website Dalian Haibo has been designated for providing goods and services to or in support of Paeksol Trading Corporation, “ OFAC (Office of Foreign Asset Controls) previously designated Paeksol for having sold, supplied, transferred, or purchased metal or coal from North Korea, where the revenue may have benefited the Government of North Korea or the Workers’ Party of Korea. In early 2018, Dalian Haibo shipped cargo from Balian, China to Paeksol in Nampo, North Korea, aboard DPRK (Democratic People’s Republic of Korea) flagged vessels.” (3)

The Treasury Department site summarized the restrictions placed upon the two companies in the following manner, “As a result of today’s action, any property or interests in property of the designated persons in the possession or control of U.S. persons or within transiting the United States is blocked, and U.S. persons generally are prohibited from dealing with the designated persons.” (3). Given the fact that the materials listed in the description of the illicit trading practice of Dalian Haibo could be used to assist North Korea’s military, it is clear that these occurrences constitute a threat to the security interests of the United States. This is especially true when one considers that the Korean War ended in an armistice rather than a peace treaty (4).

The New York Times initially interpreted one of Trump’s tweets on Friday March 22nd 2019 as having implied that Thursday’s new sanctions had been revoked (5). However, Reuters offered a different interpretation, implying that Trump’s tweets were made in regards to other additional sanctions which had been proposed on the 22nd of March 2019, and that the sanctions from the 21st the day before the tweet still remain in effect (6). Since then, the NYT has updated itself and acknowledged that the sanctions remain in place (7). The confusion was over the language of Trump’s tweet which was in reference to sanctions that were announced by the Treasury Department “today,” however the day on which the tweet was released was the 22nd, and not on the 21st when the shipping companies were blacklisted (8).

China’s response to these new United States sanctions upon two of its companies is a good example of how it views its relationship with the United States. China believes that the United States is acting in a far too unilateral manner, and that it is bringing false human rights accusations against them. The United States believes that China has serious human rights problems, and that it is not consistently acting in the interests of U.S. security. However, both nations have a very important economic relationship which has had a definitive influence upon both societies. Given the size and power of the enormous exchange of trade between the United States and China, relations between these nations will surely continue to be an important strategic object of consideration.

Trade negotiations between the U.S. and China are occurring as Trump demands that Beijing end intellectual property violations against U.S. companies. A written agreement is being constructed about forced tech transfers, intellectual property, services, currency, agriculture and non-tariff barriers to trade. According to Reuters, “U.S. Trade Representative Robert Lightizer and Treasury Secretary Steven Mnuchin arrive in Beijing on Thursday for a new round of talks with Chinese officials to work on a deal that would end a months-long trade war that has cost both sides billions of dollars and hurt global economic growth.(9)”

The stock market has responded positively to the news of this U.S.-China trade discussion, despite concerns over slowing global growth, especially sluggish growth in China and Europe (10). This shows the powerful influence which the U.S.-China relationship has on the economy. This marks a dramatic turnaround relative to stock market declines on the 27th. The new discovered confidence is rooted in major concessions being made by China in the trade negotiations. U.S. retail and housing sales have weakened. Despite these domestic and global weakness, the market has rebounded on the 28th due to the overwhelming importance of U.S.-China trade relations.

China’s assertion that it follows U.N. sanctions against North Korea is part of a broader need to affirm the validity of their economic transactions. China is making concessions in the trade war without admitting to accusations they regard as false. Demonstrating that they are not collaborating with a top enemy of the United States is an important part of the trust which needs to be established so that the trade war can end. These concessions show that China is not unwilling to admit that some of their policies and practices ought to change, even as they express frustration at perceived U.S. unilateralism and hypocrisy.

Links

  1. https://www.brookings.edu/research/the-us-china-economic-relationship-a-comprehensiv e-approach/
  2. https://www.trade.gov/mas/ian/build/groups/public/@tg_ian/documents/webcontent/tg_ia n_003364.pdf
  3. https://home.treasury.gov/news/press-releases/sm632
  4. https://www.reuters.com/article/us-northkorea-usa-peace-analysis/when-to-end-the-war- north-korea-us-at-odds-over-path-to-peace-idUSKBN1KG0PC
  5. https://www.nytimes.com/2019/03/22/world/asia/north-korea-sanctions.htm
  6. https://www.reuters.com/article/us-northkorea-usa-sanctions-explanation/trump-did-not-r everse-north-korea-sanctions-on-chinese-shipping-companies-source-idUSKCN1R32X6
  7. https://www.nytimes.com/reuters/2019/03/22/world/asia/22reuters-northkorea-usa-sancti ons-explanation.html
  8. https://www.reuters.com/article/us-usa-china-trade-exclusive/exclusive-china-shifts-positi on-on-tech-transfers-trade-talks-progress-us-officials-idUSKCN1R905P
  9. https://www.marketwatch.com/story/us-stock-futures-attempt-tepid-rise-as-investors-awa it-final-gdp-report-2019-03-28
  10. https://www.bloomberg.com/news/articles/2019-03-26/asia-stocks-set-to-rise-as-treasury -rally-eases-markets-wrap
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