A U.S. trade war with China could be averted as the numbers of U.S. trade deficits do not necessarily reflect the reality, a U.S. China expert told Xinhua in a recent interview.

Despite the worry about a possible showdown between the top two economies due to the U.S. complaints about its trade deficits with China, Douglas Paal, vice president for studies and director of Asia Program at the Carnegie Endowment for International Peace, was somewhat optimistic that such scenario would not become a reality.

“I tend to think we are not gonna go to a trade war, because an American trade war with China will also be a trade war with all the suppliers to China, who are friendly with us and have good economic relations (with us),” he told Xinhua.

Paal, a former director of Asian affairs at the National Security Council in the White House, cited the trade disputes that existed between the U.S. and Japan during the 1980s.

He noted that during that time Japan was a trade harbor for all the Asian tigers and, as a result, it boasted a huge trade surplus with the United States.

“But over the last two 20 years, that shifted to China. But it’s the same problem which is China is the last point of export (to the U.S.), so the numbers always seem too high for China and too low for everyone else,” Paal said.

“That’s just near illusion, it’s not necessarily reality,” he commented on the U.S. deficits in its trade with China.

Still, there are trade issues that need to be addressed, and the Trump administration has to prioritize all the issues, whether it’s market access, technology transfer, investment, or anti-dumping measures, Paal said.

Paal believed China understands this and has prepared well for it as it is willing to consider measures, including increasing investment and buying more American goods, technologies and bonds, “to help the American economy and help balance the strong imbalance in the U.S.-China trade.”

He noted that the Trump administration is still in the process of formulating its China policy and other policies due to the short time since it took office and the staffing problems which have left many positions unfilled so far.

“But I think the Trump people will be trying to lay the ground work for longer-term cooperation that may be more mutually beneficial in the economic sphere and (for) its high focus on North Korea’s nuclear threat,” he said.

NEED FOR LONG-TERM PERSPECTIVES ON KOREAN PENINSULA

Asked to comment on the possible China-U.S. cooperation on containing the rising tensions on the Korean peninsula after the recent nuclear test and test launching of missiles by the Democratic People’s Republic of Korea (DPRK), Paal said efforts should be first made to restart talks.

This is an urgent matter for the Trump administration to deal with, but not as urgent as demanding for an immediate solution due to its complexity, Paal said.

“The Trump administration is not ready yet with staffing and internal processes to do a complicated and careful consideration of various options,” he said, adding that South Korea demands more U.S. attention as it is in the middle of “a very disruptive political period” ahead of the coming election.

“So I think we need take it as an urgent matter, but not an immediate matter… Don’t rush to judgment,” he said.

Calling for talks to resolve the DPRK crisis, Paal said if the talks fail, then stronger pressure should be exerted on the DPRK with tougher sanctions.

“But I am not a believer that there is a magic formula to turn North Korea around. In fact, I hope we have a very complicated policy to start with making another effort offering talks and try to hold together the coalition of commonly interested nations like South Korea, the U.S., Russia and China,” he said.

Paal also urged China and U.S. leaders to discuss the DPRK issue from the long-term perspectives.

“I think the United States and China at the very top need to discuss how we think the Korean Peninsula should look in 10 and 20 years, not just about what we would do tomorrow,” he said.

Only the leaders can give mutual assurances to each other that they will not explore the possible chaotic situation on the peninsula to its advantage and take unilateral measures, he said.

TAKING ADVANTAGE OF RELATIVE TRANQUILITY IN S. CHINA SEA

On another contentious issue of South China Sea, Paal played down its urgency, saying he did not foresee new flare-up of tensions in the region in the near term.

He noted that currently there is a “relative tranquility” in the region, largely due to two reasons: First, China made big advances in the past two years with its construction activities and it is time “to digest, to consume” the advances.

Second, China has reached an understanding with the new Philippine government.

“I would hope that during the period of relative tranquility, we can focus on things of our common interests,” Paal said.

He called for speeding up talks on reach a code of conduct in the South China Sea between China and some members of the Association of Southeast Asian Nations (ASEAN).

Paal also suggested China and the U.S. play a leading role in managing the fishing stocks in the region to benefit all parties involved.

SOME OF CHINA-U.S. DIALOGUES EXPECTED TO CONTINUE

So far Trump has not taken aggressive actions toward China despite his tough talk during and after the campaign. Paal said that, as a former businessman, Trump may try to hold talks first to “start the tone and certainly trust” before getting to the hard issues.

Such talks could get very tough, and if they do not go well, the Trump administration could harden its stance toward China, he cautioned.

Meanwhile, Paal expected China and the U.S. to continue some of over 90 official dialogue mechanisms that were established during the previous Obama administration.

But he predicted that there will be serious reevaluation of some of the China-U.S. dialogues, led by the annual Strategic and Economic Dialogue (S&ED).

He proposed separating the strategic track and economic track because the S&ED has become less efficient as it has grown too big and too bureaucratic to get things done.