Biden and Xi Try to Stabilize Shaky Relations, Announce Several Agreements

Senate clears CR and President Biden expected to sign it into law

Abbreviated dispatch today as I am en route to Missouri to attend the Governor’s Ag Conference.

— President Joe Biden and Chinese President Xi Jinping met during the APEC Summit to address various geopolitical, trade, and economic issues. Both leaders recognized the need for cooperation to stabilize these issues. Highlights:

• Biden aimed to ease tensions with China without appearing weak on the issue.
• Xi sought foreign investment and export markets to counter China's economic challenges, including a real-estate crash and excessive debt.
• Some positive outcomes included an agreement to limit the export of chemicals used in making fentanyl and the re-establishment of military communication channels.
• “He and I agreed that each is willing to pick up the phone and call directly and be heard immediately,” Biden told reporters. “Any concern about anything between our nations or happening in our region, we should pick up the phone and call one another and we’ll take the call. That’s important progress,” he said.
• Regarding Taiwan, Biden said: “What I’ve said since I’ve become president, what every previous president of late has said, that we maintain the agreement that there is a one-China policy and that I’m not going to change that. And so that’s about the extent to which we discussed it.” Asked what consequences would ensue if Beijing were to interfere with Taiwan’s upcoming elections, Biden said: “I didn’t expect any interference, any at all. We had that discussion as he was leaving.”
• China's promises to reduce carbon emissions were questioned due to its plans to build new coal-fired power plants.
• Xi focused on improving business ties, meeting with U.S. business executives.
• Biden and Xi discussed avoiding severe measures that would weaken China's economy, despite trade restrictions.
• Both sides agreed to dialogue on Artificial Intelligence and increasing commercial flights.
• Biden touted steps to check the risk that jetfighters and warships from the two nations could get into an accident around the increasingly crowded South China Sea.
• Biden expressed interest in helping China's economy without compromising U.S. intellectual property.
• China's economic strategy continues to emphasize manufacturing, potentially leading to more trade conflicts.
• Several issues were raised where there was no agreement, Biden said, including human rights, Chinese exit bans placed on American citizens and coercive activities in the South China Sea.
• The two sides also discussed the war between Israel and Hamas and Russia’s invasion of Ukraine, where they also differ, Biden said.
• Biden was asked, given that his relationship with Xi goes back more than a decade, whether he trusted him. “I trust but verify, as the old saying goes,” he said. “We’re in a competitive relationship, China and the United States, but my responsibility is to make this rational and manageable, so it doesn’t result in conflict.” Biden said he believes that after 10 years of meetings he knows Xi and how he operates. “We have disagreements. He has a different view than I have [on] a lot of things. But he’s been straight. I don’t mean that as good, bad or indifferent. Just been straight.”

      
     What Xi said: "For two large countries like China and the United States, turning their back on each other is not an option. It is unrealistic for one side to remodel the other, and conflict and confrontation has unbearable consequences for both sides."

      "I am still of the view that major-country competition is not the prevailing trend of current times and cannot solve the problems facing China and the United States or the world at large. Planet Earth is big enough for the two countries to succeed."

     What Biden said: “Well, look, he is, he’s a dictator in the sense that he is a guy who runs a country that is a communist country that’s based on a form of government totally different than ours. Anyway, we made progress.”

— A stopgap spending measure to fund the government into early 2024 is headed to President Joe Biden's desk, allowing lawmakers to prepare for negotiations on full-year appropriations between the two chambers. Biden is expected to sign the measure into law.

     The Senate approved the continuing resolution (HR 6363) with strong bipartisan support in an 87-11 vote, resolving some last-minute disputes. The House had previously passed the legislation on a 336-95 vote. The measure includes an extension of the 2018 Farm Bill through September 2024, and funds 21 “orphan” programs via offsetting funding from USDA’s Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program.

     Disputes settled: Senate Armed Services ranking member Roger Wicker secured a commitment to vote on sending the annual defense policy bill (HR 2670) to a formal conference with the House, which had delayed the vote on the continuing resolution. Majority Leader Chuck Schumer (D-N.Y.) agreed to allow a vote on Rand Paul's amendment for across-the-board discretionary spending cuts, but it was rejected. Schumer also agreed to a 60-vote threshold for passing the continuing resolution, ensuring no government shutdown.

     The next funding deadlines are Jan. 19 for some agencies including Agriculture and Feb. 2 for others, creating pressure for negotiations on fiscal year (FY) 2024 appropriations. However, the House and Senate have not yet agreed on a topline budget target, as House Republicans have rejected the spring debt limit suspension law. The Senate's bipartisan bills align with the spending limits in the debt limit law, while the House's GOP-drafted bills fall below those limits on nondefense programs. Some Republicans in the House, particularly from the Freedom Caucus, are advocating for deeper spending cuts and policy changes, creating divisions within the GOP conference. Democrats in both chambers support adhering to the spending levels laid out in the debt limit law.

     Negotiations will need to resolve these differences, and lawmakers have limited time during late November and early December to reach a bicameral framework deal on spending levels and subcommittee allocations.

     Of note: House Speaker Mike Johnson (R-La.) has pledged not to rely on short-term stopgap funding measures, pushing for a more permanent solution.

     Questions remain about whether supplemental funding for Ukraine, Israel, Taiwan, the U.S. border, and domestic priorities will be tied to the final appropriations agreement or move independently, with border funding being a point of contention.

— Mary Daly, the president of the Federal Reserve Bank of San Francisco, warned that the Federal Reserve would risk its credibility if it prematurely declared victory in its fight against inflation and then had to raise interest rates again. This means that the central bank needs to be cautious in its actions and avoid sending mixed signals to the market, she told the Financial Times (link). Daly finds recent economic data showing a further deceleration in inflation to be "very, very encouraging." Despite the positive data, Daly does not rule out the possibility of another interest rate increase. Daly emphasized the need for the Fed to be both cautious and bold. She suggests that the central bank should not rush to make decisions and should be willing to admit when it doesn't have enough information. Making hasty decisions can lead to disruptions and harm the Fed's credibility. Daly plans to use one-year-ahead inflation expectations and the performance of the real economy as indicators in her approach to monetary policy. She does not anticipate rate cuts soon but rather a gradual normalization of rates after a period of restrictive settings.

— New Hampshire announces date to remain host of first-in-nation presidential primary. Voters will go to the polls Tues., Jan. 23, 2024, in the country's process to pick the Democrat and Republican nominee for president. The announcement is a rebuke of the Democratic National Committee and others who have attempted to move other states ahead of New Hampshire.

— New York's highest court heard arguments Wednesday in a lawsuit that could reshape congressional districts in the state, which is expected to be a key battleground next year in the fight for control of the U.S. House, according to the Associated Press (link). The Court of Appeals hearing in Buffalo came as Democrats want to scrap the state's district lines after losing congressional seats that helped Republicans win a narrow majority last year.

     Democrats want the maps to be redrawn in a way that will give the party an edge in 2024. Republicans are trying to keep the current district lines in place. The case could have major ramifications for the coming elections, where Republicans' control of the House is set to be tested by races in New York and other states where redistricting battles could sway seats in favor of either party.

     According to the AP: “Democrats in New York today are presenting their case before the state Court of Appeals, where they are trying to secure a ruling that would allow the party to redraw the Empire State’s congressional map ahead of next year’s elections. The result could go a long way in turning Democrats’ fortunes in New York and deciding control of Congress: If Democrats prevail in the current case, they will most likely try to reassert their dominance with more favorable lines that could help them flip as many as six Republican seats from Long Island to Syracuse.

— New Jersey’s first lady, Tammy Snyder Murphy, will run for the U.S. Senate seat now held by embattled Democrat Robert Menendez.

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