February 18, 2019

U.S., China Make Progress In Trade Talks

A delegation of Trump administration officials, including U.S. Trade Representative Robert Lighthizer, U.S. Treasury Secretary Steve Mnuchin, and Assistant to the President for Trade and Manufacturing Policy Peter Navarro, met for five days last week in Beijing with their Chinese counterparts to continue trade talks. The U.S. delegation also met with President Xi Jinping and with Vice Premier Liu He at the end of the week.

The White House issued a mildly optimistic statement at the end of the trip, noting the discussions were “detailed and extensive,” but that “much work remains.”

As Connecting the Dots has reported, the two countries face a March 1, 2019 deadline to reach a new trade deal or President Donald Trump will raise tariffs on a products from China. (As the week concluded, however, the president again said he might extend that deadline, perhaps for as long as 60 days, if he feels negotiations are progressing. He also acknowledged the talks were going extremely well” and said that if the two countries could reach a deal it would his “pleasure” to remove existing tariffs.)

President Xi also issued a statement at the conclusion of last week in which he promised China is “willing to solve the bilateral economic disputes and frictions through cooperation, and push for an agreement that both sides can accept.”

Last week’s discussions focused on forced technology transfer, intellectual property rights, cyber theft, agriculture, services, non-tariff barriers, and currency. It is not clear whether officials discussed verification and monitoring mechanisms even though U.S. officials have suggested any agreement must include ways to enforce any commitment made, including “snap-back” tariffs, rotating lists of retaliatory tariffs, trade remedy actions, or the re-imposition of World Trade Organization safeguards against import surges. Unnamed participants in the talks told news outlets the two countries remain far apart on the structural reforms, including intellectual property theft, cyber-hacking, and industrial policy, that U.S. officials have demanded that China make. (U.S. officials also have asked China to increase its purchases of U.S. commodities.)

The White House statement touched on the form that a deal between the two countries might take, suggesting it could come as a memorandum of understanding instead of a joint statement. Talks will continue this week in Washington, D.C.

There is, of course, a great deal at stake in these deliberations. If President Trump raises tariff rates due to a breakdown in negotiations, China could reply with countermeasures, which in turn could prompt the president to follow through on the threat me made last year to impose penalties on all imports of Chinese products into the United States.