US and China Haggle Over Enforcement of Trade Commitments

Date & time : Saturday, 16 March 2019

James Pliti and Yuan Yang

 

Wang Shouwen, China’s vice-minister of commerce chose a culinary anecdote on Saturday to illustrate why he thought there was still good faith in the trade negotiations with the US, despite jitters on both sides of the Pacific Ocean.  At a lunch break during the last round of talks in Washington, Robert Lighthizer, the US trade representative, ordered a Chinese dish of chicken and eggplant, while Liu He, China’s vice-premier and top economic official, had a hamburger. Each honoured the other’s cuisine, Mr Wang recalled, and both had water to help them find “common ground”. Negotiators were in contact “day and night” and making “full efforts” to finalise a pact, he told a press conference in Beijing on Saturday. After Donald Trump announced in late February that he was close to an agreement with Xi Jinping, expectations were raised that the final details could quickly be sorted out in time for a March summit at the US president’s Mar-a-Lago resort. But that has proven harder than expected.  It now seems likely that any firm agreement will come in April or later, according to people briefed on the talks, over concerns about ensuring obligations are met. China’s central bank governor Yi Gang said on Sunday that the two sides had discussed US concerns that Beijing engaged currency manipulation and reiterated pledges that have been made previously. “We will not use the currency to achieve competitive goals, to increase China’s exports, or as an instrument in trade frictions. This is our promise, we absolutely cannot do this,” he said at a press conference on the sidelines of the National People’s Congress, the country’s annual parliamentary session. Yet one of the thorniest issues in the talks is the enforcement mechanism demanded by the US to ensure that China sticks to its commitments, say people close to the negotiations.  “We’re still on the train tracks towards a deal. No question the train has slowed a little bit,” said Myron Brilliant, vice-president for international affairs at the US Chamber of Commerce. “We shouldn’t be surprised that translating the talks into an enforceable agreement is difficult given the complexity of issues being negotiated and precision required.”

The tone among US officials has become more cautious than it was a few weeks ago. Speaking at a conference at Georgetown University’s law school on Friday, Clete Willems, deputy director of the White House National Economic Council, stressed that “much work” remained to be done before a deal could be reached. “This comes down to substance and we need to have a substantive outcome . . . we’re making progress but we’re not exactly where we need to be,” Mr Willems added.  Earlier this month, Mr Lighthizer said any complaints that China was not complying would have to be resolved through a series of meetings between high-level officials. But if this was still unsatisfactory, the US would take “proportional” but “unilateral” action against China, reviving the threat of tariffs. Chinese officials want to make sure that they will not be the subject of unjustified punishment from the US. Mr Wang on Saturday said enforcement provisions should be “two-way, fair and equal”, allowing China to act with its own retaliatory tariffs if it feels that Washington is over-reacting.  “China doesn’t like the US proposal to include snapback tariffs that the US can impose on China, but the Chinese cannot retaliate against,” said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies, a Washington-based think-tank. “The Chinese also seem uneasy about agreeing to a summit at Mar-a-Lago until all the details are settled lest they set up Xi Jinping for an embarrassing outcome.”  Officials in Beijing are also putting heavy pressure on Washington to finalise as much of the agreement as possible before Mr Xi meets Mr Trump, to avoid the possibility that the notoriously unpredictable US president could balk during their talks. The abrupt conclusion of Mr Trump’s summit with Kim Jong Un, the North Korean leader, without a deal in Vietnam last month raised eyebrows in Beijing as it heightened fears that this outcome could be repeated in the trade talks with China.

But for Mr Trump, the perception that he personally closed the deal with some final concessions from Xi could be politically crucial. The US president is facing pressure from China hawks in his own conservative base and among congressional Democrats not to settle for a weak agreement. Mr Willems on Friday insisted that Mr Trump remained willing to “walk away”from a bad deal.  Meanwhile, there is still uncertainty over the nature and scale of the concessions offered by China on some of the key issues raised by the US, including its rampant use of industrial subsidies, the forced transfer of technology from western companies to foster its own innovation, and the theft and cyber theft of US intellectual property. While US officials have touted big progress in these areas, little hard evidence of a big Chinese shift has emerged. China is hoping to secure an elimination — at the very least — of all the tariffs imposed over the past year by the Trump administration on $250bn of Chinese imports, but does not yet appear to have secured a commitment from Mr Lighthizer to roll them all back. Mr Wang on Saturday made clear that this would mean removing “all the tariffs imposed on each other, so that bilateral trade relations between China and the United States can return to normal”.  Business is watching with bated breath. While many in corporate America will breathe a sigh of relief if tariffs are lifted, many executives also see this as a unique chance to put pressure on Beijing for change and reform, and do not want to see it wasted.  “We are very much of the mindset that substance, not politics, should lead these negotiations — any deal needs to be comprehensive, self-sustaining, and enduring — and if it takes a little bit longer to finalise, that’s OK,” said Mr Brilliant.

 

Source; Financial Times

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