Trump teams makes stern demands on China; China makes its own on U.S.

- Mei 04, 2018

The U.S. and China proposed seemingly insurmountable demands to each other during two days of meetings in Beijing, but agreed to keep talking in hopes of averting a trade war.

“The gap is wide and deep” between China’s state-run economic model and the free market principles of other countries, said William Zarit, chairman of the American Chamber of Commerce in China, which represents U.S. companies operating in the country.

“This will not be reconciled in one or two days,” he said.

The U.S. delegation demanded that China reduce its trade surplus with the U.S. by $200 billion over two years. Other asks were that China stop subsidizing high-tech sectors like robotics and alternative energy vehicles identified in its “Made in China 2025“ plan, cut tariffs on “all products in non-critical sectors” to levels at or below U.S. duties and assure that it would not challenge U.S. actions taken in intellectual property disputes.

Washington also demanded that China not target U.S. farmers and agricultural products or retaliate against U.S. restrictions on Chinese investments. It also asked that China ease a process for approving U.S. investments and gave Beijing until July 1 to present an improved list on investment access.

A disclaimer at the top of the document noted that the U.S. was providing the Chinese ahead of time the “draft framework solely to help facilitate candid and constructive exchanges between the two sides.”

China brought its own tough demands: It asked the U.S. to back off the $50 billion in proposed tariffs laid out in response to Chinese practices the U.S. says have ripped off valuable technology and intellectual property from U.S. companies. Beijing also wants the U.S. to ease export restrictions on high-tech goods and treat China as a market-driven economy when applying U.S. trade laws, according to a source who reviewed a document outlining China’s demands.

The U.S. has already threatened to slap tariffs on more than $150 billion worth of Chinese imports. China has countered by threatening its own tariffs on $50 billion-worth of high-value U.S. imports like soybeans and aircraft.

The increasing rancor has cause markets to shudder and led to a general backlash from U.S. farmers and other industries that would be hit hardest in any U.S.-China trade fight.

The White House released a four-paragraph statement early Friday afternoon, describing the talks as “frank.”

“The size and high level of this delegation illustrates the importance that the Trump administration places on securing fair trade and investment terms for American businesses and workers,” the statement said. “There is consensus within the administration that immediate attention is needed to bring changes to United States–China trade and investment relationship."

President Donald Trump on Friday said the U.S. “will be doing something, one way or the other, with respect to what's happening in China.”

“I have great respect for President Xi [Jinping],” Trump said before departing for Dallas to speak to the National Rifle Association. “That's why we're being so nice. And we have a great relationship. But we have to bring fairness into trade between the U.S. and China. And we'll do it.”

Maybe the biggest deliverable from the talks is that the two sides agreed to continue talking despite escalating threats of tit-for-tat tariffs.

China’s state-run Xinhua news agency said that both governments recognized “that given that considerable differences still exist on some issues, continued hard work is required for more progress.”

Officials from the two countries agreed to stay in “close communication,” the news agency reported.

Another Chinese state-backed news organization, China Daily, praised what seemed to be a “softening tone“ between the two governments.

“I think the best you could say is that the two sides may have staked out opening positions and set up a process for negotiations, but at first glance the gap seems pretty wide,” said John Frisbie, president of the U.S.-China Business Council. “Maybe they were able to close some of that in the discussions that followed, but we’ll have to see.”

Frisbie emphasized that the next question is whether another set of meetings will be scheduled and whether the Trump administration will seek to “up the ante” before then by moving forward with tariffs, or with restrictions to Chinese investments.

While the meetings may have brought “some clarity around what each side’s aspirational goals are, I don’t think uncertainty about the risk of trade actions was reduced,” he said. “We’ll have to see what happens.”

U.S. officials brought a voluminous list of demands to Beijing that from the outside appeared unrealistic in scope. That list leaked not long after meetings wrapped up on Friday. An administration official confirmed the list was drawn up ahead of the trip under the Treasury Department‘s direction.

An administration official said U.S. officials “seem genuine in their desire to negotiate something” despite the far-reaching U.S. demands.

Ben White contributed to this report.


 

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