Fresh round of negotiations comes as Chinese economy shows signs of a slowdown
US and Chinese officials will meet in the first face-to-face negotiations since a 90-day truce was declared in a trade war between Washington and Beijing, in the hope of ending a bruising confrontation between the world’s two largest economies.
After failing to reach an agreement in December when Donald Trump and Xi Jinping met, both sides agreed to suspend tariff increases while holding talks on technology transfers, as well as intellectual property theft and cybersecurity. If no agreement is reached, US tariffs on $200bn (£160bn) of Chinese goods will increase in March to 25% from the current 10%.
Trump said on Sunday that China was under pressure to do a deal amid signs of a slowdown in its economy. “I think China wants to get it resolved. Their economy’s not doing well. I think that gives them a great incentive to negotiate,” he said.
Analysts believe the talks starting on Monday in Beijing – the sixth round of negotiations between the two sides – are unlikely to produce a major breakthrough but will lay important groundwork for an agreement that both sides appear increasingly eager to reach.
China’s leaders in particular are under pressure to end a trade war that is exacerbating an already slowing Chinese economy in which exports, factory output, and consumer confidence have all declined.
“China’s slowdown is occurring across the board, affecting almost every industry and region,” said Scott Kennedy, a trade expert focused on China at the Center for Strategic and International Studies. “Resolving the trade war or at least finding some common ground with Washington will be needed to fully restore confidence,” he said.
The delegation, led by the US deputy trade representative, Jeffrey Gerrish, does not include any top US officials from the administration, a sign the talks are a precursor to higher-level meetings.
China’s economic tsar, the vice-premier Liu He, may travel to Washington in February and Trump may meet the Chinese vice-president, Wang Qishan, at the World Economic Forum in Davos near the end of this month, according to reports.
The US delegation includes officials from the Treasury, and energy and agriculture departments, as well as the State Department and the White House, according to the Office of the United States Trade Representative.
“It promises to be the first time that the core of the agenda will centre around the problems caused by Chinese industrial policy and the need to marketise China’s economy,” said Kennedy.
“If they can make sufficient progress on identifying the key issues and narrowing in on the possible solutions, that will pave the way for Chinese vice-premier Liu He to visit Washington in the coming weeks,” he added.
Key US exports including soya beans, corn and pork, as well as liquefied natural gas, are currently subject to retaliatory tariffs from China. China’s industrial policy, “Made in China 2025”, which the US argues violates World Trade Organization rules, is likely to be a topic of discussion.
China is likely to raise the issue of the telecoms firm Huawei, whose global ambitions have been thwarted by a US ban on its products. The arrest in Canada of a senior Huawei official, Meng Wanzhou, at the request of the US has spiralled into a diplomatic incident, which includes two Canadians still detained in China.
Gerrish, the head of the US delegation, is likely to follow the lead of the US trade representative, Robert Lighthizer, one of the most hawkish members of the Trump administration. Gerrish has previously described Lighthizer as one of his “incredible mentors”.
Observers say that beyond reaching an agreement, a major sticking point will be over how to confirm that both sides uphold it. Chinese officials have reportedly indicated a willingness to establish such a mechanism.
“The big issue is not just that an agreement is reached, but verifiability – that China is living up to their end of the bargain,” said Christopher Balding, a former associate professor of business and economics at the HSBC business school in Shenzhen, who writes about the Chinese economy.
In recent weeks, Beijing has made some conciliatory gestures, including drafting new rules that would ban forced technology transfers. China has promised to buy more US goods as well as cut tariffs, and improve market access for foreign companies in China.
“The Chinese side is really beginning to take it seriously,” said Balding. “I think it’s finally gotten through that this is not just going to go away.”
Both sides have been more measured in the lead-up to the talks, with Chinese state media especially toning down its rhetoric. The usually strident Global Times said in an editorial: “In a trade war, there is no winner-takes-all scenario. Washington’s losses appear slower, but what will be will be. Mutual respect for one another’s interests is required by the very nature of China-US trade. It is hoped the latest round of talks can succeed on this basis.”
This article appeared on The Guardian on 7 January, 2019.
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