U.S.-China trade negotiations resume in Beijing
January 8, 2019 Category Foreign trade, Weekly
Deputy U.S. Trade Representative Jeffrey Gerrish
Trade negotiators from China and the U.S. resumed negotiations in Beijing at Vice Ministerial level to hammer out a sustainable solution in the trade war between the two countries before the March 1 deadline when an initial 90-day truce expires. The U.S. delegation is led by U.S. Deputy Trade Representative Jeffrey Gerrish. He is considered to be closely aligned with his boss Robert Lighthizer, adopting the same hardline approach to dealing with China that has set Lighthizer apart from more moderate administration officials such as Finance Secretary Steven Mnuchin. A relatively low-ranking delegation signals that the visit is about laying groundwork for later, more high-level talks, rather than making substantive progress in negotiations, said Nicholas Lardy, Senior Fellow at the Peterson Institute for International Economics. Unexpectedly, Chinese Vice Premier Liu He showed up on the first day of the two-day talks on January 7.
China’s Vice President Wang Qishan will lead the Chinese delegation to the World Economic Forum’s annual meeting from January 22 to 25 in Davos, Switzerland, where he is expected to meet and have talks with U.S. President Donald Trump.
Washington and Beijing have been locked in a trade war since July 6, when they each applied tariffs to imports of the other’s goods. But on December 1, the day after Presidents Trump and Xi met at the G20 summit in Argentina, they agreed to a 90-day truce in their dispute. Observers said that 90 days was not enough time to tackle all of the issues involved in the trade dispute, but sufficient to create a framework for future talks. In December, the two countries have held talks by teleconference at a Vice Minister level on trade and economic issues and exchanged views on matters of mutual concern.
U.S. Treasury Secretary Steven Mnuchin said the two sides had agreed that any eventual deal would be “enforceable and verifiable and have specific dates on it.” Reducing the trade deficit with China remained a major priority for Trump but Mnuchin said the administration understood it would take time and was also focused on securing structural changes in the Chinese economy that would help balance trade. Mnuchin said the U.S. was determined to secure the same market access for American companies to China that Chinese companies get to the U.S. “And if we do that and there are structural changes, the trade deficit by definition will be a lot more balanced,’’ he said.
A new U.S. accusation might however complicate the trade talks. In late December, the United States accused China of sustained efforts to steal trade secrets and technologies from at least 12 countries in a large hacking campaign. The U.S. Justice Department announced criminal indictments against two accused hackers associated with the Chinese government, Zhu Hua and Zhang Shilong, who the U.S. say acted on behalf of the Chinese Ministry of State Security (MSS). The indictment was filed in federal court in the Southern District of New York. The defendants worked for Huaying Haitai Science and Technology Development Co in Tianjin. The indictment said they stole data from companies in the U.S., Brazil, Canada, Finland, France, Germany, India, Japan, Sweden, Switzerland, the United Arab Emirates and the United Kingdom. “The list of victim companies reads like a who’s who of the global economy,” FBI Director Christopher Wray said. The Chinese government denied the allegations. “The U.S. move is vicious in nature, severely violating the basic norms governing international relations and damaging cooperation between the two countries,” China’s Foreign Ministry Spokeswoman Hua Chunying said. “China resolutely opposes such accusations and has lodged solemn representations to the U.S. side.”
Presidents Trump and Xi also had a telephone conversation after which Trump tweeted on December 29 that a “Deal is moving along very well. If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!”. China’s customs administration announced it had approved U.S. rice imports, and Beijing also had resumed buying U.S. soybeans and announced it would suspend extra tariffs added to U.S.-made cars and auto parts starting January 1. China has also opened its first appeal court for intellectual property disputes in Beijing. The new body would handle cases that demanded “highly technical expertise”. It will allow litigants to bypass provincial high courts.
China should address the concerns expressed by the United States and other major trading partners over forced transfer of technology and openness to investment to de-escalate ongoing trade tensions, the World Bank advised. In addition, Beijing’s forthcoming domestic economic stimulus plan should focus on tax cuts and strengthen the social safety net to increase consumer confidence and household spending, the World Bank said in its latest “China Economic Update” report. At the same time, the bank endorsed Beijing’s reform performance by boosting the standing of the country’s business environment to 46th out of 190, up from 78th, in its “Doing Business 2019” report. Chinese growth will moderate to 6.2% in 2019 and 2020 from 6.5% last year, the World Bank predicted. “Consumption will remain the main driver of growth, while higher investor uncertainty and slower credit growth are expected to weigh on investment,” said John Litwack, World Bank lead economist for China. “A deceleration in global demand growth and higher U.S. import tariffs will negatively affect net exports.”
Meanwhile, China lowered import taxes on more than 700 goods from January 1, including on advanced equipment such as aircraft engines, welding robots for automotive production lines, and natural resources. There will also be cuts to some export tariffs, and temporary import tariff rates will be as low as zero for some goods, the Ministry of Finance said. This is the third round of tariff cuts announced in 2018. China has been the world’s second largest importer of goods for nine consecutive years, and accounted for 10.2% of global imports last year.
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