U.S.-China Trade Talks Resume With No Breakthroughs in Sight

Date: Wednesday, July 31, 2019
Source: The Wall Street Journal

American side aims to see what can be salvaged from draft deal scuttled by Beijing requiring Chinese to curb subsidies and technology transfers

SHANGHAI—Chinese and U.S. negotiators resumed trade talks, taking tentative steps to overcome mutual mistrust and limited political appetite for a breakthrough agreement after weeks of recriminations.

The U.S. team, led by U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin, gathered for dinner Tuesday with the Chinese side, led by Chinese Vice Premier Liu He, at the Fairmont Peace Hotel, a Shanghai landmark on the city’s riverfront, according to a person familiar with the situation. The negotiators then met for a more formal round of talks at a government guesthouse on Wednesday.

Both sides are looking to the other to demonstrate goodwill, said people briefed on the discussions, with the U.S. expecting a pickup in Chinese orders for American farm goods and Beijing waiting for Washington to relax restrictions on Chinese telecommunications gear maker Huawei Technologies Co.’s access to U.S. technology.

“In trade negotiations, nothing is decided until everything is decided, although it’s possible there will be some baby steps, some partial landing zones, to build confidence,” said James Green, a former U.S. diplomat and trade official who is now an adviser at McLarty Associates, a consulting firm.

Apart from small steps, however, expectations are low for significant progress in resolving a trade dispute that has rattled global markets and seen both sides slap punitive tariffs on about half the more than $600 billion in goods they trade.

President Trump, in a series of tweets Tuesday morning, ratcheted up pressure on Beijing to quickly reach a deal and warned that if he were re-elected, the terms of an agreement “will be much tougher than what we are negotiating now…or no deal at all.”

Later, in comments to reporters at the White House, he said, “We’re either going to make a great deal or we’re not going to make a deal at all.”

He also said he believed China would prefer to negotiate with a Democratic president. “They’ll pray that Trump loses,” Mr. Trump said.

A senior Republican senator opposed to tariffs brushed aside Mr. Trump’s comments.

“I don’t think you ought to make anything out of it except to forget the tweet,” said Sen. Chuck Grassley of Iowa, chairman of the Senate Finance Committee. “Just forget his tweet and say, ‘What a blessing it is that, in Shanghai, Lighthizer and Mnuchin are sitting down with their negotiators now, and when they’re talking there’s a chance of getting something done.’ ”

After negotiations appeared to be close but then foundered in May, both sides blamed the other for the breakdown. Since then, each has side taken steps, from the Huawei limits to new Chinese rules on cybersecurity, that are likely to impede a broader agreement.

“You can assume the remaining challenges are the most difficult ones to deal with. I don’t think one round in Shanghai can resolve it,” said Eric Zheng, chairman of the American Chamber of Commerce in Shanghai.

U.S. negotiators are trying to see what can be salvaged from the lengthy draft agreement under negotiation before the impasse. That draft required Beijing to make structural and legal changes to pare back subsidies and technology-transfer requirements the U.S. side says are unfair. After negotiators thought a deal was in sight, the Chinese side rejected the draft as one-sided.

Mr. Trump and Chinese President Xi Jinping agreed late last month to restart negotiations, with Mr. Trump saying afterward that China agreed to step up agricultural purchases, while U.S. companies would soon be allowed to resume sales to Huawei.

Even so, progress in carrying out those concessions has been slow. Beijing has said the country has bought millions of tons of U.S. soybeans since the two presidents met in late June. The U.S. has shipped out just over 1 million tons of U.S. soybeans to China in the three weeks ended July 18, according to U.S. Agriculture Department data.

U.S. soybean exports for the current farm year ending Aug. 31 are just a third of what they were last year. Those soybeans being shipped now are likely the purchases it made at the start of the year that are only now being exported to China, said Xiaoping Zhang, the China country director for the U.S. Soybean Export Council.

China “was supposed to start buying our agricultural product now—no signs that they are doing so,” Mr. Trump tweeted Tuesday. “That is the problem with China, they just don’t come through.”

This week’s talks are the 12th face-to-face meetings between the negotiators and are being held in Shanghai for the first time. While Chinese experts following the talks see the Shanghai round as a symbolic restart, they also say the Beijing leadership can afford to drag out talks until next year, to see if the U.S. presidential election makes Mr. Trump amenable to a deal.

“It depends on the willingness of both sides, especially the American side,” said Li Yong, a senior fellow at Beijing-based think tank China Association of International Trade.

 

Read from the original source.

 

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