TWN Info Service on WTO and Trade Issues (Feb19/04)
7 February 2019
Third World Network

US-China trade war inching towards an entente

Published in SUNS # 8838 dated 4 February 2019

Geneva, 1 Feb (D. Ravi Kanth) – The festering US-China trade war, launched by the US, seems to be inching towards an entente between the two largest economies, after the US President Donald Trump claimed that “tremendous progress” has been made during two days of talks that ended on Thursday (31 January).

President Trump, who is expected to meet his Chinese counterpart President Xi Jinping later this month in China, told reporters on Thursday at a meeting with Chinese Vice-Premier Liu He that “we’ve made tremendous progress.”

“It doesn’t mean you have a deal, but I can say there is a tremendous relationship and warm feeling and we’ve made tremendous progress,” he said.

However, reports in the US media claimed that China has not budged yet on the crucial structural changes sought by the US negotiators led by the China hawk Ambassador Robert Lighthizer, the US Trade Representative (USTR).

China, for example, did not make any commitments on issues centering around the alleged theft of intellectual property, forced technology transfer, disciplines for so-called state-owned enterprises, and industrial subsidies, US media reports said.

“The two sides are still far from a deal, and they didn’t agree Thursday to a written framework with blanks left for areas where there is disagreement – the kind of document that is standard in trade negotiations,” according to a report in The Wall Street Journal of 1 February.

Significantly, China did not indicate whether it sought substantial improvements from the US for removing trade barriers imposed on Chinese goods through anti-dumping and countervailing measures that are based on the non-market economy grounds.

China did not indicate whether it had raised the issue of enveloping security barriers imposed on Chinese telecom companies, particularly Huawei.

“No final deal will be made until my friend President Xi, and I, meet in the near future to discuss and agree on some of the longstanding and more difficult points,” said President Trump, suggesting that it is still work in progress.

In a letter delivered to the US President by the Chinese top negotiator at the meeting, President Xi said that “China-US relations are at a critical stage.”

According to a report in the, President Xi said “the two countries should, in the spirit of mutual respect and win-win cooperation, continue to try to meet each other half way and step up consultations, so as to reach a mutually beneficial agreement as early as possible.”

Although the US did not issue an explicit statement about the concessions made by China during the two days of talks that were held in the Eisenhower Executive Building close to the White House, China’s vice-premier Liu He indicated that China would buy 5 million tons of US soybeans.

President Trump suggested that such a huge purchase would “make our farmers very happy.”

Later, the US administration clarified that China has agreed to buy an additional 5 million metric tons of soybeans – but not daily, and no timeframe was specified.

President Trump also signalled that a deal with China is possible by 1 March when the 90-day deadline ends for Washington to decide whether it would impose new unilateral crowbar tariffs of 25%, up from 10%, on $200 billion of Chinese goods under US Special 301 provisions of the US Trade Act of 1974.

“I think we can do it by March 1. Can you get it down on paper by March 1? I don’t know,” Trump said, pronouncing that “this is either going to be a big deal or it’s going to be a deal that we’ll just postpone for a while.”

The US president also suggested at the meeting with the Chinese chief negotiator that he did not anticipate the need to extend the deadline.

Trump, who asked the Chinese negotiator to read out the letter from President Xi, expressed confidence that things can be turned around during the one-on-one meeting with his Chinese counterpart President Xi in Hainan later this month.

The Chinese vice-premier Liu He, who was a Harvard University graduate and close to Wall Street, said the two days of talks focused on “three key themes” – “trade, structural issues and enforcement.”

The US team led by the USTR Ambassador Robert Lighthizer indicated that no specific concessions were made by the Chinese team.

Ambassador Lighthizer and his Treasury counterpart Steven Mnuchin are expected to visit China sometime this month to resume negotiations.

“We focused on these core ideas, these core concepts and it’s my judgement that we made headway in significant ways,” Ambassador Lighthizer said Thursday, according to a report in the Financial Times.

According to a report by the Xinhua news agency, the two trade delegations held “a frank, concrete and constructive discussion” and “agreed to further strengthen cooperation” on issues concerning intellectual property and technology transfer.

According to a statement issued by the White House after the meeting, the two sides have covered “a wide range of issues, including: (1) the ways in which United States companies are presumed to transfer technology to Chinese companies; (2) the need for stronger protection and enforcement of intellectual property rights in China; (3) the numerous tariff and non-tariff barriers faced by United States companies in China; (4) the harm resulting from China’s cyber-theft of United States commercial property; (5) how market-distorting forces, including subsidies and state-owned enterprises, can lead to excess capacity; (6) the need to remove market barriers and tariffs that limit United States sales of manufactured goods, services, and agriculture to China; and (7) the role of currencies in the United States-China trading relationship.”

Further, the White House claimed that the two sides discussed about reducing the US trade deficit with China, emphasizing that “the purchase of United States products by China from farmers, ranchers, manufacturers, and businesses is a critical part of the negotiations.”

But President Trump’s remarks also failed to conceal the urgency of having an agreement with China to secure some market access gains for its soybean farmers and Wall Street financial behemoths such as Goldman Sachs in the wake of the negative fallout from the recent partial shutdown of the federal administration.