TWN Info Service on WTO and Trade Issues (Sept19/03)
18 September 2019
Third World Network

US claims “conceptual” accord reached in trade war with China

Published in SUNS #8974 dated 11 September 2019

Geneva, 10 Sep (D. Ravi Kanth) – The United States has reached a “conceptual agreement” with China in their festering trade war on how to enforce a final deal, the US Treasury Secretary Steven Mnuchin claimed on Monday (9 September).

In an interview to Fox News on 9 September, Mnuchin indicated that “he believes Washington has a “conceptual agreement” with Beijing on how to enforce a final deal,” according to a report in the Washington Trade Daily.

China has all along demanded a “two-way, fair and equal” enforcement system for resolving their trade disputes.

Earlier, Mnuchin had suggested that Washington was veering round to the view that it would accept a two-way enforcement system for resolving bilateral trade disputes arising from the proposed US-China trade agreement (reached) on the margins of the annual International Monetary Fund and the World Bank meetings in April this year.

But Mnuchin’s statement made on the margins of the IMF-World Bank meeting was seen as a “sign of split” with the US chief negotiator Ambassador Robert Lighthizer, according to a report in the Financial Times on 15 April.

“The biggest risk he [Ambassador Lighthizer] faces in the China negotiations is not necessarily from the other side of the table, but from his side of the table, from being undermined at home,” the FT report had said quoting an unnamed former senior US trade official.

Therefore, it remains to be seen whether Mnuchin’s latest claim is shared by Ambassador Robert Lighthizer, who was indifferent to kick-starting the talks with China unless there are signs of significant progress, The Wall Street Journal reported on 5 September.

The US and China will resume their trade talks next month in Washington amid the growing global economic slowdown.

The US administration “would prefer to go back to May, when 90% of the deal was done,” said the US National Economic Council Chairman Larry Kudlow on 6 September.

But Kudlow acknowledged that it was not clear whether Beijing is now willing to accept the deal that was on the table in May. “We are going to have a broad-based discussion and see where it leads,” Kudlow said.

However, prospects of a credible deal remain uncertain due to unbridgeable differences on a range of issues, analysts said.

The US Trade Representative Ambassador Robert Lighthizer and Treasury Secretary Steven Mnuchin spoke to the Chinese Vice Premier Liu He on Thursday (5 September) morning Beijing Time to resume face-to-face talks.

Ahead of the phone conversation on Thursday, two Republican senators David Purdue and Steve Daines had travelled to Beijing and held discussions with a number of senior Chinese government officials, including Vice Premier Liu He.

President Donald Trump, Treasury Secretary Steven Mnuchin and USTR Ambassador Lighthizer were informed about our visit, the senators suggested, maintaining that their goal is “to help reinforce President Trump’s efforts to level the playing field with all our trading partners,” the Washington Trade Daily reported on 5 September.

Clearly, the visit by the two senators coupled with growing criticism of President Trump’s tactics for intensifying the trade war amid increasing global recessionary fears seem to have prompted the two sides to kick-start the talks.

The US has already imposed 15% additional duty on $112 billion of Chinese goods from 1 September.

Washington also plans to raise tariffs on largely non-consumer items used by businesses to 30% from 25% from 1 October.

Beijing has retaliated in response to Washington’s unilateral move by targeting politically-sensitive items such as soybeans and auto parts with additional duties of 30% and 35% respectively.

Senior sherpas from the two sides will hold meetings “in mid-September to lay the groundwork for meaningful progress,” the spokesperson for the USTR announced on Thursday (5 September).

But expectations for a breakthrough in talks between the two sides remain low.

“Chinese analysts, however, do not hold an optimistic view of the upcoming talks, considering the previous US flip-flopping attitude and lack of sincerity in reaching a deal,” China’s Global Times wrote on Thursday (5 September).

Washington has demanded major “structural changes” in China’s trading and economic system.

The USTR Ambassador Lighthizer, who is known to be a China hawk, wants sweeping changes in China’s intellectual property regime, an end to mandatory transfer of technologies, elimination of industrial subsidies granted to Chinese state-owned enterprises, and last but not least a unilateral enforcement mechanism among others.

Ambassador Lighthizer, for example, had insisted that only the US can retaliate in case China fails to adhere to commitments agreed in the proposed US-China agreement – but not Beijing, if the US failed to comply with its side of the bargain.

According to Senator Chuck Grassley, who chairs the US Senate Finance Committee, Ambassador Lighthizer “didn’t want to schedule a meeting with senior Chinese officials unless there are signs of significant progress,” The Wall Street Journal reported on 5 September.

“In conversations I’ve had [with Ambassador Lighthizer], it’s pretty certain the United States doesn’t care much to sit down and talk unless there’s going to be really serious movement on the three or four issues we think are most important,” said Mr. Grassley, who listed currency manipulation and intellectual property theft as priorities, it reported.

China has repeatedly indicated that while it is prepared to commit to more purchases of American farm products, it will not agree to unilateral demands raised by the US regarding structural changes in the Chinese economy, said Chinese trade officials, who asked not to be identified.

China had repeatedly maintained that it will agree to a balanced “two-way, fair and equal” deal that would remove restrictions on Chinese telecom companies such as Huawei to access high-tech products.

“The path to even a modest deal is strewn with many obstacles, as neither side is likely to pull back any of the existing trade sanctions without substantial concessions from the other side,” Eswar Prasad, a China expert and economist at Cornell University, told The Wall Street Journal on 5 September.