U.S. Pushes China to Follow Through on Trade Promises
U.S. Pushes China to Follow Through on Trade Promises
BEIJING—The U.S. and China opened talks on Monday to resolve a trade fight that is threatening the global economy, with U.S. negotiators focused on a make-or-break issue: guarantees that Beijing will follow through on its offers.
The negotiations, which run through Tuesday, are the first time the two sides have met face-to-face since President Trump and President Xi Jinping of China agreed to a temporary tariff truce during a meeting in Argentina on Dec. 1. Mr. Xi’s top economic policy aide stopped by the meeting to greet participants in what people briefed on the matter said was a show of Beijing’s seriousness.
President Trump and Chinese President Xi Jinping, left, at a working dinner after the G-20 leaders’ summit in Buenos Aires in December.
Photo:
kevin lamarque/Reuters
Trade officials from Washington and Beijing are seeking to hammer out details on a number of broad pledges recently made by the Chinese leadership: more Chinese purchases of U.S. goods and services; increased U.S. access to China’s markets; better protection of U.S. intellectual property and reductions in Beijing’s subsidies to Chinese companies.
For each category, according to individuals with knowledge of the discussions, U.S. negotiators are pressing their Chinese counterparts to devise ways to ensure that Beijing will make good on its promises.
For instance, the U.S. side wants China to be specific about what it will purchase by specific dates. In addition, if Beijing revises regulations to boost U.S. access to China’s markets, U.S. negotiators want assurance that it won’t use government authority over licensing, environmental regulation and other areas to hinder U.S. companies.
The U.S. side also wants Beijing to list its subsidies, according to the people with knowledge of the discussions. China was supposed to do so as part of its 2001 entry into the World Trade Organization. The U.S. has complained at the WTO that Beijing hasn’t fully listed its subsidies as required, especially those offered by local governments. China has responded that it has met its obligations.
As part of efforts to make sure China enforces any deal it strikes with the U.S., the Trump administration is considering options such as keeping current tariffs on Chinese goods and removing them only after Beijing carries out its pledges.
Chinese Vice Premier Liu He’s appearance won applause from the U.S. delegation's leader, Deputy U.S. Trade Representative Jeffrey Gerrish, Under Secretary of Commerce Gilbert Kaplan and other U.S. officials.
Vice Commerce Minister Wang Shouwen is heading the Chinese delegation. But if this week’s talks progress, Mr. Liu himself is expected to follow up with a trip to Washington to meet with U.S. Trade Representative Robert Lighthizer, anointed by Mr. Trump as the lead negotiator with China.
As representatives from the U.S. and China try to hammer out an agreement on trade, the White House is seeking to stop what it calls “forced technology transfer.” WSJ’s Shelby Holliday explains.
As part of the cease-fire agreement between Messrs. Trump and Xi, the U.S. is suspending tariff increases on $200 billion of Chinese imports until March, allowing Beijing three months to address what the U.S. calls its unfair trade and economic practices.
The Trump administration’s focus on how to enforce any deal with Beijing highlights what U.S. officials call China’s poor follow-up record. Hurdles for U.S. and other foreign firms operating in China have grown over the years, they said, despite similar market-opening pledges Beijing has made over years of previous negotiations.
For example, China has pledged for more than a decade to open its financial-services sector and early last year promised anew to do so—part of a plan meant to forestall the tougher trade measures that Mr. Trump has since imposed. Specifically, China’s central-bank Gov. Yi Gang said in April that China would remove by the end of June the current 49% ownership cap on foreign securities firms’ mainland joint ventures.
However, UBS Group of Switzerland is the only foreign investment bank so far to receive Beijing’s approval to hold a majority stake in a Chinese venture. Chinese regulators have yet to green-light similar applications from companies including
JPMorgan Chase
& Co. of the U.S. and Nomura Holdings of Japan. For the banks, one hurdle is a new regulatory requirement that majority owners have at least 100 billion yuan ($14.6 billion) in net assets.
“This history will impact the willingness of the current administration to accept a final package without monitoring, guarantees as well as enforcement tools” to ensure Beijing complies with the deal, said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce, who meets regularly with officials in both capitals.
Chinese officials suggest that Beijing is willing to put in place a process for monitoring progress toward fulfilling its offers. At the same time, mistrust of Washington also runs deep within Zhongnanhai, the Chinese leadership compound. “Will the U.S. side keep coming back for more after we strike a deal?” asked a Chinese official involved in economic policy-making.
Chinese Vice Premier Liu He, President Xi’s right-hand man, stopped by to greet the U.S. delegation.
Photo:
Chris Emil JanflEn/Zuma Press
As U.S. and Chinese negotiators met, North Korean leader Kim Jong Un arrived Monday in China, North Korea’s main backer amid a standstill in denuclearization talks, a pointed reminder of China’s influence in other matters of U.S. interest. Mr. Trump in the past has said he’s willing to relax trade demands on China in exchange for help with North Korea’s nuclear program.
Monday’s talks at the Commerce Ministry in Beijing were held in a giant conference room divided by a rectangular table in the middle with rows of chairs on each side. More than two dozen officials and their aides from Washington and the U.S. Embassy in Beijing sat across from their Chinese peers from the Commerce Ministry, the Finance Ministry and other government agencies.
Though he wasn’t in the room, Mr. Lighthizer’s leading role on the U.S. side is seen as a double-edged sword by Beijing. Mr. Trump’s faith in Mr. Lighthizer shows the president’s desire to cut a full trade deal with Beijing, Chinese officials said. A previous trade truce declared in May by Mr. Liu and Treasury Secretary Steven Mnuchin was quickly overturned by Mr. Trump, who saw the Chinese offer as inadequate.
As companies moving goods from China to the U.S. face heftier tariffs, some have developed creative techniques to avoid paying them. The WSJ’s Steven Russolillo takes to the field to explain how some businesses sidestep import duties.
Mr. Lighthizer is also seen as a tough negotiator, with a hard-line stance on China trade. For him, more Chinese purchases of U.S. products are secondary to Beijing’s willingness and ability to solve some longstanding structural issues such as subsidies to Chinese companies, especially state-owned firms in high-tech areas.
Before the latest round of talks started, China had extended a few olive branches to Washington. It removed punitive tariffs on U.S.-made cars and auto parts, renewed purchases of American soybeans and began altering an industrial policy criticized by the Trump administration as protectionist.
In addition, Beijing recently issued a new draft foreign-investment law that promises to level the playing field for foreign companies in China. The draft law still leaves room for China to discriminate against foreign firms by tapping a murky national-security review process and other potential loopholes, according to trade experts.
—Bob Davis
contributed to this article.
Write to Lingling Wei at lingling.wei@wsj.com
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