[Chinese negotiators presented their own hard-line terms for a reshaped trade relationship, demanding the United States drop a complaint over China’s licensing terms for foreign patent holders and immediately designate China a market economy, which would give it easier treatment under routine U.S. trade enforcement actions.]
By Simon Denyer and David J.
Lynch
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Treasury
Secretary Steven Mnuchin walks through a hotel lobby in Beijing during
trade
talks Thursday. (Greg Baker/AFP/Getty Images)
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BEIJING
— Two days of inconclusive
U.S.-China talks ended here Friday amid signs that the Trump administration is
demanding dramatic concessions that challenge core elements of China’s economic
system and its ambitions for future development.
China said “big differences” remained as a
high-level U.S. government delegation headed home, although it said consensus
had been reached on some issues.
Given China’s equally uncompromising stance,
it was unclear where the two sides had found common ground. U.S. envoys are
likely to have met stiff resistance, given their demands for fundamental
revisions in how the Chinese leadership manages foreign trade and its domestic
economy. The demands included a $200 billion cut in the U.S. trade deficit with
China by 2020.
Chinese negotiators presented their own
hard-line terms for a reshaped trade relationship, demanding the United States
drop a complaint over China’s licensing terms for foreign patent holders and
immediately designate China a market economy, which would give it easier
treatment under routine U.S. trade enforcement actions.
The dueling negotiating menus represented
“maximalist” positions that may make eventual agreement more difficult, said
Scott Kennedy, who directs a project on the Chinese economy at the Center for
Strategic and International Studies.
“This could be remembered as the day that the
U.S. and China found out it wasn’t misunderstanding causing their
difficulties,” Kennedy said. “The trouble now may be that they understand each
other all too well.”
With the U.S. team, including Treasury
Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross and U.S. Trade
Representative Robert E. Lighthizer, en route to Washington, the White House
released a statement calling the talks “frank.”
The U.S. briefing paper, presented to Chinese
officials before the talks, said that “the United States-China trade relationship
is significantly unbalanced” and that “immediate” action is needed to reduce
the U.S. trade deficit. The paper appeared on the social media site Weibo
before being deleted by Chinese government censors.
The meetings marked an attempt by the Trump
administration to leverage changes from China without sparking a potentially
disastrous trade war, after threatening to impose tariffs on up to $150 billion
in Chinese imports.
U.S. negotiators entered the talks with a
sweeping set of demands that called for China to drop its tariffs to match
lower U.S. levels; eliminate limits on U.S. investment in key industries; end
state-sponsored cyberattacks on U.S. targets; strengthen intellectual-property
safeguards and halt subsidies for several advanced technology industries.
“Each side has staked out positions the other
side will not reach,” said John Frisbie, president of the U.S.-China Business
Council. “The gap’s pretty wide right now.”
The talks ended with no details on next
steps. But some analysts predicted tough bargaining in the weeks to come.
“The Trump administration is making very
strong demands upfront, which is likely to offend the Chinese,” said Andrew
Collier, managing director of Orient Capital Research in Hong Kong. “It may
take them some time to formulate an answer, as they don’t react well to ‘in
your face’ demands, particularly from the U.S.”
U.S. negotiators will brief President Trump
upon their return. The president faces several critical decisions in coming
weeks, including whether to impose threatened tariffs on Chinese goods, even as
he seeks Beijing’s help in resolving a showdown over the North Korean nuclear
program.
Trump told reporters Friday that he expects
to meet North Korean leader Kim Jong Un, a China ally, “very soon.”
After years of ineffective U.S. complaints
about Chinese trade practices, Trump clearly has opted for tougher action, said
Claire Reade, a former U.S. negotiator. “The problem is China is not playing by
the rules in a very important way,” she said, “and China is way too big to just
let it go.”
The United States wants China to take swift
action to reduce the $375 billion deficit in goods trade by $200 billion by the
end of 2020. Washington also is seeking fundamental changes to the way China’s
Communist Party runs its economy, taking aim at a massive state-subsidized
effort to achieve global dominance in advanced technologies, known as “Made in
China 2025.”
Chinese experts say Beijing is determined not
to give ground over that issue. “Asking China to stop its state industrial
policy is, to some degree, a violation of China’s sovereignty, and it’s
impossible for China to accept it,” said Lu Xiang, an expert in Sino-U.S.
relations at the Chinese Academy of Social Sciences in Beijing.
The Xinhua News Agency reported that the two
sides agreed to establish a “working mechanism” to maintain close communication
on the issues discussed in the talks.
In a document supplied by the U.S. delegation
to the Chinese side ahead of the talks, the United States demanded that China
strengthen the protection of intellectual-property rights and take “immediate,
verifiable” steps to halt some of the practices identified in U.S. allegations
against the Chinese, notably commercial cyberespionage and the theft of
intellectual property and trade secrets.
The document also asked China to ensure that
investors in China are “afforded fair, effective and nondiscriminatory market
access and treatment” and that China reduce “tariffs on all products in
noncritical sectors to levels that are no higher than the levels of the United
States’ corresponding tariffs.”
Wei Jianguo, a former vice commerce minister,
said it was beyond the Chinese government's reach to engineer such a rapid
reduction in the deficit, since that would involve commercial decisions guided
by market forces. “The U.S. side might not understand the Chinese government
and think it has unlimited power to make any decision,” he said. “It’s not like
that.”
U.S. sanctions against leading Chinese
telecommunications equipment manufacturer ZTE have also cast a significant
shadow over the trade relationship.
Last month, the Commerce Department barred
U.S. companies from exporting to ZTE for seven years, saying the company
violated a previous settlement of criminal and civil charges by making
shipments to Iran and North Korea.
That move was a big blow to ZTE, which has
relied on U.S. chips and software to power its smartphones. But it has also
reinforced China’s determination to accelerate the development of its own
high-tech industries and reduce its reliance on the United States.
“There’s no space for negotiation on China’s
development,” said Ruan Zongze, executive vice president at Beijing's China
Institute of International Studies, a think tank affiliated with the Foreign
Ministry. “China has to progress, and it’s unstoppable by anyone.”
China’s Commerce Ministry said it made
“solemn representations” to the U.S. delegation over the ZTE case during the
talks.
Lynch reported from Washington. Luna Lin, Lui
Yang and Shirley Feng in Beijing contributed to this report.
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