US wrangles China for firm commitments as trade talks continue
WASHINGTON — As President Trump dangles the possibility of extending a March deadline to reach a trade deal with China, his advisers are trying to secure firm commitments from Beijing to purchase more US products, prevent currency manipulation, and end its practice of forcing American companies to hand over valuable technology.
Negotiators from both countries, who are meeting in Washington over the next two days, are expected to trade memos and haggle over phrasing as they try to make progress toward a deal. But US officials are increasingly focused on ensuring that China, which has often reneged on promises to past administrations, actually adheres to any agreement.
Whether a substantive deal can be reached in the coming days remains unclear. So far, the Chinese have largely reiterated promises to allow foreign car companies and banks freer access to the Chinese market and to increase purchases of US goods, including soybeans and semiconductors.
In recent meetings, the Chinese made only vague commitments on structural issues, including protecting intellectual property and paring back heavy subsidies to state-owned enterprises, said William Reinsch, a former US trade official and now a senior adviser at the Center for Strategic and International Studies.
“The Chinese have not yet put forward anything close to what we’re asking on the so-called structural issues,” Reinsch said. “There are differences of opinion on whether they will.”
Complicating matters is Trump, who in recent days has appeared to undercut his advisers by saying that talks might outlast a March deadline that the president himself set in an effort to pressure China to cut a deal.
“I can’t tell you exactly the timing,” Trump said Tuesday, adding that the deadline he had set of midnight March 1 “is not a magical date. A lot of things can happen.”
On Thursday morning, US Trade Representative Robert Lighthizer, flanked by Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, and economic advisers Larry Kudlow and Peter Navarro, met with Vice Premier Liu He of China and a team of Chinese advisers in the executive office building next to the White House. The meeting kicked off two days of top-level talks in which Lighthizer, a longtime China critic, hopes to secure promises from Beijing to make lasting structural changes to its economy.
Much of the recent discussion has centered on deadlines and enforcement mechanisms to ensure that China keeps any promises for economic reforms. Lighthizer, Navarro, and other trade advisers have often called out China for promising changes to US officials in the past, but then failing to follow through. The administration is considering a process that would allow tariffs to kick back in if the Chinese are found to have reneged on a commitment.
US officials have come to realize that China has been repackaging promised reforms and trying to sell them as concessions to Trump. This has caused deep frustration among the administration’s China hard-liners, including Navarro and Lighthizer, who have been skeptical that China will actually agree to new, substantive commitments.
In the run-up to this week’s meeting, both sides have tried to begin formalizing the framework of an agreement around six memorandums of understanding. However, a detailed draft text of an agreement has not yet been written.
“The Chinese are playing for an extension,” said Michael Pillsbury, a Hudson Institute scholar who advises the Trump administration and speaks regularly with Chinese officials. “That’s one of their top goals right now.”
Pillsbury said that despite Trump’s hints about extending the deadline, they are expecting he will follow through on his “tariff man” instincts and raise levies on $200 billion worth of Chinese goods March 2. He said he believes that China has prepared a package of structural concessions to offer the United States after those tariffs are increased in an effort to get all the tariffs rolled back.
Both countries have also floated measures that could undermine years of efforts aimed at making China’s economy more market-oriented. The offers include large, state-directed purchases of technological goods, natural gas and soybeans, as well as closer management of China’s currency. Those measures would violate Chinese promises to the World Trade Organization and the International Monetary Fund.
But that may matter little to Trump, who has been largely focused on narrowing the trade gap between the two countries by getting China to buy more US products. The US trade deficit with China is likely to increase in 2019, said Derek Scissors, a resident scholar at the American Enterprise Institute, increasing pressure on Trump to reach a deal that involves more American products flowing East.
China’s recent offers have included buying $200 billion of US semiconductors during the next six years, in addition to purchases of soybeans and natural gas. The eye-popping figure would help reduce the $382 billion trade deficit in goods that the United States ran up with China last year, a metric Trump often sees as evidence of a failed economic relationship.
In return for buying more US products, the Chinese have asked Trump not to follow through on his threat to increase tariffs to 25 percent from 10 percent — and to hopefully remove the tariffs entirely. They have also pushed the United States to remove restrictions on exports of high-tech products to China as well as constraints on Chinese investments in the United States.