U.S., China face deep trade, IP differences in high-level talks

The two sides will meet next door to the White House in the highest-level talks since U.S. President Donald Trump and Chinese President Xi Jinping agreed a 90-day truce in their trade war in December

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WASHINGTON: The United States and China launch a critical round of trade talks on Wednesday amid deep differences over U.S. demands for structural economic reforms from Beijing that will make it difficult to reach a deal before a March 2 U.S. tariff hike.

The two sides will meet next door to the White House in the highest-level talks since U.S. President Donald Trump and Chinese President Xi Jinping agreed a 90-day truce in their trade war in December.

People familiar with the talks and trade experts watching them say that, so far, there has been little indication that Chinese officials are willing to address core U.S. demands to protect American intellectual property rights and end policies that Washington says force U.S. companies to transfer technology to Chinese firms.

The U.S. complaints, along with accusations of Chinese cybertheft of U.S. trade secrets and a systematic campaign to acquire U.S. technology firms, were used by the Trump administration to justify punitive U.S. tariffs on $250 billion worth of Chinese imports.

Trump has threatened to raise tariffs on $200 billion to 25 percent from 10 percent on March 2 if an agreement cannot be reached. He has also threatened new tariffs on the remainder of Chinese goods shipped to the United States.

Chinese officials deny that their policies coerce technology transfers. They have emphasized steps already taken, including reduced automotive tariffs and a draft foreign investment law that improves access for foreign firms and promises to outlaw “administrative means to force the transfer of technology.”

A crucial component of any progress in the talks, according to top administration officials, is agreement on a mechanism to verify and “enforce” China’s follow-through on any reform pledges that it makes. This could maintain the threat of U.S. tariffs on Chinese goods long term.

TEMPERED EXPECTATIONS

Some business groups watching the talks were tempering expectations for a breakthrough this week.

But the Chinese side, led by Vice Premier Liu He, would likely have to bring to the table a new offer that goes significantly beyond its previous offers to significantly increase purchases of U.S. goods, including soybeans, energy and manufactured goods.

People familiar with the talks said manufactured goods, a key priority for the Trump administration, were among the largest components of Chinese purchase pledges aimed at significantly reducing the U.S. trade deficit with China. But here, too, there are “no guarantees” that Beijing would follow through on these pledges, one of the people said.

Also hanging over the talks is are U.S. indictments against Chinese top telecommunications equipment maker Huawei Technologies Co, accusing it of bank and wire fraud to evade Iran sanctions and conspiring to steal trade secrets from T-Mobile US Inc.

MNUCHIN UPBEAT

U.S. Treasury Secretary Steven Mnuchin, one of the Trump administration’s strongest advocates for a deal with China, made upbeat comments about the talks for the second day in a row on Tuesday, saying on Fox Business Network that he expects “significant progress” on market access and technology transfer issues. He insisted that the Huawei case and trade talks were “separate issues.”

Meanwhile, earnings warnings from U.S. companies hit by the slowdown in China’s economy – due in part to the tariffs – are piling up. 3M Co joined Caterpillar, Nvidia and Apple to blame weakening Chinese demand for revenue and profit shortfalls.

 

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