China and the United States are closing in on phase one of a trade deal after negotiators "reached principled consensus", said the Chinese Commerce Ministry yesterday.
Vice-Premier Liu He spoke on the telephone with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on Friday night, and "had earnest and constructive discussions on properly addressing each other's core concerns, and reached principled consensus", said the ministry in a statement.
The White House on Friday sounded more cautious, with its economic adviser Larry Kudlow saying the deal had not been completed, although he acknowledged both sides have made huge progress.
Hopes that Chinese President Xi Jinping and his US counterpart Donald Trump would sign the agreement at the Asia-Pacific Economic Cooperation summit this month were dashed after host Chile scrapped the event over nationwide protests.
But Mr Trump said he is looking for a new venue and it could be Iowa, a farming state that could benefit from this phase one deal, and where Mr Xi spent two weeks in 1985 studying agriculture technology.
In interviews with American media, Mr Kudlow said negotiators have largely sewn up deals on agriculture, financial services and currency.
Beyond a promise by China to buy farm goods from the US, the deal would also "open up and reduce a lot of barriers and onerous regulations that will allow American farmers to export to China", said Mr Kudlow.
The agreement on financial services would give US companies - insurance firms, investment banks and commercial banks - complete ownership of their operations in China, noted Mr Kudlow.
There was also "some progress" on forced transfers of technology, he said, adding that it would go into a second phase agreement that negotiators would have to iron out. The US has said a full trade deal with China could take three phases.
The protracted trade war between the world's two largest economies has roiled markets and caused a global slowdown, while sweeping tariffs have hit businesses and consumers in both countries.
One sticking point has been the tariffs, which China wants removed before talks can proceed. Another round of US duties is scheduled to kick in on Dec 15, affecting consumer goods such as laptops and mobile phones.
The US wants an enforcement mechanism that would give it the ability to slap tariffs on China if the latter violated the agreement.
Complicating matters, the World Trade Organisation on Friday gave China its approval to impose sanctions on US imports worth US$3.6 billion (S$4.9 billion) after the American authorities unfairly put anti-dumping duties on Chinese goods. This case preceded the trade war, but could muddle affairs as the two sides try to resolve their 20-month-long trade dispute.
Mr Steven Okun, senior adviser at international strategic advisory firm McLarty Associates, said the phase one deal needs to construct a foundation for a phase two pact.
"The commitments announced to date do not appear to put forth an enforceable framework in which China will commit to addressing the underlying basis for the US tariffs: forced technology transfers, cybertheft and other unfair trade practices," he said. "Nor has the US committed to forgo the pending tariffs, let alone take down the existing tariffs."
Still, any agreement will hopefully create a more positive environment to deal with the core issues that will ensure the relationship is on a level playing field and the tariffs are removed on both sides, said Mr Okun.
