US weighing currency pact with China as part of partial deal

The currency accord would be followed by more negotiations on core issues like intellectual property and forced technology transfers.
The currency accord would be followed by more negotiations on core issues like intellectual property and forced technology transfers.PHOTO: REUTERS

WASHINGTON (BLOOMBERG) - The White House is looking at rolling out a previously agreed currency pact with China as part of an early harvest deal that could also see a tariff increase next week suspended, according to people familiar with the discussions.

The currency accord - which the US said had been agreed to earlier this year before trade talks broke down - would be part of what the White House considers to be a first-phase agreement with Beijing.

It would be followed by more negotiations on core issues like intellectual property and forced technology transfers, the people said.

The internal deliberations come as a team of Chinese negotiators, led by Vice-Premier Liu He, arrived in Washington to resume trade talks with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin from Thursday (Oct 10).

It's the first face-to-face talks between senior officials since July.

The discussions around an interim deal come as the Trump administration this week further ramped up pressure on Beijing by blacklisting Chinese technology firms over their alleged role in oppression in the far west region of Xinjiang, as well as placed visa bans on officials linked to the mass detention of Muslims.

At the same time, a fight over free speech between China and the US National Basketball Association, triggered by a tweet backing Hong Kong's protesters, has underscored the heated tensions.

The window for such an agreement is closing, with the US planning to raise duties to 30 per cent from 25 per cent on about US$250 billion (S$345 billion) of Chinese imports next Tuesday. Additional duties are set to take effect on Dec 15.

A Chinese official said on Wednesday that the country was still open to reaching a partial trade deal with the US that may include large purchases of American commodities, but added that success was contingent on President Donald Trump halting further tariffs.

Showing progress with a currency pact and other matters this week could serve as a reason to delay next week's tariff hike.

Bloomberg News reported last month that the White House was discussing plans for an interim deal.

Still, Mr Trump this week said he preferred a complete trade agreement with China. "My inclination is to get a big deal. We've come this far. But I think that we'll just have to see what happens. I would much prefer a big deal. And I think that's what we're shooting for," he said.

A White House spokesman declined to comment. A Treasury spokesman didn't respond to a request for comment.

MANIPULATION LABEL

No details were made public about the US-China currency pact reached in February that Mr Mnuchin at the time called the "strongest" ever.

Broader trade negotiations between the two countries broke down in May after the US accused China of backtracking on its commitments. Then, in August, the Trump administration formally declared China a currency manipulator.

According to people familiar with the currency language, the pact largely resembles what the US agreed to in a new trade agreement with Mexico and Canada and also incorporates transparency commitments included in Group of 20 statements.

Still, Mr Lighthizer cautioned earlier this year that the currency agreement hinges on the overall enforcement of the trade deal. "There's no agreement on anything until there's agreement on everything. But the reality is we have spent a lot of time on currency, and it'll be enforceable," he said in congressional testimony on Feb 27.

The senior negotiators from the US and China are scheduled to hold talks through Friday, people familiar with the plans said.

Mr Liu met a small group of business executives, and separately with International Monetary Fund officials on Wednesday afternoon, people familiar with the meetings said.