US, China begin talks amid deep differences over reforms

Few signs China will address US demands on structural reforms at highest-level talks since Dec

US Commerce Secretary Wilbur Ross (right), Trade Representative Robert Lighthizer (second from right) and top US officials sitting down with (from left) Chinese Vice-Premier Liu He, central bank governor Yi Gang and other Chinese vice-ministers and s
US Commerce Secretary Wilbur Ross (right), Trade Representative Robert Lighthizer (second from right) and top US officials sitting down with (from left) Chinese Vice-Premier Liu He, central bank governor Yi Gang and other Chinese vice-ministers and senior officials for negotiations in the Diplomatic Room at the Eisenhower Executive Office Building yesterday.PHOTO: AGENCE FRANCE-PRESSE

WASHINGTON • The United States and China launched a critical round of trade talks yesterday amid deep differences over Washington's demands for structural economic reforms from Beijing that will make it difficult to reach a deal before a March 2 US deadline to increase tariffs on Chinese goods.

Cabinet-level officials, led by Chinese Vice-Premier Liu He and US Trade Representative Robert Lighthizer, gathered in the Eisenhower Executive Office Building, next to the White House.

During a photo opportunity at the start of the scheduled two days of talks, Mr Lighthizer, Treasury Secretary Steven Mnuchin and other top Trump administration officials sat silently across a long table from their Chinese counterparts, ignoring a reporter's questions.

After a few minutes, Mr Lighthizer broke the silence with joking small talk about table positioning and appearing in photographs from the meeting between US President Donald Trump and Chinese President Xi Jinping in Argentina last year.

The talks began two days after the US charged Chinese telecommunications company Huawei Technologies and its chief financial officer, Meng Wanzhou, with conspiring to violate US sanctions on Iran by doing business through a subsidiary it tried to hide.

The talks are expected to be tense, with little indication so far that Chinese officials are willing to address core US demands to fully protect American intellectual property rights and end policies that Washington has said force US companies to transfer technology to Chinese firms.

The US complaints, along with accusations of Chinese cyber theft of US trade secrets and a systematic campaign to acquire US technology firms, were used by the Trump administration to justify punitive US tariffs on US$250 billion (S$338 billion) worth of Chinese imports.


Mr Trump has threatened to raise tariffs on US$200 billion of goods to 25 per cent from 10 per cent on March 2 if an agreement cannot be reached.

He has also threatened new tariffs on the remainder of Chinese goods shipped to the US.

"Clearly on the structural concerns, on forced technology transfer, there remains a significant gap if not a wide chasm between the two sides", a person familiar with the talks said.

Chinese officials deny that their policies coerce technology transfers.

They have emphasised 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".

China is fast-tracking that new law, with the country's largely rubber-stamp Parliament likely to approve it in March.

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 US tariffs on Chinese goods long term.

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

With a month to go before the deadline, it was unlikely that the best offers from either side would be put on the table in the next two days, said Ms Erin Ennis, senior vice-president of the US-China Business Council.

But the Chinese side would likely have to bring to the table a new offer that goes significantly beyond its previous offers to significantly increase purchases of US goods, including soya beans, 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 US trade deficit with China.

But here, too, there are "no guarantees" that Beijing would follow through on these pledges, one of the people said.

Mr Mnuchin, one of the Trump administration's strongest advocates for a deal with China said on Fox Business Network on Tuesday that he expects "significant progress" on market access and technology transfer issues.

He insisted that the Huawei case and trade talks were "separate issues".


A version of this article appeared in the print edition of The Straits Times on January 31, 2019, with the headline 'US, China begin talks amid deep differences over reforms'. Subscribe