US-China trade

What pivotal US-China talks may yield

US President Donald Trump (left) and Chinese President Xi Jinping have given their officials until March 1 to work out a deal on "structural changes" to China's economic model.
US President Donald Trump (left) and Chinese President Xi Jinping have given their officials until March 1 to work out a deal on "structural changes" to China's economic model.PHOTO: AFP

WASHINGTON • The United States and China will hold a pivotal round of talks this week in an attempt to end their trade war.

US President Donald Trump and Chinese President Xi Jinping gave their officials until March 1 to work out a deal on "structural changes" to China's economic model.

Chinese Vice-Premier Liu He will meet US Trade Representative Robert Lighthizer in Washington for two days of talks starting tomorrow.

Here is a range of scenarios to consider - and clues to watch for - as the talks begin.

BASE CASE

Even if Mr Lighthizer and Mr Liu reach an agreement this week, it will probably take time to brief the two presidents, then for Mr Trump and Mr Xi to decide if they are satisfied.

Following the last meetings in Beijing, the two sides put out separate statements.

The US acknowledged progress on issues such as purchases of US products, but added that any deal would need to include "ongoing verification and effective enforcement".

 
 
 

China has called the talks "extensive, in-depth and detailed".

The broad outlines of a deal are clear at this point.

The Chinese will probably agree to buy more American goods, Beijing may promise to stop stealing intellectual property, and the two sides could develop a workable enforcement system to give the deal teeth.

If officials indicate that they plan to hold another round of talks, that would be a sign that the two sides still think a deal can be done before March 1, even if they are not willing to lay out the whole package.

Another possible outcome, if the two sides agree to meet again, would be an extension to the tariff truce.

BREAKTHROUGH CASE

In the best-case scenario, the Chinese come to the table with an offer on economic reforms that is more ambitious than expected.

That convinces Mr Lighthizer, a China hawk who has said progress with Beijing will take years, that the Chinese are serious about opening up their state-driven model. It could be enough for Mr Trump or the White House to hail a deal in principle. Markets would rally, shrugging off months of anxiety about a global trade war.

The problem is the Chinese would need a game-changing offer that shows they are serious about loosening the grip of the state on the world's second-biggest economy.

BREAKDOWN CASE

If there is no statement of any kind at the conclusion of talks, look out.

A fiery Trump tweet may not be far behind, expressing frustration with the lack of progress. Mr Trump has walked away before.

In May, the two countries issued a joint statement in which China agreed to increase farm goods and energy exports, and recognised the importance of intellectual property protections.

Within days, the US President rejected the framework and sent his negotiators back to the drawing board. A similar reaction by Mr Trump could put the talks on ice for a long time.

Much will depend on how hawks in his administration - including Mr Lighthizer, White House adviser Peter Navarro and Commerce Secretary Wilbur Ross - react to China's offers.

 
A version of this article appeared in the print edition of The Straits Times on January 29, 2019, with the headline 'What pivotal talks may yield'. Print Edition | Subscribe