U.S., China Plot Road Map to Resolve Trade Dispute by November

August 17, 2018
Editor’s note: The press, the free traders and the globalists continue to seek compromise. Treasury Secretaries Hank Paulson, Tim Geithner and Jack Lew also tried talking with China to seek compromise and failed. China’s bid to become the global superpower is unlikely to change soon.

Chinese and U.S. negotiators are mapping out talks to try to end their trade impasse ahead of planned meetings between President Trump and Chinese leader Xi Jinping at multilateral summits in November, said officials in both nations.

[Lingling Wei and Bob Davis | August 18, 2018 | WSJ]

The planning represents an effort on both sides to keep a spiraling trade dispute—which already has involved billions of dollars in tariffs and comes with the threat of hundreds of billions more—from torpedoing the U.S.-China relationship and shaking global markets.

Scheduled midlevel talks in Washington next week, which both sides announced on Thursday, will pave the way for November. A nine-member delegation from Beijing, led by Vice Commerce Minister Wang Shouwen, will meet with U.S. officials led by the Treasury undersecretary, David Malpass, on Aug. 22-23.

The negotiations are aimed at finding a way for both sides to address the trade disputes, the officials said, and could lead to more rounds of talks.

The talks represent a clear move by Beijing to get back on track relations with Washington that were cordial early in the Trump presidency and involved coordination to rein in North Korea. Those relations have soured, especially after Mr. Trump’s initial tariffs on Chinese imports, which he said were designed to punish Beijing for alleged intellectual-property violations and technology theft. The resulting tit-for-tat of trade threats and retaliation has hit China’s currency and stock markets.

Mr. Xi has instructed lieutenants to try to stabilize the bilateral relationship as soon as possible, according to advisers to the Chinese government. A prolonged and broader conflict with Washington, many officials and experts in China say, threatens to derail the Chinese leader’s plans to remake the economy and transform China into a global superpower.

The talks, though, could also get derailed, especially as the U.S. continues to levy tariffs. So far the U.S. has imposed levies on $34 billion in Chinese goods, with tariffs on an additional $16 billion in goods scheduled to take effect next week. China has matched those tariffs dollar-for-dollar.

U.S. officials have said the nation’s strong economy is giving Washington leverage in the negotiations.

“I think investors are moving out of China because they don’t like the economy, and they’re coming to the USA because they like our economy,” said Lawrence Kudlow, the White House’s top economic official, at a cabinet meeting on Wednesday. “Right now, their economy looks terrible.”

But there are differing views on how to respond. The Treasury and Mr. Kudlow’s National Economic Council, which are more sympathetic to Wall Street and the U.S. business community, have put together a pared-down list of requests to China that they think could be a basis for a deal. But the U.S. trade representative’s office, which is in charge of tariffs, wants to hold off on negotiations, arguing that additional levies would give the U.S. more bargaining power by October, said people briefed on the discussions.

China’s Foreign Ministry didn’t respond to a request for comment. The U.S. Treasury declined to comment ahead of next week’s talks.

So far, Mr. Trump hasn’t decided between the two camps and will weigh in when there is a deal on the table, U.S. officials said.

Messrs. Trump and Xi would meet first at the leaders’ summit of the Asia-Pacific Economic Cooperation forum, which involves 21 economies, in mid-November, said officials in both nations. That would be followed by a second session at the Group of 20 leaders’ summit in Buenos Aires at the end of November.

Negotiators often find that a scheduled meeting between two leaders gives an urgency to negotiations and in this case would signal the leaders’ desire not to have the trade battle spin out of control.

U.S. and Chinese leaders have often met at these summits, but when Treasury Secretary Steven Mnuchin attended the G-20 meeting of finance chiefs last month, he held no formal meetings with Chinese officials.

Next week, while the negotiators meet, the U.S. trade representative will hold public hearings on the administration’s plans for tariffs on an additional $200 billion in Chinese imports. Beijing has pledged to respond in kind, and Chinese media are urging the public to prepare for a protracted trade war with the U.S.

“You’re beginning to talk about serious economic effects,” said Josh Kallmer, senior vice president at the Information Technology Industry Council, a trade association of high-technology companies, which opposes tariffs.

In Beijing, senior Chinese officials in recent days have been meeting with U.S. business executives, trying to get them to lobby the Trump administration against its proposed tariffs. On Friday, Zhang Mao, head of China’s antitrust body, met with Craig Allen, president of the U.S.-China Business Council, and some representatives from American companies, according to the antitrust body’s website.

Mr. Zhang stressed the need to negotiate, according to the statement, and called for U.S. companies operating in China to “play an active role” in developing the bilateral trade relationship.

In Washington, business groups have been urging the White House to ease their demands of China. During May talks in Beijing, U.S. negotiators handed Chinese counterparts an eight-point list that would require China to cut the trade deficit by $200 billion, scrap the industrial policies that have helped make China the world’s second-largest economy and pledge not to oppose the U.S. at the World Trade Organization on lawsuits against Beijing. China never came close to meeting those demands.

Treasury has worked on a more refined list of demands that hue more closely to what business groups think are possible. They include reduction of subsidies, elimination of overcapacity in steel, aluminum and other industries, cessation of pressure on U.S. companies to transfer technology, additional purchases of U.S. goods and services and strengthening of the yuan, which has fallen nearly 10% against the dollar since April, making U.S. products more expensive in China and Chinese products cheaper in the U.S.

The U.S. trade representative’s office, in particular, argues that Beijing hasn’t made any credible efforts to deal with U.S. complaints about intellectual-property transfer and theft. Some Chinese officials believe that U.S. Trade Representative Robert Lighthizer  has an “old concept” of trade theory and are wary of dealing with him, one of the Chinese officials says. U.S. officials say that Mr. Lighthizer believes pressure on Beijing would force U.S. and other foreign companies to relocate operations outside of China, weakening Beijing’s ability to develop new technologies.

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