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  June 19th, 2018 | Written by

Outcomes Elusive in US-China Trade Negotiations

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  • The White House has reiterated that some Chinese imports would be affected by a 25-percent tariff.
  • The administration said investment restrictions and export controls on China would be proposed by June 30.
  • China: If US introduces trade sanctions, negotiated agreements will not go into effect.

US and Chinese delegations met for consultations on the bilateral trade relationship in mid-May, after which the two sides issued a joint statement which contained commitments dependent on outcomes from forthcoming tariff and investment actions.

After initial negotiations in early May, a US trade delegation led by Secretary of the Treasury Steven Mnuchin met with a Chinese delegation led by State Council Vice Premier Liu He on May 17. Discussions occurred in response to escalating trade tensions following the possible imposition of 25 percent tariffs as determined following the United States Office of the Trade Representative (USTR) Section 301 investigation.

According to a document reviewed by reporters from Bloomberg and the Wall Street Journal, the US trade delegation presented an eight-point list of demands:

Deficit reduction. The US trade deficit with China would decrease by $200 billion from 2018 levels by 2020. The Wall Street Journal reported Treasury and US Department of Commerce (DOC) officials constructed several purchase options for China with items such as aircraft, automobiles, agricultural goods, and liquefied natural gas.

US intellectual property (IP) protection. China would “immediately” undertake a series of measures to better protect US IP, including the cessation of government subsidies for advanced technologies, government support for cyber espionage, and policies and practices facilitating technology transfer. By January 2019, China would “eliminate provisions” of technology licensing requirements deemed unfair by the Section 301 investigation report.

Nonretaliation to US investment restrictions. China would not “oppose, challenge, or otherwise retaliate” against US restrictions on investments from China.

Removal of investment barriers. China would remove investment restrictions, thereby promoting “fair, effective, and non-discriminatory market access”; by July 1, 2018, China would compile an “improved” negative list for foreign investment, with remaining investment restrictions to be removed following discussions by both parties.

Removal of tariff and nontariff barriers. By July 1, 2020, China would lower tariffs to the level of US tariffs.

Increased market access for services and agricultural products. China would remove market access barriers on US services and agricultural products as detailed.

Implementation. US and Chinese representatives would meet on a quarterly basis to review progress. In the event of noncompliance, the United States could impose tariffs “or other restrictions” on Chinese imports or “confiscate counterfeit or pirated goods.”

The Chinese delegation requested the following :

Technology. The United States would allow the export of integrated circuits to China, open US government procurement to Chinese technologies, and modify the export ban on ZTE.

Financial restrictions. The United States would remove barriers to Chinese e-payment companies and approve China International Capital Corp.’s financial license.

Trade measures. The United States would cancel 25 percent tariffs on Chinese goods, not employ a “surrogate country approach” in antidumping cases, and refrain from future Section 301 investigations against China. The “surrogate country approach” refers to the lack of US recognition of China as a market economy, therefore using other markets such as India to analyze Chinese trade pricing and costs.

The May 19 joint statement signaled progress on several points of concern. The parties agreed to reduce the US trade deficit in goods by an unspecified amount, in part through “meaningful increases in [US] agriculture and energy exports.” Related to technology transfer concerns, the parties agreed to “strengthen cooperation” on IP protection for China to “advance relevant amendments” to its Patent Law. Broadly, the parties agreed to “encourage two-way investment,” create a “fair, level playing field for competition,” and “engage at high levels” on trade and investment issues.

The implementation of the joint statement commitments remains uncertain. The White House reiterated in late May that some Chinese imports would be affected by a 25-percent tariff, and the list of investment restrictions and export controls would be proposed by June 30 and implemented “shortly thereafter.”

Additional negotiations occurred between Secretary of Commerce Wilbur Ross and Vice Premier Liu in early June but concluded without an official comment or joint statement. On June 3, Chinese government news agency Xinhua reported that “if the [United States] introduces trade sanctions,” negotiated agreements would not “go into effect.”