An all-star US trade delegation has arrived in Beijing today for high-level talks with their Chinese counterparts, amid a trade stand-off between the world’s two largest economies.
US trade officials arrive in Beijing — but China’s ready for a fight
This is the first time key officials from both countries have met to lay out their demands, but it seems the chances of an immediate breakthrough are low.
Our great financial team is in China trying to negotiate a level playing field on trade! I look forward to being with President Xi in the not too distant future. We will always have a good (great) relationship!— Donald J. Trump (@realDonaldTrump) May 3, 2018
A Chinese government official close to the trade talks told the South China Morning Post yesterday that China will not offer concessions on anything it considers to be a core interest.
“There are too many issues that we may not be able to solve in one round. Both sides can continue the discussions in Beijing or in Washington,” the official said. “If the talks break down and the US side escalates their actions, we are also well prepared for it.”
Who’s at the talks?
The US has sent a team of hard-line top officials including Treasury Secretary Steven Mnuchin, US Trade Representative Robert Lighthizer and Commerce Secretary Wilbur Ross.
Mnuchin, who is leading the US delegation, told American media before he left for China he’s “cautiously optimistic” on the talks. “We are looking to have a very frank discussion on trade and the issues of the trade imbalance,” he said.
The US’ trade deficit of $375 billion is “too big, too continuing, too chronic and too inspired by evil practices”, Commerce Secretary Wilbur Ross said in an interview with CNBC earlier this week.
He warned that hefty tariffs would be imposed if a negotiated settlement was not achieved to “this recurring problem of trade with China.”
China hasn’t released a confirmed list of participants yet other than Vice Premier Liu He, but Vice President Wang Qishan, who is President Xi Jinping’s right hand-mand, and Minister of Commerce Zhong Shan are expected to take part.
Liu, President Xi’s top economic advisor, visited the US in February on a mission to defuse trade tensions. He was given the a cold shoulder by President Trump, who declined to meet him and rolled out tariffs on steel and aluminum imports from China on the first day of his visit.
What does the US want?
The US plans to put two major demands on the negotiating table – a $100 billion cut in its $375 billion annual trade deficit with China, and limits on the nation’s $300 billion “Made in China 2025” plan to upgrade its high tech sectors like artificial intelligence, semiconductors and electric cars.
Wilbur Ross has called the Chinese plan an “attack” on “American genius,” while White House trade adviser Peter Navarro alleged that that China plans to “dominate every single emerging industry of the future.”
One of the chief concerns is that the scale and opacity of China’s government-directed economy will give select Chinese companies, a huge advantage over their international rivals.
President Donald Trump has repeatedly criticised Chinese unfair trade practices and worsening trade balance between the two countries.
He has accused China of taking “massive amounts of money and wealth” from the States in the form of one-sided trade and intellectual property theft.
The US has threatened to impose a total of $150 billion in tariffs, possibly to be implemented in early June, aimed at products from various sectors including aeronautics, information and communication technologies.
What’s China saying?
China has insisted that it will not bend to pressure from the US side. It has hit back against by threatening a $50 billion tariff package on US products: from fruits, nuts and wine to aircraft and chemicals.
“The doors are open for negotiation but we are also prepared to fight to the end,” said an editorial by China state media agency Xinhua.
But despite the tit-for-tat rhetoric, China seems to have been making concessions already – albeit at its own pace.
It recently unveiled a series of measures to open up its financial sector to foreign investment, and pledged to give foreign automakers easier access to the domestic car market.
“China has its own roadmap when it comes to reform and opening up,” Jia Xiudong, a senior research fellow at the China Institute of International Studies, told Inkstone. “But we’ll do so because it fits China’s interest, not the US’ expectations.”
Jia said that it would be impossible for China to scrap plans like “Made in 2025” to upgrade its high tech industry, but protecting intellectual property was on the agenda given that China is eager to drive innovation.
“China’s solution is not to cut back on China’s exports to the US, but to increase US exports to China,” Jia said. “We will just make the cake bigger.”
The trade talks this week are only the start: neither side is likely to walk out happy with the outcome.