U.S., China struggle to bridge trade gaps, more time seen likely

U.S., China struggle to bridge trade gaps, more time seen likely
U.S. President Donald Trump meets with Chinese Vice Premier Liu He in the Oval Office at the White House in Washington, U.S., February 22, 2019. REUTERS/Carlos Barria   -  Copyright  CARLOS BARRIA(Reuters)
By Reuters

By Rajesh Kumar Singh and Humeyra Pamuk

WASHINGTON (Reuters) – Top U.S. and Chinese trade negotiators met on Friday to wrap up a week of talks that have seen the two sides struggle over the details of structural reform commitments by China, increasing the likelihood of extending the March 1 U.S. deadline for a deal.

People briefed on the talks said more time is likely needed in the talks given China’s resistance this week to U.S. demands for specific steps by Beijing to end forced transfers of U.S. technology, to rein in industrial subsidies and other policies aimed at giving unfair advantage to U.S. firms.

If the two sides fail to reach a deal by midnight on March 1, U.S. President Donald Trump is scheduled to raise tariffs to 25 percent from 10 percent on $200 billion (£153.2 billion) of Chinese imports into the United States.

Trump will meet with Chinese Vice Premier Liu He at the Oval Office later on Friday, at which further details about how future of the negotiations will likely emerge.

Optimism over the trade talks lifted stocks, especially technology shares, while oil prices rose to their highest since mid-November, with Brent crude reaching a high of $67.73 a barrel.

“The working assumption that we have is that the two sides are going to go past the deadline because I think it’s going to require the two presidents to meet to finalize on certain aspects of the deal,” Myron Brilliant, head of international affairs for the U.S. Chamber of Commerce, told reporters.

“We’re getting closer, we’re not there yet. There are still gaps and there is still work to be done,” added Brilliant, who has been in contact with both governments about the talks.

The Chamber, the largest U.S. business lobbying group, has been urging the administration to pursue a “comprehensive, systematic, sustaining and ensuring deal” that addresses core U.S. intellectual property and market access complaints, rather than one based on more Chinese short-term purchases of goods.

CNBC reported that China had committed to purchasing $1.2 trillion in U.S. goods and that the two countries were discussing a late-March meeting between Trump and Chinese President Xi Jinping in Florida, citing sources familiar with the situation.

A rise in tariffs would be a further blow to manufacturers struggling to deal with the disruption to their supply chains caused by tit-for-tat tariffs imposed in a trade war that has roiled markets and slowed global economic growth.An industry official briefed on the talks said that if a framework deal can be reached, it may take another three to six months to fill in the details, and the two sides remain far apart on a mechanism to verify and enforce follow-through commitments China makes.

“It has to be a mechanism which the administration has faith in and the Chinese are comfortable with,” the official said. “How to work that out is proving to be a challenge.”

Members of the Chinese negotiating team declined to comment on the state of the talks on Friday as they entered the offices of U.S. Trade Representative Robert Lighthizer for talks.

Two members of the Chinese delegation, who did not give their names, told Reuters they did not know if talks would be extended beyond Friday. They were scheduled to leave for Beijing on Saturday, according to a member of staff at their hotel.

Reuters reported exclusively on Wednesday that the two sides are starting to sketch out an agreement on structural issues, drafting language for six memorandums of understanding on proposed Chinese reforms.

That marked the most progress the two sides have made toward a deal. But negotiators have struggled this week to agree on specific language within those memorandums to address tough U.S. demands for structural changes in China’s economy, sources familiar with the talks have told Reuters.

The memorandums would cover forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers to trade.

China has provided no details yet on how it would improve protections for the intellectual property of foreign companies operating in China, or end forced technology transfer, Ted McKinney, undersecretary for trade and foreign agricultural affairs at the U.S. Department of Agriculture, told reporters.

“Are all the answers coming that make for clarity on ‘We’re going to stop stealing intellectual property, we’re going to stop forcing tech transfer, we’re going to make structural changes?’ Not yet,” McKinney said. “But we’re not done yet.”

Trump, who has demanded concessions from both allies and rivals on trade as part of his “America First” policy, has said the March 1 deadline could be extended if enough progress is made.


U.S. officials contend China has so far failed to fulfill its pledges to deal with American concerns on the issues at the center of the trade war. Trump’s administration wants to put a mechanism in place to prevent a repeat.

The issues under discussion include an enforcement mechanism to ensure that China complies with any agreements.

“We won’t fall into those same pitfalls,” U.S. Secretary of State Mike Pompeo said on Thursday in an interview on Fox Business Network.

“They have made commitments on cyber and other things which they have simply not honored … The heart of these discussions will surround the enforcement mechanisms,” he said.

(Reporting by Humeyra Pamuk and Rajesh Kumar Singh; additional reporting by David Lawder in Washington, writing by Simon Webb; editing by Jonathan Oatis and James Dalgleish)

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