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US-China trade talks: what’s under debate
BEIJING, Feb 17, 2019 (BSS/AFP) – US and Chinese officials wrapped up days of
trade talks in Beijing on Friday with plans to resume negotiations in
Washington this week as the world’s top two economies try to smooth out their
thorny trade dispute.
US President Donald Trump said the talks were going “extremely well”, while
his advisors deep in the details warned there was still “much work” to do.
Beijing and Washington have already imposed duties on more than $360
billion in two-way trade, which are weighing on their manufacturing sectors
and have shaken global financial markets.
Trump has said he may extend a March 1 deadline after which tariffs on $200
billion worth of Chinese goods are set to more than double.
Here is a breakdown of the main sticking points:
– IP theft & tech transfer –
Washington contends Beijing has encouraged theft of American intellectual
property while forcing US companies to turn over trade secrets for market
access.
Beijing has long denied the charges but is working to step up punishments
for IP theft, fast tracking a new foreign investment law which explicitly
bans forced technology transfer.
It is also gradually increasing the scope of industries where foreign firms
can operate without a Chinese joint venture partner.
It is unclear if the moves will be enough to appease the Trump
Administration. The FBI recently said it is investigating Chinese economic
espionage across the US while the Justice Department is leading a name, shame
and prosecute campaign against Chinese spying and theft.
US prosecutors recently ensnared Chinese tech giant Huawei with charges of
trade secret theft, including an alleged programme to reward technology theft
from rivals.
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– Industrial policy –
China’s industrial policy has raised concerns — especially a “Made in
China 2025” initiative that aims to make the Asian giant into a global leader
in emerging technologies like artificial intelligence, through generous state
support for domestic firms.
Beijing and the Chinese state media have played down the policy this past
year as it roused controversy, but for China the trade tensions have only
reinforced the need to increase self-sufficiency in crucial technology like
semiconductors.
Indeed, a brief US ban on sales to state-backed telecom giant ZTE nearly
killed the company last year.
– State subsidies –
In recent years China’s state-owned companies have strengthened their
domestic dominance — flying in the face of Western demands for market
reforms.
Washington hopes China will lessen the role of the state in the economy and
curtail generous subsidies for industries and companies.
But economist Cui Fan of the University of International Business and
Economics in Beijing cautioned China may not give ground if the US wants to
discuss state subsidies beyond the remit of the World Trade Organization
agreement.
“I am afraid it will be difficult to completely solve this month,” he said.
– Trade deficit –
China’s politically sensitive trade surplus with the US last year hit a
record $323.3 billion as the tit-for-tat tariffs kept Chinese buyers away
from American agricultural and energy commodities.
Beijing has pledged to pick up purchases of US soybeans and other goods and
dangled a massive buying spree over negotiations to nudge the White House
towards a deal. The White House Friday emphasised discussions on purchases to
reduce the “large and persistent bilateral trade deficit”.
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But any buying spree would have to rely heavily on the Chinese state-owned
firms which Washington is battling to sideline.
– Deal in sight? –
The two sides are working towards a Memorandum of Understanding to detail
their commitments ahead of a potential meeting between Trump and Xi.
The test will be if Trump can get on board with a deal to address the trade
deficit that defers structural changes.
Earlier this month he told the American public a deal “must include real
structural change to end unfair trade practises”, but Chinese analysts say
that will take time.
“We are a slow moving country. Some patience is needed,” said Zhang, adding
negotiating China’s entry into the WTO took more than a decade.
Then there is the question of how to enforce whatever is agreed on. Beijing
has long been wary of outside oversight.
BSS/AFP/SR/1925 HRS