Trade war: China unlikely to agree to US demands

As the US-China trade talks enter a critical phase this week, Beijing is unlikely to agree to Washington’s take it or leave it demands that include huge market access for American goods and complex structural reforms to deny policy space for the development of Chinese high-tech industries, analysts said.

The eleventh round of talks which would be held in Washington from 8 May have already been soured due to incessant threats by the Trump administration over the past three days. The prospects for a balanced agreement seem pretty bleak, after the US President Donald Trump and his trade representative ambassador Robert Lighthizer and the treasury secretary Steven Mnuchin threatened that Washington will impose higher tariffs of 25% on Chinese goods worth $200 billion from 10 May.

The USTR and the treasury secretary on Monday accused Beijing of reneging on its promises during the tenth round of talks that ended in Beijing last week. “Over the course of the last week or so, we have seen an erosion in commitments by China, I would say retreating from commitments that have already been made, in our judgement,” ambassador Lighthizer claimed on Monday.

China apparently suggested in the draft that it would reopen issues that Washington assumed had already been clinched. “We are not willing to go back on documents that have been negotiated in the past,” the USTR maintained. The two US’ officials “made it clear there are deep concerns about the direction of talks that go beyond negotiating style,” according to a report in the

Wall Street Journal (WSJ) on 7 May.

Up until now, the USTR had adopted hawkish positions demanding farreaching changes in the Chinese trading regime while his treasury colleague Steven Mnuchin chose to adopt dovish stance by suggesting a two-way enforcement system for overseeing the implementation of commitments.

Quoting Professor Eswar Prasad of Cornell University, the WSJ report suggested that “the level of brinkmanship on both sides and their obvious mutual distrust has made the path to even a temporary ceasefire a lot murkier that just a few days ago.”

Significantly, neither the USTR, nor the US treasury secretary clearly indicated on which areas or issues that China retreated from the previous agreed language. Ambassador Lighthizer pointed an accusing finger at hawks in Beijing for retreating from previously agreed language.

“My own view is that there were serious, real commitments that were enforceable and that some people in China found that difficult and objected to it,” Lighthizer maintained, claiming that major issues still remain unresolved.

The USTR had presented maximalist demands on a range of issues such as stringent disciplines to eliminate industrial subsidies in China, especially for state-owned enterprises, enhanced rules on intellectual property rights for allegedly stopping the mandatory transfer of technology and other trade secrets, and sweeping commitments in electronic commerce, particularly removing all restrictions on cross-border data flows and storing of data in foreign servers and cloud computing.

Clearly, one area where there are irreconcilable differences between the two sides is Washington’s evasive stance that it will phase out the retaliatory tariffs it had already imposed on more than $ 250 billion of Chinese goods in stages depending on Beijing’s implementation of the commitments agreed in the final deal, a Chinese official told the Mint last week.

China wants lifting of all retaliatory tariffs imposed on Chinese goods once the agreement is concluded, the official suggested. China also demanded a balanced agreement that would include an enforcement mechanism to oversee Washington’s implementation of its commitments set out in the agreement. China is unwilling to agree on cross-border data flows, storing of its data in foreign servers, web services, and cloud computing among others.

Despite the dire threats issued by President Trump and his officials, China has decided to attend the talks in Washington from 8 May. “What matters most now for China is calm- the Chinese public wants an agreement, but meanwhile is well prepared for other potential outcomes, including a temporary breakdown in talks, the Chinese daily Global Times maintained on Tuesday..

Surely, China must be following the developments in the US Congress after the chair for the Senate Finance Committee Senator Chuck Grassley threatened that “the [Trump] administration can take the lead by promptly lifting trifss on steel and aluminium from Canada and Mexico” for approving the USMCA[US, Mexico, and Canada Agreement] by the Congress.