US, China to resume trade talks next month but a credible deal may be elusive

The US and China will resume their trade talks next month in Washington amid the growing global economic slowdown. However, prospects of a credible deal is uncertain because of unbridgeable differences on a range of issues, said analysts.

US trade representative Robert Lighthizer and treasury secretary Steven Mnuchin on Thursday spoke to Chinese vice premier Liu He to resume face-to-face talks, according to a statement issued by the Chinese commerce ministry.

Ahead of the phone conversation, two Republican senators, David Purdue and Steve Daines, had travelled to Beijing for discussions with a number of senior Chinese government officials.

US President Donald Trump, Mnuchin, and Lighthizer were informed about the visit, the senators said, maintaining that their goal was to help reinforce Trump’s efforts “to level the playing field with all our trading partners”, Washington Trade Daily reported on 5 September.

The visit by the two senators and the growing criticism of Trump’s tactics for intensifying the trade war amid increasing recessionary fears, seem to have prompted the two sides to kick-start the talks.

The US has imposed 15% additional duty on Chinese imports worth $112 billion from 1 September. Washington also plans to raise tariffs on largely non-consumer items used by businesses from the existing 25% to 30% from 1 October. Beijing retaliated to the unilateral move by targeting politically-sensitive items such as soybeans and auto parts with additional duties of 30% and 35%, respectively.

To advance these talks, senior sherpas (middle level officials who do the ground work) from the two sides will hold meetings “in mid-September to lay the groundwork for meaningful progress”, a USTR spokesperson said on Thursday.

Stock markets in Shanghai and Tokyo welcomed the news with the CSI 300 benchmark of Shanghai- and Shenzhen-listed stocks rising by 1.8%. However, expectations for a breakthrough in talks between the two sides remain low.

“Chinese analysts do not hold an optimistic view of the upcoming talks, considering the US’ previous flip-flopping attitude and lack of sincerity in reaching a deal,” China’s Global Times said.

Washington has demanded major “structural changes” in China’s trading and economic system. Lighthizer, who is known to be a China hawk, wants sweeping changes in China’s intellectual property regime, seeking an end to mandatory transfer of technologies, elimination of industrial subsidies granted to Chinese state-owned enterprises, and a unilateral enforcement mechanism, among others. Lighthizer has also insisted that only the US can retaliate if China fails to adhere to the commitments agreed upon in the proposed US-China agreement, but Beijing cannot take similar steps if the US fails to uphold its side of the bargain.

According to Senator Chuck Grassley, who chairs the US Senate finance committee, Lighthizer “didn’t want to schedule a meeting with senior Chinese officials unless there were signs of significant progress”, The Wall Street Journal reported on Thursday. “In conversations I’ve had (with Lighthizer), it’s pretty certain that the United States doesn’t care much to sit down and talk unless there’s going to be real serious movement on the three or four issues we think are most important.” Grassley said, according to WSJ.

China has indicated that while it was prepared to commit to more purchases of US farm products, it will not agree to unilateral demands raised by the US regarding structural changes in the Chinese economy, said Chinese trade officials who asked not to be identified. They maintained that it will agree for a balanced “two-way, fair and equal” deal that would remove restrictions on Chinese telecom companies such as Huawei to access high-tech products.