Trump floats fresh Xi summit to settle trade war
Last Modified: 08:09 PM, Thu Jan 31, 2019

James Politi in Washington

FT.com. 01 February 2019
Two sides claim progress at end of Washington talks but Lighthizer fails to report specific concessions

The US and China claimed progress in tackling some of the thorniest issues in their trade war as Donald Trump suggested that a new presidential summit might be necessary to settle the economic conflict within the next month. 

At the end of two days of negotiations in Washington, Robert Lighthizer, the US trade representative, said his talks with Liu He, China’s vice-premier, had finally centred on US demands for structural reforms by Beijing — such as ending the forced transfer of technology from US companies or reining in the use of industrial subsidies.

But Mr Lighthizer failed to report a specific concession made by Beijing, and said he and Steven Mnuchin, US Treasury secretary, were considering a trip to Beijing after the Chinese new year celebration in early February to resume negotiations.

“We focused on these core ideas, these core concepts and it’s my judgment that we made headway in significant ways,” Mr Lighthizer said on Thursday.  

The two trade delegations held a "frank, concrete and constructive discussion" and "agreed to further strengthen cooperation" on structural issues such as technology transfers and intellectual property protection, according to a readout from China’s state news agency Xinhua, which stopped short of providing details on commitments to resolve such issues. It also confirmed the proposed Lighthizer-Mnuchin visit for mid-February.

Mr Trump, the US president, earlier in the day raised the possibility of a new summit with Xi Jinping, his Chinese counterpart. 

“I think that probably the final deal will be made, if it’s made, between myself and President Xi,” Mr Trump said in the Oval Office. 

The two countries had "clarified the timetable and roadmap for the next consultation," according the Xinhua statement.

If no resolution is reached by March 1, tariffs on $200bn of Chinese goods are set to increase from 10 per cent to 25 per cent, a prospect that has spooked world financial markets because of the inevitable economic damage.

Mr Xi was also upbeat on Thursday, saying in a letter presented to Mr Trump by the Chinese delegation that “intensive consultations” had yielded “good progress”.   

   

“I hope our two sides will continue to work with mutual respect and win-win co-operation,” the Chinese president wrote, adding that an agreement would “send a positive signal to our two peoples and the broader international community”. 

China has offered to boost its purchases of US goods to reduce the bilateral trade deficit — including a new pledge to purchase 5m metric tonnes of soyabeans — and suggested it was willing to discuss regulatory changes to improve market access for international investors. 

But it has been reluctant to undermine state support for the economy in a way that would reduce its chances of competing with the US on innovation and advanced technologies — and doubts remain about its willingness to cede much ground. 

US officials have stressed that they are looking to ensure that any commitments made by Beijing can be verified and enforced — a politically and legal challenging goal. “If we can get an agreement, it’s worth nothing without enforcement,” Mr Lighthizer said.  

US officials are counting on  fears of a tariff escalation being more intense in Beijing than they are in Washington over the next month, particularly given angst over the Chinese economic slowdown. 

But the White House is facing pressure of its own — in the form of the hit taken by the US economy this month from the partial government shutdown and Mr Trump’s sensitivity to adverse movements in equity markets. 

Politically, Mr Trump is striving to fulfil one of his key 2016 campaign pledges — to reset trade relations with China. But any agreement that is seen as weak or inconclusive would expose him to attacks from Democratic rivals. 

The chance of a big breakthrough this week in the trade talks was relatively low, after Beijing reacted with outrage to Monday’s  indictment of Huawei, the Chinese telecoms equipment maker, on criminal charges it stole US technology and violated US sanctions. But US officials said there was no evidence it adversely affected the negotiations. 

A new summit between Mr Trump and Mr Xi would follow their  steak dinner in Buenos Aires on December 1, just after the G20 summit in the Argentine capital. That meeting resulted in a commercial ceasefire between the US and China and avoided a tariff escalation that was originally scheduled for January 1. 

According to The Wall Street Journal, the new meeting between Mr Trump and Mr Xi was expected to be held on the southern Chinese island of Hainan, right after a  planned meeting between the US president and Kim Jong Un, the leader of North Korea, at the end of February. 

Andy Rothman, an investment strategist at Matthews Asia, said if such a meeting were placed in the calendar, it would be an encouraging sign. “There’s no political upside for Trump to make an out-of-the-way stop to meet with Xi and not come away with a deal,” Mr Rothman said. 

Mary Lovely, a professor of economics at Syracuse University and a senior fellow at the Peterson Institute for International Economics, a think-tank, said it was still unclear whether the US was prepared to make “tough trade-offs” with the Chinese in the final stretch. US officials have avoided discussing under what conditions they would be prepared to make their own concessions to Beijing — such as on eliminating tariffs imposed by Washington over the past year. 

Myron Brilliant, head of the international affairs at the US Chamber of Commerce, the largest business lobby group, said it was important that Mr Trump was personally involved in the negotiations — to an extent that no president has been on trade since Bill Clinton in the late 1990s. But he warned that in order for a substantive deal to be reached, the two sides would have to start negotiating on the basis of a joint document, which so far had not happened. 

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Publication: FT.com
Organization: US Treasury Department, United States Chamber of Commerce, Syracuse University, Matthews International Capital Management LLC, WSJ.com, Brilliant AG, Huawei Technologies Co Ltd, Peterson Institute for International Economics, New China News Agency, White House
Location: US, Asia-Pacific, China, Washington D.C.
People: Xi Jinping, Donald Trump, Robert Lighthizer, Andy Rothman, Steven Terner Mnuchin, Meng Wanzhou, Liu Bin He, James Politi
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World, Asia-Pacific companies, US politics & policy, US-China trade dispute, Politics, Trade disputes, Global Economy, Chinese economy, US-China trade dispute, Global trade, Economy, US trade, US economy, Chinese trade, Asia-Pacific economy
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