Dim prospects for deal as China and US resume trade war talks



Wendy Wu | South China Morning Post

Top Chinese and US negotiators launched a new round of high-stakes trade talks in Washington on Thursday, looking for ways to build momentum as tensions dog bilateral ties.

Despite the strains, both sides are aiming to launch a previously agreed currency pact and purchases of agricultural products by China as part of an early harvest deal that could mean a suspension of tariff increases planned for next week.

The two sides held deputy-level talks on Wednesday, in preparation for the formal meeting on Thursday between Chinese Vice-Premier Liu He and US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin.

Sources told the South China Morning Post that there was little progress on Wednesday, with the US yet to agree to postpone the tariff increases and China reluctant to discuss forced technology transfer.

The White House is keen to implement a currency pact the two nations agreed to in February to create more scope to resolve sticky issues and help delay tariff rises due on October 15, according to Bloomberg.

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Chinese officials also said China was open to a partial trade deal with the United States that could include big purchases of American commodities, but added that success was contingent on US President Donald Trump halting further tariffs, Bloomberg reported.

But Chinese diplomatic observers have played down hopes for any meaningful outcome, citing growing tensions in non-trade sectors and big differences in long-debated issues.

“The US has not changed its extensive and rigorous requests for China, nor has it responded to China’s core concerns,” Renmin University international relations professor Shi Yinhong said. “Even if there is a deal, it could only be a mini-deal, even a minimal mini-deal. A currency pact, if true, does not bring any substance.”

The currency pact was discussed in depth in talks in February and March when the two sides were close to ironing out a trade deal that ran to more than 100 pages. But back then the yuan’s exchange rate was not a source of friction.

Trade talks collapsed in May as the US accused China of backtracking on its previously agreed commitments while China criticised that the US for making excessive demands.

As talks stalled in Shanghai in July, US President Donald Trump labelled China as a currency manipulator and announced new tariffs on nearly all Chinese products shipped to the US.

Tariffs on US$250 billion of Chinese goods are set to increase from 25 to 30 per cent on Tuesday, while fresh duties of 15 per cent on US$160 billion of largely consumer products will go into effect on December 15.

As Liu prepared to go to Washington, the US government blacklisted 28 Chinese entities and announced sanctions, including visa controls on Chinese officials citing human rights concerns in Xinjiang.

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Earlier Trump also pressured China to handle the unrest in Hong Kong in a “peaceful” and “humane” manner, warning that trade talks could be affected if anything “bad” happened in China’s handling of anti-government protests in the city.

At the same time, Chinese state media have lashed out at Apple and the US National Basketball Association in relation to protests in Hong Kong.

In response, Apple removed an app criticised for allowing protesters in Hong Kong to track police, while the NBA’s Chinese partners suspended cooperation with the association after an NBA general manager tweeted a post in support of anti-government protests in Hong Kong.

Analysts said there was little hope of a breakthrough in this round of negotiations.

“Even if a deal can be reached, the US can find any excuse at any time to impose sanctions over China’s trade practices or on Chinese companies,” said Lu Xiang, a research fellow on US issues with the Chinese Academy of Social Sciences.

“The US administration is in ‘a confusion of trivialities’ and it lacks consistency … making it hard for China to have confidence in it.

“We can talk, but we are not hopeful. It would be very good if a partial deal could be reached, but a comprehensive deal as defined by the US is unlikely.”

Sticking points include China’s alleged forced technology transfer, state subsidies, market reforms and a mechanism that would force China to make good on its promises.

Lu said that despite this, China might agree to buy American goods.

Shi said the disagreement over Hong Kong and Xinjiang was only making the “tiny” prospect of a breakthrough even smaller.

“It is not logical to imagine that top leaders in Beijing will make concessions in trade talks when the US is ramping up pressure on human rights issues in Xinjiang and the Hong Kong unrest,” he said.

For Trump, who is battling an impeachment challenge at home, concessions to China would only give more ammunition for his opponents, Shi said.

He said concessions would only come if there was “a significant recession” in the US economy before the next presidential election.

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