The Trump administration rejected an offer by two Chinese vice-ministers to travel to the US this week for preparatory trade talks because of a lack of progress on two key issues, highlighting the difficulty that Washington and Beijing will face in trying to reach an agreement by a deadline of March 1.
This week’s planned trip by Wang Shouwen and Liao Min was intended to pave the way for a higher-level meeting in Washington on January 30 and 31 by Liu He, China vice-premier, and Robert Lighthizer, US trade representative.
But, according to people briefed on the negotiations, US officials cancelled this week’s face-to-face meetings with Mr Wang, a vice-minister of commerce, and Mr Liao, a vice-minister of finance, because of a lack of progress on “forced” technology transfers and potentially far-reaching “structural” reforms to China’s economy.
The two issues could ultimately derail the talks and cause more worry for financial markets. Investors are already jittery about the consequences of escalating tensions between the two largest economies. If an agreement is not reached by March 1, President Donald Trump has said he will more than double the punitive tariff rate imposed on about half of all Chinese exports to the US, from 10 per cent to 25 per cent.
Larry Kudlow, the president’s top economic adviser, said on Tuesday afternoon that no “intermediate meetings” had been scheduled with Chinese delegates and denied there had been any cancellation. The US was still preparing for its planned meeting with Mr Liu at the end of the month, he said. “The story is unchanged. We are moving towards negotiations,” he told CNBC.
US negotiators are demanding that Beijing end what they allege are “forced” technology transfers from foreign companies to Chinese joint venture partners and other firms. They also want President Xi Jinping’s administration to scrap state subsidies and industrial policies that they believe discriminate against foreign investors.
Mr Trump’s negotiators wanted Mr Liao, one of Mr Liu’s closest aides, and Mr Wang to come to face-to-face talks in Washington with a written offer outlining how Beijing intended to address US complaints about technology transfers and structural reforms.
But, according to the people briefed on the stalemate, Mr Xi’s negotiators are refusing to alter their longstanding position that foreign companies are not forced to transfer technology to Chinese companies.
They also argue that Beijing’s recent offer to improve market access for foreign investors in certain sectors — and strengthen protection of intellectual property — should address US concerns.
While preparations for Mr Liu’s visit to Washington next week are continuing, the Trump administration’s refusal to receive Mr Wang and Mr Liao this week shows how large a gap still exists between the two sides’ positions.
The price of US soyabeans, which is linked to the health of US-China trade, fell as much as 1.9 per cent to $8.995 a bushel after the Financial Times first reported on the cancelled talks, before closing down 0.8 per cent at $9.0925 a bushel. The S&P 500 ended 1.4 per cent lower, its worst one-day performance since January 3.
Officials at the Chinese commerce ministry did not respond to a request for comment. USTR declined to comment.
On January 19, Mr Trump said that “things are going very well with China and with trade”. A deal “could very well happen” by the March 1 deadline, he added.
However, just days earlier Chuck Grassley, a US senator, said that, according to a briefing he received from Mr Lighthizer, “there has not been any progress made on structural changes that need to be made”.
According to the people briefed on the talks, Chinese negotiators hope Mr Trump will instead be mollified by promises of large purchases of US agricultural and energy commodities that will help to reduce the chronic trade imbalance.
