US demands regular review of China trade reform: report

January 21, 2019 07:38
File photo of the US and Chinese delegations led by President Donald Trump and President Xi Jinping attending a working dinner after the G20 leaders summit in Buenos Aires on Dec. 1, 2018.  Photo: Reuters

The United States is pushing for regular reviews of China’s progress on pledged trade reforms as a condition for a trade deal – and could again resort to tariffs if it deems Beijing has violated the agreement, Reuters reports, citing sources briefed on negotiations to end the trade war between the two nations. 

US President Donald Trump said there has been progress toward a trade deal with China, but denied that he was considering lifting tariffs on Chinese imports. 

“Things are going very well with China and with trade,” he told reporters at the White House on Saturday, adding that he had seen some “false reports” indicating that US tariffs on Chinese products would be lifted. 

“If we make a deal certainly we would not have sanctions and if we don’t make a deal we will,” Trump said. “We’ve really had a very extraordinary number of meetings and a deal could very well happen with China. It’s going well. I would say about as well as it could possibly go.” 

Chinese Vice Premier Liu He will visit the United States on Jan. 30 and 31 for the next round of trade negotiations with Washington. 

That follows lower-level negotiations held in Beijing last week to resolve the bitter dispute between the world’s two largest economies by March 2, when the Trump administration is scheduled to increase tariffs on US$200 billion worth of Chinese goods. 

A continuing threat of tariffs hanging over commerce between the world’s two largest economies would mean a deal would not end the risk of investing in businesses or assets that have been impacted by the trade war.  

“The threat of tariffs is not going away, even if there is a deal,” said one of three sources briefed on the talks who spoke with Reuters on condition of anonymity.

Chinese negotiators were not keen on the idea of regular compliance checks, the source said, but the US proposal “didn’t derail negotiations”. 

A Chinese source said the US wants “periodic assessments” but it’s not yet clear how often. 

“It looks like humiliation,” the source said. “But perhaps the two sides could find a way to save face for the Chinese government.” 

The Trump administration has imposed import tariffs on Chinese goods to put pressure on Beijing to meet a long list of demands that would rewrite the terms of trade between the two countries. 

The demands include changes to China’s policies on intellectual property protection, technology transfers, industrial subsidies and other trade barriers. 

Unusual for trade deals 

An enforcement and verification process is unusual for trade deals and is akin to the process around punitive economic sanctions such as those imposed on North Korea and Iran. 

Disputes over trade are more typically dealt with through courts, the World Trade Organization (WTO) or through arbitration panels and other dispute settlement mechanisms built into trade agreements. 

Trump’s team has criticized the WTO for failing to hold China accountable for not executing on promised market reforms. The US has also criticized the WTO’s dispute settlement process and is seeking reforms at the organization

Regular reviews would be one potential solution to address a demand from US Trade Representative Robert Lighthizer for ongoing verification of any trade pact between the two countries, three sources familiar with the talks told Reuters. 

The threat of tariffs would be used to keep reform on track, the sources said

The Trump administration has accused China of repeatedly failing to follow through on previous pledges to implement reforms sought by the United States. 

Washington often cites as an example the difficulties still faced by foreign payment card operators in entering China’s market despite a 2012 WTO ruling that Beijing was discriminating against them.  

A separate industry source said it is likely that different agreement on separate issues – forced technology transfer, intellectual property, changes to China’s legal system – would require separate verification processes, all of which will need to be hammered out by negotiators. 

“The challenge of verification and enforcement stems from the fact that China has made promises it hasn’t kept,” the source said. 

-- Contact us at [email protected]