LDN - Business

U.S., China to resume trade talks in Washington amid low expectations

[August 22, 2018] By David Lawder

WASHINGTON (Reuters) - U.S. and Chinese officials are set to resume contentious trade talks on Wednesday under the cloud of a prediction by U.S. President Donald Trump that there would be no real progress.

The discussions among mid-level officials could set a framework for further negotiations as each country prepares to hit the other with new tariffs on Thursday in a deepening dispute over China's economic policies.

Trump has threatened to impose duties on virtually all of the more than $500 billion (392.06 billion pounds)of Chinese goods exported to the United States unless it meets his demands.

The two days of meetings are the first formal U.S.-China trade talks since U.S. Commerce Secretary Wilbur Ross met Chinese economic adviser Liu He in Beijing in June.

After negotiations in May, Beijing believed it had assurances from the U.S. that tariffs were off the table. But less than 10 days later, the White House said it would push forward on punitive measures.

China has said it hopes for quiet, steady talks to get "a good result on the basis of equality, parity and trust."

Speaking in Beijing on Wednesday, Chinese Foreign Ministry spokesman Lu Kang said that now China and the United States have already started consultations they of course still hope for a "good outcome".

Lu added that he didn't want to make any statements or release any details while talks were ongoing.

"We hope that everyone can calmly sit down together and have earnest discussions toward an outcome that is in beneficial to both sides."

But Trump told Reuters on Monday that he did not "anticipate much". In an interview, he said resolving the trade dispute will "take time because China's done too well for too long, and they've become spoiled."

Trump also accused China of manipulating its yuan currency to make up for the effect of tariffs, while arguing the U.S. central bank should be more accommodating.

On Tuesday, however, Trump administration officials were largely silent about the latest round of talks. Spokespersons for the U.S. Treasury, the U.S. Trade Representative's office and the U.S. Commerce Department did not respond to queries about the Treasury-led meetings.

"These are working-level discussions with representatives from across the administration," a White House official told Reuters. The official declined further comment but pointed out Trump's own pessimistic comments in the Reuters interview.

"This is to some extent a temperature-taking exercise," said Scott Kennedy, director of China studies at the Center for Strategic and International Studies in Washington. "Expectations are probably low on both sides."

Previous talks were held by cabinet-level ministers, including Chinese Vice Premier Liu He, U.S. Treasury Secretary Steven Mnuchin and Commerce's Ross.

The talks on Wednesday and Thursday will led by lower-level officials, Treasury Undersecretary David Malpass and Chinese Commerce Vice Minister Wang Shouwen. Deputy USTR Jeffrey Gerrish is also expected to participate.

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A sign marks the U.S Treasury Department in Washington, U.S., August 6, 2018. REUTERS/Brian Snyder/File Photo

"The vice minister from Mofcom is not going to be authorized to make some great offer, but if the Chinese say one interesting thing, maybe you set up a second meeting and the level goes up a step," said Derek Scissors, a China scholar at the American Enterprise Institute, a Washington think tank.

"But I'd say there's an 80-90 percent chance they are a total waste of time, and that's why no one in the administration is talking about this," he added.

Ultimately Trump will need to personally be involved in settling the dispute with Chinese President Xi Jinping, Scissors said.

LENGTHY DEMANDS

Trump's administration is pressing China to make sweeping economic policy changes to better protect U.S. intellectual property, end its industrial subsidy efforts and open its markets to foreign competition.

In May, U.S. officials presented China with a lengthy list of demands that also included reducing the U.S. trade deficit with China by $200 billion annually. It is unclear whether that list has been revised for the latest round.

Beijing denies U.S. allegations that it systematically forces the unfair transfer of U.S. technology and insists that it adheres to World Trade Organization rules.

The discussions this week were expected to do little to stop the scheduled activation of 25 percent U.S. tariffs on another $16 billion in Chinese goods scheduled to take effect at 12:01 a.m. EDT (0401 GMT), along with immediate retaliatory tariffs expected from China on $16 billion of U.S. goods.

But this could soon trigger Trump's unveiling of a second $200 billion to $300 billion list of Chinese goods to be targeted with U.S. tariffs.

On June 16, when Trump first threatened to dramatically escalate his tariffs with an initial $200 billion list of Chinese goods, he said would hit China with tariffs on another $200 billion in goods if Beijing retaliated a second time.

Erin Ennis, senior vice president of the U.S.-China Business Council, said it was probably good for the two sides to start with lower level officials who could "get into the weeds" on the IP protection problems that U.S. companies are facing in China.

"It's good that they're talking because not talking isn't solving the issues and is only leading to more tariffs," she said.

(Reporting By David Lawder; Additional reporting by Steve Holland, and Michael Martina in Beijing; Writing by David Lawder and Peter Henderson; Editing by Kim Coghill)

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