LDN - Business

U.S., China launch high level trade talks amid deep differences

[January 30, 2019] By David Lawder

WASHINGTON (Reuters) - The United States and China were set to try again on Wednesday to dig out from a damaging trade war with a new round of high-level talks aimed at bridging deep differences over China's intellectual property and technology transfer policies.

Cabinet-level officials, led by Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer, are due to begin two days of talks at 9 a.m. EST (1400 GMT) next door to the White House. They come with about a month left in a 90-day trade truce agreed in December by President Donald Trump and Chinese President Xi Jinping.

People familiar with the talks and trade experts watching them say that, so far, there has been little indication that Chinese officials are willing to address core U.S. demands to protect American intellectual property rights and end policies that Washington says force U.S. companies to transfer technology to Chinese firms.

The U.S. complaints, along with accusations of Chinese cyber theft of U.S. trade secrets and a systematic campaign to acquire U.S. technology firms, were used by the Trump administration to justify punitive U.S. tariffs on $250 billion worth of Chinese imports.

Trump has threatened to raise tariffs on $200 billion of goods to 25 percent from 10 percent on March 2 if an agreement cannot be reached. He has also threatened new tariffs on the remainder of Chinese goods shipped to the United States. China has retaliated with tariffs of its own, but has suspended some and is allowing some purchases of U.S. soybeans during the talks.

"Clearly on the structural concerns, on forced technology transfer, there remains a significant gap if not a wide chasm between the two sides," a person familiar with the talks told Reuters.

Chinese officials deny that their policies coerce technology transfers.

They have emphasized steps already taken, including reduced automotive tariffs and a draft foreign investment law that improves access for foreign firms and promises to outlaw "administrative means to force the transfer of technology."

China is fast-tracking that new law, with the country's largely rubber-stamp parliament likely to approve it in March.

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A staff member walks past U.S. and Chinese flags placed for a joint news conference by U.S. Secretary of State Mike Pompeo and Chinese Foreign Minister Wang Yi at the Great Hall of the People in Beijing, China June 14, 2018. REUTERS/Jason Lee

A crucial component of any progress in the talks, according to top administration officials, is agreement on a mechanism to verify and "enforce" China's follow-through on any reform pledges that it makes. This could maintain the threat of U.S. tariffs on Chinese goods for the long term.

TEMPERED EXPECTATIONS

Some business groups watching the talks were tempering expectations for a breakthrough.

With a month to go before the deadline, it was unlikely that either side would put their best offers on the table in the next two days, said Erin Ennis, senior vice president of the U.S.-China Business Council.

"I don't think there's going to be any big outcome," Ennis said of the talks scheduled for Wednesday and Thursday. "Hopefully they make some good progress that will set them up to be able to get to completion at the end of the 90 days."

But the Chinese side, led by Vice Premier Liu He, would likely have to bring to the table a new offer that goes significantly beyond its previous offers to significantly increase purchases of U.S. goods, including soybeans, energy and manufactured goods.

People familiar with the talks said manufactured goods, a key priority for the Trump administration, were among the largest components of Chinese purchase pledges aimed at significantly reducing the U.S. trade deficit with China. But here, too, there are "no guarantees" that Beijing would follow through on these pledges, one of the people said.

Also hanging over the talks are U.S. indictments against Chinese top telecommunications equipment maker Huawei Technologies Co, accusing it of bank and wire fraud to evade Iran sanctions and conspiring to steal trade secrets from T-Mobile US Inc.

(Reporting by David Lawder and Chris Prentice; Additional reporting by Yawen Chen and Ben Blanchard in Beijing; Editing by Leslie Adler & Kim Coghill)

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