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Chinese Ministry of Commerce confirms reports of January trade meeting with U.S.

January 9, 2019 39 1 No Comments

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The U.S. and China will resume trade talks at a meeting in China in January, according to the head of the Chinese Ministry of Commerce and other unnamed sources. The negotiations will take place amidst increasingly friendly trade relations between the two countries, which began with a 90-day truce called after a meeting between Donald Trump and Chinese President Xi Jinping at the G20 Summit in Buenos Aires.

A spokesman for the Chinese ministry, Gao Feng, said that telephone conversations between Chinese and U.S. trade teams have been ongoing, uninterrupted by the Christmas season in the United States. He confirmed that the two sides had arranged “face-to-face consultations” in January, but would not confirm the previously reported timeframe of the week of January 7th.

Feng’s remarks added a new layer of certainty to an increasingly optimistic outlook for the future of the trade war. Since the meeting between the two presidents in Buenos Aires, the Chinese government has sought to assuage public fears that the 90-truce would be just that: a pause in otherwise escalating hostilities between the two countries. Earlier in December, Feng said that the government would “follow a clear timetable and roadmap to hold consultation on issues of intellectual property rights protection, technological cooperation, market access, and trade balance that conform to the interests and demands of both sides, and the two sides should strive to reach a consensus.” He added that China’s ultimate goal in the talks was to remove all Trump-era tariffs.

The news was reported a day earlier by Bloomberg, citing anonymous sources familiar with the matter. According to those sources, Deputy Trade Representative Jeffrey Gerrish will lead the U.S. negotiations team, accompanied by David Malpass of the Treasury Department. Neither office would confirm the news at the time of its reporting.

Since the G20 meeting at the start of December, both sides have made concessions in a good faith effort to lay the ground for cooperation. The Trump administration has agreed to delay until March an increase in tariffs on 200 billion dollars worth of Chinese goods — an increase originally scheduled for the beginning of January — in the hopes of striking a deal before then. If it did take effect, the increase would raise the tariff on those goods from 10 to 25 percent. The Chinese government, for its part, announced a third round of tariff decreases at the end of December and resumed buying specific American products like soybeans.

Among the U.S. goods China is welcoming into its market is American rice, which China recently announced it was preparing to import for the first time ever. The move, which has been the subject of years of negotiations, was interpreted by analysts as a good sign of China’s willingness to negotiate, especially considering the high price of U.S. rice as compared to that which China regularly imports from other countries in Asian. Perhaps a largely symbolic gesture by the Chinese administration, is was not made clear in the announcement how much rice the country was prepared to begin importing from U.S. producers.

A recent proposal meant to address U.S. complaints about intellectual property protection for foreign companies operating in China — and the Chinese government’s intervention in the affairs of foreign businesses — has been similarly interpreted as a step towards cooperation in the upcoming trade talks. The draft legislation, submitted for public review until February 24th, would terminate the Chinese government’s mandatory technology transfers for international corporations, and institute a new set of procedures designed to “set up and improve the mechanism facilitating foreign investment.” In announcing the proposal, the Ministry of Commerce said that the bill would replace a set of existing laws and improve China’s compliance with international rules governing foreign ventures.

There are concerns, however, about both the effectiveness of the proposed legislation and the possibility of its becoming law. In its current form, the proposal reserved the right of the Chinese government to retaliate against countries it accuses of similar discriminatory practices against Chinese businesses. What’s more, the draft is a long way from being submitted in a final form to the Chinese parliament for approval, a process that could extend long past the February 24th review deadline. Bonnie Glaser, director of the China Power Project at the Centre for Strategic and International Studies, said that the new legislation should be considered with “a healthy dose of skepticism” lest the international community begin to accept promising gestures as concrete signs of cooperation. “The question is what will follow, on what issues will China be willing to compromise on, what concrete steps will be taken and how quickly,” she argued. “China is trying to convince the U.S. that is is willing to take some measures to address U.S. demands. The question is how much is enough?”

Such concerns point to the overarching question of how desperate the Chinese government is to put an end to the trade war, at the expense of economic leverage against the United States. Despite the current tariffs, China’s year-over-year exports have been increasing at a high rate and economists argue that the effects of the trade war have yet to be felt by the Chinese economy. That said, disappointing export growth in the final months of 2018 has suggested to some that the coming year may begin to show evidence of that impact. “With the tariffs we haven’t seen the direct impact, but we’ll see that next year,” said Tom Rafferty, the head economist on China at The Economist Intelligence Unit, in late December. “The risk here [is] it’s going to slow down pretty clear into 2019. Global demand is going to shift down a notch or two.” That prediction was echoed by Zhu Ning, a professor of finance at Tsinghua University and deputy director of China’s National Institute of Financial Research, who said that the effect would be most immediately evident in a decrease in export growth.

On Twitter on Saturday, President Trump struck an optimistic tone. “Just had a long and very good call with President Xi of China. Deal is moving along very well,” he wrote. “If made, it will be very comprehensive, covering all subjects, areas and points of dispute. Big progress being made!” Chinese state media reported similar comments from President Xi, encouraging coordination and stability in the relations between the two countries.

In any case, the January meeting (assuming it is finalized by U.S. officials) will undoubtedly represent a turning point in the stalled trade war. Immediately in the balance are the tentative concessions by the Chinese government outlined above and the Trump administration’s delayed increases in across-the-board tariffs, the implementation of which will, it seems, depend on the outcome of negotiations.

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