August 3, 2020

Chinese Vice-Premier Liu He handed greater clout for Washington talks in bid to end trade war

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By Teddy Ng, Kinling Lo From South China Morning Post

  • delegates authority to Liu through special envoy status to show means business as fresh talks begin
  • Possible memorandum of understanding to be discussed as clock ticks towards March 1, when tariff truce ends

China’s Vice-Premier Liu He will hold talks with top US officials on Thursday and Friday to discuss a possible memorandum of understanding to suspend the trade war between the two nations.

Liu will meet US Treasury Secretary Steven Mnuchin and US Trade Representative Robert Lighthizer, the Chinese commerce ministry said in a short statement, without giving further details. Liu will be travelling as a special envoy of President Xi Jinping, the statement said.

Peter Navarro, a fierce China critic and an assistant to US President Donald Trump on trade policy, would also join the talks, a separate White House statement said. It said Liu’s meeting would be preceded by deputy-level talks starting on Tuesday, led by deputy US trade representative Jeffrey Gerrish.

The outcome of the talks in Washington, likely to be the last before a 90-day tariff truce ends on March 1, will largely decide whether China and the United States can reach a pact – probably in the form of a memorandum of understanding – to suspend the battle that has been disturbing global markets and clouding growth prospects since last year.

Chinese foreign ministry spokesman Geng Shuang urged the sides to “seize the opportunity”. “I hope both sides can seize the opportunity and work together to reach a mutually beneficial agreement that is acceptable to both,” Geng said in a daily press briefing on Tuesday.

The last time Liu travelled as special envoy was last May, when he went to Washington for trade talks before a first round of tariffs was launched by the US.

Zhang Yansheng, chief research fellow at the China Centre for International Economic Exchanges, said the special envoy role showed China’s sincerity in trying to reach a deal.

“For the last stage of talks, Liu has been delegated power from Xi, showing that the steps Liu takes and what he is going to propose are with stronger bargaining power than before, as they are approved by the president,” he said.

If the two countries were to reach a consensus this time, it would most likely be achieved by separating several different aspects, he said.

“First, it is more likely that they can reach a consensus on tariffs, and agree not to introduce any additional tariffs on top of what has already been imposed,” Zhang said. “If they do not suspend tariffs, both countries and other economies in the world will not be able to handle it.

“Second, core problems – even if the negotiation period is extended – are not something that can be solved in a short period of time.”

The US has repeatedly said China does not have a good track record of implementing its commitments, and its reluctance to trust Beijing has left the countries far apart in some aspects of their negotiations. The US delegation has insisted that any deal on structural reform must be verifiable and monitored.

On “core and structural problems”, Zhang said the nations could reach a consensus on a broad direction of how to resolve these differences in future.

Beyond that, more “sensitive issues” like intellectual property protection may need to be handled over a longer period, he said.

This week’s meetings, at which the two sides were also due to discuss China’s pledge to buy a substantial amount of goods and services from the United States, were to take place in the Office of the United States Trade Representative and the Eisenhower Executive Office Building, next to the White House, the US statement said.

The countries are nearing the end of a 90-day suspension of further tariff increases that was agreed by Trump and Xi in Buenos Aires on December 1. The US has threatened to increase tariffs from 10 per cent to 25 per cent on US$200 billion worth of Chinese exports to the US if a deal cannot be reached by March 1.

In a tweet on Sunday, Trump wrote: “Important meetings and calls on China trade deal, and more, today with my staff. Big progress being made on soooo many different fronts! Our country has such fantastic potential for future growth and greatness on an even higher level!”

Last week in Beijing, Liu and US officials held the two countries’ sixth round of trade talks in the past year, with both sides saying progress had been made towards resolving their dispute.

But Yuan Zheng, an American affairs expert at the Chinese Academy of Social Sciences, said that it was not looking likely that a memorandum of understanding could be signed before a proposed meeting between Xi and Trump in late March.

“Both sides are trying to create a positive atmosphere, but the US’ requests on structural industrial reforms from China would be too much of a compromise for Beijing to make,” Yuan said.

“Also, Trump would definitely like to enjoy the spotlight of that moment, therefore he would wait until China makes a certain degree of concession and confirm everything during his meeting with Xi to witness the signing of the document personally.”

The South China Morning Post has reported that Chinese officials proposed Xi and Trump meet on the southern Chinese island of Hainan around the time of the annual Boao Forum for Asia, which will run from March 26 to 29.

Zhang Zhexin, a US affairs expert at the Shanghai Institutes for International Studies, said a memorandum was likely based on the progress of the previous round of talks, in Beijing last week.

“Although a final agreement is unlikely to be made on Liu’s visit, a memorandum is expected to be signed based on their consensus achieved in Beijing: that both sides were determined to reach a deal to lay out the path of the bilateral trade relationship for the next few years and, more importantly, the path of broad China-US relations in the longer run,” he said.

“A consensus and the basic framework are ready, but they’ll need an extension of the Trump-proposed deadline on March 1, by two months or so, to finalise all the details.”

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