China: U.S, China Wrap Up Three Days of Negotiations with Positive Tone, Long Road Ahead

From Ryan Ong, Director, International Business Policy, National Association of Manufacturers

Top line: Earlier today in Beijing, U.S. and Chinese negotiators wrapped up the first round of in-person negotiations under the 90-day tariff pause agreed to in December by President Donald Trump and Chinese President Xi Jinping. Though the two sides did not announce any joint deliverables, both sides indicated that the three-day negotiations were positive and covered a wide range of issues, from Chinese purchases of U.S. products to tougher structural and monitoring issues. The two sides did not announce details of a next round of negotiations, though a Chinese negotiating team could visit the United States in the coming weeks. NAM President and CEO Jay Timmons expressed hope that negotiations “moves the ball forward” to boost business certainty and a bilateral trade deal with China.

Detailed Analysis: Senior negotiating teams from the United States and China concluded three days of intensive trade negotiations in Beijing earlier today, marking the end of a first set of in-depth discussions under the 90-day negotiating window agreed to on December 1 by Presidents Trump and Xi as part of an agreement that also paused tariff escalation.

These negotiations were held against a backdrop of a robust set of demands from the administration (and particularly chief negotiator and U.S. Trade Representative Robert Lighthizer) that China address a broad range of trade issues, and mixed signals from within the administration about how preparations were proceeding. President Trump tweeted late last month that the two sides are making “big progress” while Council of Economic Advisors Chair Kevin Hassett stating in an interview that there would be a “heck of a lot of U.S. companies that have sales in China” whose earnings would take a hit due to a softening economy in China. At the same time, Amb. Lighthizer stressed in the leadup to negotiations that the United States would only accept a strong deal across an ambitious scope of U.S.-priority trade issues, and that more tariffs may be needed to secure meaningful outcomes in any trade deal. Additional pressure for these negotiations could come due to the government shutdown and the resulting halt in reviews of backlogged exclusion applications.

Yet reports and statements from both sides point to a constructive set of broad-ranging discussions. In the lead-up to talks, NAM sources indicated that the Chinese government approached negotiations with plans to offer a broader mix of trade concessions, and did indeed make a handful of announcements in the lead-up to talks with approval of five genetically modified crops, agricultural product purchases, and various steps related to intellectual property (such as Patent Law revisions, the announcement of a new IP appellate court, and steps to increase punishments for IP infringers). Both the United States (President Trump, Commerce Secretary Wilbur Ross, members of the trade delegation) and China (Ministry of Commerce) issued positive statements following the talks, and Chinese lead negotiator (and Vice Premier) Liu He made a surprise visit during negotiations – all steps reinforcing the notion that conversation was frank but constructive.

USTR’s formal statement following negotiations indicated that the two sides discussed “China’s pledge to purchase a substantial amount of agricultural, energy, manufactured goods, and other products and services from the United States,” and that the United States raised the need for steps “addressing our persistent trade deficit and to resolving structural issues” in areas such as forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft of trade secrets for commercial purposes, services, and agriculture.”  Notably, the United States also raised issues related to monitoring, pushing for benchmarks to ensure Chinese implementation of its commitments and concrete steps to take if the United States believes they have not been carried out. These structural and verification issues, which were the focus of the latter half of this negotiating round, will likely remain the thorniest issues to resolve and would sit front and center in future rounds.

The U.S. negotiating team was led by Deputy U.S. Trade Representative Jeffrey Gerrish, and also included Gregg Doud (USTR’s Chief Agricultural Negotiator) and leads from the Departments of Agriculture (Ted McKinney), Commerce (Gil Kaplan), Energy (Steven Winberg) and Treasury (David Malpass), as well as other senior official from those agencies as well as the White House. The Chinese delegation, reported to number more than 100, was led by Vice Commerce Minister Wang Shouwen, a senior Minister of Commerce official who has been deeply involved in these negotiations and led the August 2018 Chinese delegation to Washington.

In the meantime, while this round of negotiations marked the highest profile China development for the week, China was also in the background topic of conversation for trilateral conversations between Amb. Lighthizer, European Commissioner for Trade Cecilia Malmström and Japanese Minister of Economy Hiroshige Seko in Washington earlier today. The three leaders discussed a number of topics that touch on U.S. concerns with China, including increasing information exchange on non-market policies and practices, work on World Trade Organization Reform issues, and specific issues such as industrial subsidies and forced technology transfer.

Neither side announced formal timing or next steps for negotiations, though USTR’s statement indicated that the delegation “will now report back” to Amb. Lighthizer and President Trump “to receive guidance on the next steps.”  Given the short 90-day negotiating period, the constructive nature of this round points to a Chinese delegation visiting Washington in the coming weeks, though China’s Lunar New Year holiday could push that visit into February.