US to China: Fix tech policies. China's retort: Drop tariffs
WASHINGTON (AP) — The Americans want to safeguard their technological riches, restore balance to their top trading relationship and force a sharp-elbowed rival to play by the rules and keep its word.
The Chinese want the Trump administration to drop its tariffs so they can regain freer access to the world's largest consumer market while pursuing their goal of becoming a global technology superpower.
It would be hard to overstate what's at stake as Presidents Donald Trump and Xi Jinping meet Saturday at a Group of 20 summit in Osaka, Japan, to seek a truce in their trade war and revive negotiations between the world's two largest economies.
The Trump administration has accused Beijing of deploying predatory tactics — including stealing technology and forcing foreign companies to hand over trade secrets — in an illicit drive to surpass America's technological supremacy.
Trump has already imposed 25% tariffs on $250 billion and is threatening to tax an additional $300 billion' worth, thereby extending his import taxes to just about everything China ships to the United States. China has retaliated by imposing tariffs on $110 billion in U.S. imports.
Negotiations to resolve the dispute broke off last month after the administration accused Beijing of reneging on commitments it had previously made. Trump and Xi are expected to agree to some kind of cease-fire in Osaka. This would buy time for their negotiating teams to work toward a meaningful long-term agreement. During a truce, it is assumed, Trump would hold off on taxing the additional $300 billion in Chinese imports.
But reaching a substantive agreement could prove enormously difficult. The differences between America's mostly free-market capitalist economy and China's state-driven economic system are vast. Here's a look at what each side wants:
Chinese officials have said they want to revive negotiations with the Trump administration. Yet they have given no indication that Xi plans to propose any new initiatives or offer fresh concessions when he meets Trump.
As a condition of any settlement, Beijing has demanded that Trump lift all the punitive tariffs he's imposed on Chinese products. That might be next to impossible. Even if a significant agreement can be reached, U.S. negotiators want to keep in place at least some of their import taxes to ensure that Beijing fulfills whatever steps it agrees to.
"Any deal would need the U.S. to roll back its tariffs, which doesn't seem to be on the table," said Mark Williams of Capital Economics.
Beijing denies the allegations that it steals U.S. companies' intellectual property and forces them to hand over proprietary technology. And Chinese officials have vowed to resist anything that strikes them as a one-sided agreement. Beijing has complained that Trump's trade war is designed mainly to suppress a rising global competitor so the U.S. can maintain its technological dominance.
"Both sides must make compromises and concessions, not just one party," one of China's negotiators, Wang Shouwen, a deputy commerce minister, said at a news conference this week.
Beijing might prove reluctant to take any major steps — such as reducing government subsidies to Chinese companies — that could threaten its ambition to turn its companies into world leaders in such advanced technologies as artificial intelligence and autonomous cars.
"Some of those things are the hardest for China to do," said Robert Holleyman, a partner in the trade practice at the law firm Crowell & Moring. "The U.S. knew that going into this."
Still, Holleyman said, some Chinese economic reformers have said that what the Trump administration wants — especially widening U.S. companies' access to China's markets — could benefit Beijing, too.
"Reformers recognize that allowing healthier market access with global collaboration can also be in the interest of China," said Holleyman, who formerly oversaw negotiations with China at the Office of the U.S. Trade Representative.
That said, he acknowledged, "the hard-liners don't see that."
For now, Holleyman said, "China's been willing to make offers in a whole bunch of areas." For example, Beijing appears willing to buy more U.S. goods and thereby narrow America's gaping trade deficit with China — a perennial complaint of Trump — which hit a record $381 billion last year.
Still, a Chinese government report in early June asserted that any promises to buy more American exports in a settlement had to be realistic.
Some observers hope for a repeat of December's surprise agreement by Trump and Xi in Argentina to postpone plans for higher tariffs while their negotiators continued to meet. That cease-fire bought five months of talks. The result was that the two sides appeared to be closing in on a deal before the breakdown in negotiations last month heightened tensions.
"The situation is now more serious," said Tu Xinquan, director of the Institute for WTO Studies at the University of International Business and Economics in Beijing. "If the dialogue can arrest the trend of the escalation of the trade war and restart the talks, it will be a good result."
THE UNITED STATES
Commerce Secretary Wilbur Ross this week laid out three priorities for the Trump administration in its talks with Beijing.
The administration wants China to commit to more purchases of U.S. exports, including such things as soybeans and liquefied natural gas.
Then Trump officials want China to end what they call its abusive practices, including forced technology handovers and the use of regulations to hobble American companies operating in China.
Most and "hardest" of all, Ross said, is devising ways to ensure that China honors whatever commitments it makes. That's why the administration is eager to retain some of the Trump tariffs, which could be lifted gradually as Beijing proves its sincerity.
After all, Trump officials argue, China has made empty promises before: A 2018 report by the Office of the U.S. Trade Representative found that Beijing promised eight times since 2010 not to force foreign companies to transfer technology to China. Yet the coercion continued, the U.S. said.
China's reluctance to reform its ways has cost it a key ally in the United States: American businesses. U.S. companies, which long backed China-friendly U.S. trade policies, now largely support Trump's combative stance, if not the tariffs he's using as leverage.
Trump has suggested that he might be willing to use the fate of the Chinese telecommunications giant Huawei as a bargaining chip in trade talks. The Commerce Department last month put Huawei on a blacklist, which effectively bars it from buying the U.S. technology it needs.
"I can imagine Huawei being included in some form of a trade deal," Trump said in May. He offered no details. But he said any arrangement "would look very good for us, I can tell you that."
But the president could run into sharp resistance from Congress if he goes easy on Huawei, which is viewed as a national security threat because of the possibility that its equipment could be used for cyberespionage.
Calling Huawei and other blacklisted Chinese tech firms "a clear and present danger to America's long term security," Oregon Sen. Ron Wyden, top Democrat on the Senate Finance Committee, said he would oppose any trade agreement that sacrifices "the safety of American families for some quick bucks and political points."
McDonald reported from Beijing.