U.S.-China Trade Talks End With No Deal in Sight

Source: By Alexandra Stevenson, New York Times • Posted: Thursday, August 1, 2019

From left, Robert Lighthizer, the Trump administration’s top trade negotiator, Vice Premier Liu He of China and Treasury Secretary Steven Mnuchin in Shanghai on Wednesday.
Pool photo by Ng Han Guan

American and Chinese negotiators finished talks on Wednesday with little progress toward ending a trade war that has shaken the world’s economic confidence and rattled markets.

Treasury Secretary Steven Mnuchin and Robert E. Lighthizer, the Trump administration’s top trade negotiator, were seen leaving trade talks on Wednesday, the Chinese state news media said.

Both sides “conducted frank, efficient and constructive in-depth exchanges on major issues of common interest in the economic and trade field,” said a statement late in the day that was released by CCTV, China’s state broadcaster.

Another round of high-level talks will take place in the United States in September, CCTV reported.

The Trump administration had not yet released its own statement.

The meeting marked the first formal resumption of talks after negotiations fell apart almost three months ago, with each side pointing fingers at the other for derailing a deal. They agreed to try again after meeting last month on the sidelines of the Group of 20 summit meeting in Osaka, Japan.

Instead, both sides appear to be settling in for a lengthy economic conflict.

Senior Chinese officials who gathered at an economic meeting on Tuesday run by China’s top leader, Xi Jinping, stressed that the country had to rely on domestic demand to manage “new risks and challenges” and ward off what they described as “downward pressure on the economy,” according to the Chinese state news media. China could turn “a crisis into an opportunity,” the report added.

A lengthy trade war presents China’s leaders with some difficult options. China is enduring an economic slowdown that has been made worse by the trade tensions. Beijing has responded by ratcheting up spending on infrastructure and other big-ticket projects, a reliable growth strategy that nevertheless could worsen the country’s debt problems and do little to solve economic imbalances that could hinder its long-term prospects.

Should China reach a quick deal, on the other hand, the country’s leaders risk looking weak in the face of foreign powers, undermining the Communist Party’s historical claim to rule.

At a daily news briefing on Wednesday, Hua Chunying, a spokeswoman for the Chinese Foreign Ministry, said that “only if the U.S. shows sufficient integrity and sincerity, and conducts trade talks with the spirit of equality, mutual respect, mutual understanding and mutual accommodation, can the trade talks make progress.”

The talks started on a positive note, despite tough rhetoric from both sides the week before. The Shanghai talks were the first official negotiations to be held outside Beijing or Washington.

As American delegates arrived in Shanghai on Tuesday afternoon, an editorial in the Chinese state news media described the city as an “auspicious” place for the stalled talks to begin again, pointing out that President Richard Nixon visited the city in 1972 as relations between China and the United States were beginning to warm.

Chinese officials welcomed the American delegation with a dinner on Tuesday night at the Fairmont Peace Hotel on Shanghai’s famous Bund promenade.

But around the same time in Washington, President Trump accused China of failing to follow through on its promises, adding that a deal was unlikely before the 2020 United States presidential election.

He also complained that China had not started to buy American agricultural goods as he said was promised after he met with Mr. Xi in Japan last month. Chinese officials have disputed that they agreed to the purchases.

On Wednesday in China, as the official talks got underway at the Xijiao State Guest Hotel, further pessimism clouded the event. An editorial in The Global Times, a nationalist tabloid controlled by the Chinese Communist Party, warned that “the U.S. has to change its bad habit of using tough talk to cheer on its negotiating team, which easily undermines the mutual trust between China and the U.S.”

The Chinese-language People’s Daily, the flagship newspaper of the Chinese Communist Party, said in an editorial that American trade negotiators should “consult with sincerity” and not “make trouble out of nothing.”

The issues between the two countries go beyond tariffs. The Trump administration is preparing to decide whether to grant dozens of special licenses to American companies to sell to Huawei, the Chinese telecommunications giant that Washington earlier this year put on a list that restricts its access to American technology. Though Huawei has increasingly developed its own technology, it relies on American chips and software to power a broad swath of its products.

Wilbur Ross, the United States secretary of commerce, told reporters during a visit to Brazil this week that a decision on those licenses was “forthcoming,” without giving details.

On Tuesday, Huawei announced an increase in sales for the first half of the year, indicating that the clampdown by the Trump administration has had little impact on the company so far. But the blacklisting is viewed by Beijing as a significant hurdle to a trade deal, and the limits could further hurt Huawei the longer they last.

CCTV reported on Wednesday that trade negotiators had discussed how China would increase its purchases of American agricultural goods as well as how the United States would “create favorable conditions for procurement” of technology.

After talks broke down in May, Mr. Trump raised the tariff on $200 billion in Chinese goods to 25 percent. He has threatened to impose the same 25 percent tariff on an additional $300 billion in Chinese exports to the United States if no deal is agreed upon.

Sine then, China has taken a more defiant approach to the United States, threatening to put American companies and individuals on its own blacklist. It has changed its policy for handling trade tensions, promising to “never give in on major issues of principle.” It has put at least one American company on notice, investigating FedEx over delayed shipments of goods from Huawei to its clients.

On Friday, the Chinese state news media reported that FedEx was suspected of violating the law. FedEx has said the delays were due to operational errors, but the Chinese authorities said that argument did “not meet reality,” according to Xinhua, China’s state-run news agency.

The two sides went into the talks this week still lacking even a draft agreement that they could both work from. The Trump administration has requested sticking to the text as it stood at the end of April. But in May, Chinese negotiators sent a copy of a new draft to Washington in which they had crossed out a long list of sections upon which the two sides had previously agreed.

The tone of Chinese rhetoric, from the government and from various research groups in China that work closely with the government, has grown tougher in recent weeks, and some say that Mr. Trump’s talk of the ease of winning a trade war is starting to be matched by some on the Chinese side.

“The U.S. administration went into this thinking they had a strong hand, like in poker,” said Andy Mok, a senior consultant on trade at the Center for China and Globalization. “The best the U.S. can hope for in the trade war is as little political and economic damage as possible.”