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US-China trade dilemma: how to hold Beijing's feet to the fire
By Delphine TOUITOU
Washington (AFP) May 5, 2019

Trump to hike tariffs on $200 bn of Chinese goods
Washington (AFP) May 5, 2019 - US President Donald Trump announced Sunday that the United States would raise tariffs on $200 billion of Chinese goods to 25 percent this week, because trade talks are moving "too slowly."

Trump's action came as a major Chinese delegation is expected to arrive Wednesday in Washington for the latest round of talks to end the trade war between the world's two biggest economies -- a round billed as the last one and possibly leading to a deal to end the conflict.

"For 10 months, China has been paying Tariffs to the USA of 25% on 50 Billion Dollars of High Tech, and 10% on 200 Billion Dollars of other goods," Trump tweeted.

"The 10% will go up to 25% on Friday," he said.

The two sides have imposed tariffs on $360 billion in two-way trade since last year. But Trump and Chinese leader Xi Jinping agreed to a truce in December to refrain from further escalation.

As recently as last week, the US had depicted the trade talks as going well.

"The Trade Deal with China continues, but too slowly, as they attempt to renegotiate. No!" Trump complained Sunday.

Trump says he wants to reduce the huge US trade deficit with China, which in 2018 totalled $378.73 billion if you include trade in services.

Besides a greater opening of the Chinese market to US goods, Trump is pressing for structural changes such as Beijing ending its practice of forcing US companies that operate in China to share their technology.

Trump is also demanding that China halt theft of intellectual property and subsidies to state-owned companies.

To pressure China, Trump has even threatened to slap tariffs on all Chinese products entering the US -- they were worth $539.5 billion last year.

US and Chinese officials say a historic deal ending their ongoing trade war could be imminent, but a key question is how can Washington be sure Beijing will live up to its end of the bargain?

With up to 100 Chinese officials reportedly expected next week in Washington, with the possibility of unveiling a grand agreement after months of tensions, that question is hanging over the talks.

Beijing may make eye-popping offers to buy American energy and agriculture exports as a means of cutting the soaring US-China trade deficit ($378.7 billion in 2018, including services trade), but all eyes will be on whether the agreement has any teeth.

US President Donald Trump increased pressure on the Chinese on Sunday by announcing that the United States will increase tariffs on $200 billion of Chinese goods from 10 percent to 25 percent this week, because the trade talks are moving "too slowly."

US Vice President Mike Pence said Friday the enforcement mechanism would be key to the decision on whether to remove the punishing US tariffs which now cover more than $250 billion in Chinese imports altogether.

"The reason enforcement has become central to this negotiation is the long history of China not living up to the spirit of the commitments it has made in the WTO and in bilateral negotiations with the US and other countries," Edward Alden, a trade expert at the Council on Foreign Relations, told AFP.

Trump has repeatedly accused China of stealing from the United States by buying less from America than it sells.

But Trump also has demanded structural changes to the Chinese economy, including an end to forced transfer of American technology, theft of intellectual property and the massive role the Chinese government plays in markets and industry.

US Trade Representative Robert Lighthizer, who is leading the US delegation along with Treasury Secretary Steven Mnuchin, has insisted Washington will not accept empty promises and will demand verification Beijing is keeping its word.

Reaching trade agreements with China can be especially challenging, given that its regulations are not transparent, Alden said.

"China can change its laws in ways that please the United States, but then use regulatory tools to thwart implementation."

- 'That's the core' -

To ensure strict compliance, US negotiators have proposed monthly, quarterly and semi-annual meetings, with the twice-yearly meetings to involving the most senior officials.

And should American businesses report violations of the agreement, Washington could begin a series of consultations with their Chinese counterparts, and then unilaterally impose new tariffs if no resolution is achieved, according to US media reports.

But China also would have recourse to the same tariff tool in case of a US violation.

"The enforcement mechanism is crucial to the agreement," Doug Barry, spokesman for the US-China Business Council, told AFP.

"Without a credible, time specific, verifiable means to hold parties accountable, we will miss an opportunity to put the trade relationship on a new and better footing."

Alden says the tool under discussion appears novel because bilateral free trade agreements typically resolve disputes through arbitration panels which oversee retaliatory tariffs, similar to the World Trade Organization dispute settlement process.

Businesses on both sides of the Pacific want the talks to wrap up as soon as possible to reduce uncertainty in international commerce at a time when the trade war has weighed on manufacturing sectors in both countries.

Among the top 15 US states exporting to China, many have been hit hard by China's retaliatory tariffs on soy, pork or in the aviation sector, including Alabama, Illinois and Washington State, according to the US-China Business Council.

Companies are calling for the tariffs imposed last year -- which cover more than $360 billion in two-way trade -- to be lifted.

But Washington hopes to retain the ability to resort to tariffs as a cudgel.

"We have to maintain the right to be able to -- whatever happens to the current tariffs -- to raise tariffs in situations where there's violations of the agreement," Lighthizer said in Senate testimony in March.

"That's the core. If we don't do that, then none of it makes any difference."

But, according to Alden, that could create "ongoing uncertainty" for businesses unaware of when either side could seek to impose unilateral tariffs.


Related Links
Global Trade News


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