MNI EXCLUSIVE: Next Months Crucial For China-US Deal: Advisors

--China Believes Protectionist Self-Harm Pushing U.S. Back To The Table

By Wanxia Lin

     BEIJING (MNI) - China and the U.S. could reach a preliminary trade

agreement as soon as this September, following the green light for a resumption

in the talks, although not everyone is optimistic about the chances of a quick

deal, government advisors told MNI.

     "If the Trump administration stops flip-flopping this time, it is possible

for both sides to reach a preliminary agreement in three months," said Chen

Wenling, Chief Economist at the China Center for International Economic

Exchanges, a high-level government-back think tank.

     She said U.S. President Donald Trump needs "achievements" that can help him

secure re-election next year and reaching a deal with China this year would help

him win a second term by countering domestic complaints from soybean farmers and

others. Defusing global trade tensions with a deal would also underpin U.S.

economic growth and employment in the run-up to the November 2020 vote.

     On the other hand, Chen Fengying, former director of world economy at the

China Institutes of Contemporary International Relations, a prominent

government-back think tank, noted that the two countries still have to figure

out the starting point before trade negotiations can be brought back to life.

     "The U.S. wants to resume from the previous ninth round of negotiations,

while China wants to continue from the eleventh round," Chen Fengying pointed

out, without elaborating on the differences that drove the two governments apart

in May. She believes that if the U.S. can agree with China on the starting point

for renewed talks, progress can be expected "very soon".

     Both Chens said there is no timetable or roadmap and the situation could

change during the negotiations, including the possibility of relapsing back into

stalemate and escalating into a deeper conflict.

     --90% AGREED

     Chen Wenling, believes that the removal of all the tariffs imposed on

Chinese imports by Washington since the trade dispute flared up is a priority

issue for Beijing and preconditions for a deal. But she conceded that the Trump

Administration's willingness to weaponise tariffs suggests it won't give up on

them lightly.

     At the same time, for Chen Wenling, Washington must rein in its demands for

concessions from Beijing. "It is said that China promised to buy $200 billion of

American goods (at the G20) in Argentina last year, and since then that number

has grown to $300 billion, then $330 billion," she said, adding that "the U.S.

must make a concession on what they asked for."

     More pressing for the U.S., according to Chen Wenling, is for the U.S. to

restore greater market access for its agriculture products in China, in

particular to help the many soybean farmers on the verge of bankruptcy. China

can restore imports of American soybean and cool global soybean prices, she

said, as well as expanding energy and airplanes imports from the U.S.

     As for other U.S. requirements, including intellectual property protection,

ending forced technology transfer, and equal treatment for state-owned and

privately-owned companies, China is capable of satisfying Washington's hopes,

according to Chen Wenling, chiming with U.S. Treasury Secretary Steve Mnuchin's

comment that the two sides are 90% agreed. She added, without elaborating, that

the outstanding 10% lies in internet control and data flow.

     She believes that the next phase in the trade negotiations hinge on what

the U.S. offers. In this context, Washington's restoration of American supplies

to Huawei are seen not so much as a concession but a "self-correction", driven

by the self-harm of cutting off supply chains and losing access to the Chinese

market. Moreover, if the U.S. relaxed exports of high-tech products to China,

such as in the areas of military equipment or bioengineering, the bilateral

trade deficit would shrink by $100 to 200 billion, Chen Wenling estimated.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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