MNI POLICY: U.S. and China Won't Get Lucky in 13th Trade Talk

By Brooke Migdon

     WASHINGTON (MNI) - As the U.S. and China prepare for their 13th round of

trade talks in Washington Thursday, negotiators on both sides of the table

should not expect to gain any significant concessions, former trade advisors

told MNI.

     Despite U.S. "wins" in trade deals this year with Japan, Mexico and Canada,

the U.S. and China will most likely seek a "mini deal" calling for large-scale

purchases of U.S. goods and the end of tariffs on imported Chinese goods,

according to experts.

     "It's a mistake for the U.S. to go into these negotiations thinking that

China is desperate for a deal. That is just simply not true," former Treasury

and World Bank economist David Dollar told MNI. China's economy is no more

distressed than the U.S., aided by exports to other regions like Europe,

Southeast Asia and Africa.

     Enough "resistance" exists on both sides to prevent either one from doing

anything "dramatic" to forge a more comprehensive deal, Dollar said.

     President Donald Trump has escalated tensions with China claiming the

world's second largest economy "has been hit very hard" and its leaders "want to

make a deal very badly." While global markets have been roiled by the dispute,

Chinese leaders have rejected claims they use unfair trade practices like

improper subsidies and have retaliated against U.S. tariffs. 

     Governor of the People's Bank of China, Yi Gang, will be joining Vice

Premier Liu He and the Chinese delegation, a former senior White House official

confirmed Tuesday. Yi's inclusion signals that possible U.S. restrictions on

portfolio investment flows, dubbed as "fake news" by White House trade advisor

Peter Navarro, could be a topic of discussion Thursday, along with accusations

of currency manipulation.

     The U.S. Department of Commerce blacklisted 28 Chinese entities on Tuesday,

targeting some of its top artificial intelligence companies, on the grounds of

human rights abuses in the Xinjiang region.

     Chinese Foreign Ministry spokesman Geng Shuang told reporters to "stay

tuned" when asked if China would retaliate during a news conference.

     Trump's impending October 15 tariff hike on $250 billion of Chinese goods

might motivate its leaders to commit to large-scale agricultural or industrial

purchases, Dollar said. In return the Chinese will likely request the U.S. roll

back tariffs it has already imposed on Chinese imports, as well as planned

tariffs in October and December, he said.

     "I think that if the U.S. are satisfied with the deal, that's certainly

plausible," Dollar said.

     But headway on issues like intellectual property rights or cyber security

is unlikely to be made during this round of negotiations, according to Dollar,

who said that clarity remains a significant roadblock.

     In May, following months of negotiations between the two countries, China

returned a heavily-edited 150-page draft trade agreement to Washington, deleting

commitments to alter its laws to address key U.S. demands, such as theft of U.S.

intellectual property, forced technology transfers and currency manipulation.

     Former Chamber of Commerce Asia Team lead, Tami Overby, said the Chinese

backing out of the proposed deal is an example of misunderstanding rather than

deceit or defiance.

     "It's not as black and white as the Chinese reneged," she said. "There was

a very clear misunderstanding."

     Overby, who attended many of the Trans Pacific Partnership negotiation

rounds, said it's likely the Chinese believed they would be able to address U.S.

concerns administratively rather than through legislation. She added that the

Trump administration's lack of personnel versed in Chinese culture has increased

the potential for more confusion and misinterpretation.

     "This is where the rubber meets the road," she said, because one word or

phrase can "completely change everything."

     Although Vice Premier Liu He will attend the talks, unlike past visits to

the U.S., he will be stripped of his title as "special envoy," which had

empowered him to negotiate on behalf of Chinese President Xi Jinping.

     "The signal I read in that is that the Chinese are not really expecting a

big deal here," Overby said.

--MNI Washington Bureau; +1 202 371 2121; email: brooke.migdon@marketnews.com

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