China says 'big differences' remain after trade talks with U.S. team

Washington Post

China said some "big differences" remained Friday after two days of trade talks with a high-level U.S. government delegation, although consensus had been reached on other issues.

It was unclear where the two sides found common ground, but the overall aims of U.S. envoys are likely to have met stiff resistance as they seek fundamental concessions on how the Chinese leadership manages trade and its own economy.

The meetings, which wrapped up Friday, marked an attempt by the Trump administration to leverage changes from China without sparking a potentially disastrous trade war, after threatening to impose tariffs worth up to $100 billion in Chinese imports.

As he headed for second day of meetings, Treasury Secretary Steven Mnuchin told reporters that the two sides were having "very good conversations," according to the Reuters news agency.

But it was not a surprise to learn later Friday that the talks had ended without a deal that addresses U.S. concerns over China's trade and investment practices, as well as over state subsidies to high-tech industries.

"The two sides fully exchanged views on expanding U.S. exports to China, bilateral trade in services, two-way investment, protection of intellectual property rights, resolution of tariffs and non-tariff measures, and reached consensus in some areas," state news agency Xinhua reported.

"The two sides recognized that there are still big differences on some issues and that they need to continue to step up their work and make more progress."

The U.S. delegation was not just calling for efforts to reduce the size of the trade deficit with China, which reached $375 billion last year. But it has also asked for fundamental changes to the way China's Communist Party runs its economy, taking aim at a massive state-subsidized effort to achieve global dominance in advanced technologies, known as "Made in China 2025."

Chinese experts say Beijing is determined not to give any ground over that issue, and that is likely to be the source of at least some of the differences between the two sides.

Xinhua reported that two sides agreed to establish a "working mechanism' to maintain close communication on the issues discussed in the talks.

In a document reportedly supplied by the U.S. delegation to the Chinese side ahead of the talks, Washington asked Beijing to take action to cut the trade deficit by $100 billion over the next 12 months, and by another $100 billion by the end of 2020.

The document was cast as a draft agreement provided ahead of the talks "solely to help facilitate candid and constructive exchanges between the two sides."

A Chinese expert close to the negotiating team, who requested anonymity while discussing a sensitive issue, confirmed the document was genuine. Bloomberg News agency also said it had seen the document.

In it, the U.S. delegation asked that China immediately "cease providing market-distorting subsidies and other types of government support that can contribute to the creation or maintenance of excess capacity in the industries targeted by the Made in China 2025 industrial plan."

It also demanded China strengthen the protection of intellectual property rights and take "immediate, verifiable" steps to halt some of the major U.S. allegations against the Chinese: commercial cyberespionage, and the theft of intellectual property and trade secrets.

It also asked China to ensure that U.S. investors in China are "afforded fair, effective and nondiscriminatory market access and treatment," and that China reduce "tariffs on all products in noncritical sectors to levels that are no higher than the levels of the United States' corresponding tariffs."

Underlining the tensions, the Commerce Department reported on Thursday that the U.S. merchandise trade deficit with China widened by 16 percent in the first three months of this year, to $91.1 billion.

U.S. sanctions against leading Chinese telecom equipment manufacturer ZTE had also cast a significant shadow over the trade relationship in recent weeks.

Last month, the Commerce Department barred U.S. companies from exporting to ZTE for seven years, saying the company had violated the terms of a previous settlement of criminal and civil charges for making shipments to Iran and North Korea.

That move was seen a big blow to ZTE, which has relied on U.S. chips and software to power its smartphones. But it has also reinforced China's determination to accelerate the development of its own high-tech industries and reduce reliance on the United States. In other words, it has reinforced China's determination to pursue its "Made in China 2025 plan" despite U.S. objections, experts said.

China's Commerce Ministry said it had made "solemn representations" to the U.S. delegation over the ZTE case during the talks.

"The U.S. side stated that it attaches importance to China's representations and will report to the U.S. president on China's position," a spokesman for China's Commerce Ministry said, according to the ministry's website.

The U.S. delegation made no public statements during the talks.

The Washington Post's Luna Lin, Yang Liu and Shirley Feng contributed to this report.

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