Washington Insider -- Monday

More US, China Trade Talks

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

US-China Trade Talks This Week

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin will travel to Shanghai Tuesday to meet with Chinese Vice Premier Liu He. Mnuchin said the U.S. team will be in Shanghai for two days.

White House press secretary Stephanie Grisham said in a statement the officials will "continue negotiations aimed at improving the trade relationship between the United States and China... The discussions will cover a range of issues, including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, the trade deficit, and enforcement," Grisham said.

As for the reasoning behind Shanghai being chosen as opposed to Beijing, Mnuchin said on CNBC, “The reason why we’re going to Shanghai is that the host country, China, has invited us there. There’s a significance to them of the Shanghai Communiqué and the symbolism, obviously, of that important agreement. So, hopefully I’ll take that as good news that we’ll be making progress next week.“

The Shanghai Communiqué was a document that set the stage for normalized diplomatic relations between the U.S. and China during President Richard Nixon’s visit to the country in 1972.

Chinese President Xi Jinping could make an appearance in Shanghai and meet with the visiting U.S. officials, some sources speculate.

Immigration Shift Eyed for Investment in Rural Areas

A rule that would raise the investment limits for immigrants applying to the EB-5 visa program was published Wednesday by the Trump administration.

The program currently allows foreigners who invest $1 million in a U.S. commercial project that will create or preserve at least 10 jobs to apply for a green card. That investment threshold drops to $500,000 if the project takes place in a high-unemployment or rural area.

Under the new regulation, the standard threshold is increased to $1.8 million, and the threshold for rural or high-unemployment areas will rise to $900,000 — a smaller jump than the $1.35 million proposed in an earlier version of the rule.

Sen. Chuck Grassley, R-Iowa, in a floor speech last week said it will encourage investment in rural America.

Washington Insider: More US, China Trade Talks

The urban press is reporting this week that almost three months after their trade talks broke down in acrimony, Chinese and American negotiators meet again in Shanghai. For example, Bloomberg says that this is amid “tempered expectations for breakthroughs in their yearlong trade war.”

Two days of talks are scheduled to restart tomorrow after an uneasy truce reached by Presidents Trump and Xi Jinping on the sidelines of the Group of 20 summit in Osaka, Japan, last month. “Deep tensions remain, though, and recent days have brought mixed signals from both sides, with neither showing an urge to compromise.”

While China has indicated its readiness to buy US agricultural products, it has also called the U.S. the "black hand" behind anti-government protests in Hong Kong and said Friday an investigation into FedEx Corp.’s claims it mistakenly rerouted Huawei Technologies Co. packages to the US as well as other legal violations.

Trump has spoken with tech executives recently about the ban on selling products to Huawei and potentially easing that prohibition while other US officials played down the possibility of a quick trade deal.

Increasingly at stake now is the health of a global economy “weighed down by uncertainty for markets and companies.” The International Monetary Fund last week further reduced its estimates for global growth and warned that damage was to some extent “self-inflicted” by prolonged uncertainty caused by the trade war, escalating tensions over technology, and Brexit.

“There is still a huge gap between the two sides on key sticking points,” said Robin Xing, chief China economist at Morgan Stanley in Hong Kong. “So far there is still no clear path toward a comprehensive deal.”

China is seen sticking to its three key demands: The immediate removal of all existing tariffs, a balanced agreement, and realistic targets for additional Chinese purchases of American products. No achievements would be made if the U.S. sticks to its existing stance during the Shanghai talks, Taoran Notes, a blog run by the state-owned Economic Daily newspaper, said Friday.

The U.S. should remove all additional tariffs first if it wants to reach a deal, and equality and respect between the two sides are the only way to reach agreement, it said. China is not afraid of US threats to impose tariffs on an additional $300 billion of Chinese goods, it said.

Among the U.S. demands are structural reforms to China’s economy, greater protection of intellectual property rights and a more balanced trading relationship.

Leading the delegation from Washington, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin “will put forth the view we’d like to go back to where we were last May, where we did not have an agreement but we seemed to be about 90% of the way there,” White House economic adviser Larry Kudlow told reporters on Friday.

The prospects for an agreement are also hampered by tensions over geopolitical issues including Hong Kong, North Korea, Taiwan and the South China Sea. Huawei remains a key point of contention, with China last week urging the U.S. to block a proposed bill that would stop the Chinese telecom giant from accessing US patents.

Some in the U.S. administration also are concerned about the inclusion of new “hard-liners” on the Chinese side. Such a view is dismissed by China analyst Pauline Loong, managing director at research company Asia-Analytica in Hong Kong.

“This is not some minor discussion with give and take on minor issues,” she said. “The concessions now needed to clinch an agreement will require decisions at the Politburo Standing Committee level, not at the level of the negotiating team.”

The discussions will cover a range of issues, including intellectual property, forced technology transfer, non-tariff barriers, agriculture, services, the trade deficit, and enforcement, according to a White House statement.

“China is not going to make dramatic concessions, so the issue for the U.S. side is whether it wants to accept a practical compromise or resume escalation,” said David Dollar, a former U.S. Treasury official in Beijing, who is now a senior fellow at the Brookings Institution in Washington.

On Friday, President Trump said China may wait until after the 2020 U.S. presidential election to sign an agreement because Beijing would prefer to reach a deal with a Democrat. “I think that China will probably say, ‘let’s wait,’” he told reporters in the Oval Office. “When I win, like almost immediately, they’re all going to sign deals.”

So, we will see. There are growing numbers of press reports about pressure on U.S. crop and livestock producers, as well as on Chinese manufacturers as a result of the trade standoff. And it seems clear that the U.S. negotiators have lowered their expectations, perhaps significantly. Whether there is a political will to actually agree is another matter, experts warn, so the coming talks should be watched closely by producers as they proceed, Washington Insider believes.

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