US, China Make Little Progress in Talks

U.S. and China Make Scant Progress in Trade Talks

BEIJING (AP) -- The U.S. and China asked one another to make sweeping concessions in trade talks, failing to bridge sharp divisions and raising the chances that each government will slap tariffs on tens of billions of dollars of the other country's exports before settling the dispute.

Top economic officials on both sides sat down for two days of talks this week after exchanging lists that contained sizeable demands. The U.S. asked China to cut its trade surplus by $200 billion, for example, while the Chinese officials sought to get Washington to ease national-security reviews of Chinese investments. Instead of reaching common ground, the talks ended inconclusively Friday.

Planned meetings of U.S. officials with President Xi Jinping and Vice President Wang Qishan didn't materialize. The U.S. delegation left Beijing without comment or agreement with Chinese officials on a joint statement.

"Significant disagreements over certain issues" remain, said a statement published by China's official Xinhua News Agency. Xinhua said the two sides reached consensuses in "some areas" and would set up a "working mechanism" to keep communications going. But Xinhua didn't elaborate.

As the delegation was flying back to Washington, the White House released a statement saying the two sides "held frank conversations" about "rebalancing" U.S.-China economic relations. The U.S. trade team would brief President Trump and "seek his decision on next steps," the statement said. It made no mention of any effort to maintain ongoing communication on trade issues with Beijjing.

The negotiations, which took place at the Chinese government's Diaoyutai Guesthouse complex in western Beijing, came after weeks of tit-for-tat tariffs and escalating rhetoric about more tariffs and other trade penalties. The lack of meaningful progress prolongs the economic fight between the world's two largest economies, one that likely will keep rattling investors, businesses and policymakers world-wide.

"With both sides digging in, we're headed for a first round of tariffs by each side," said Michael Hirson, a former U.S. Treasury representative in Beijing who is now a Eurasia Group analyst.

The trade battle is intensifying as China's overseas shipments are starting to slip, as are other key economic indicators such as home sales and industrial output. A slowdown in exports could cause China's policy makers to adopt policies aimed at spurring growth, though that could set back the government's effort to reduce corporate debts and other financial risks.

For the U.S., the trade spat is already cutting into American farms' sales of soybeans, pork and other commodities to China, one of the world's biggest markets. Since early April, when China announced tariffs on some U.S. agricultural goods and threatened to target others, Chinese importers have canceled purchases of corn, cut orders for pork and dramatically reduced soybean purchases.

U.S. President Donald Trump sent his senior economic team -- including Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer -- to look for progress. As it headed to Beijing, the U.S. officials issued an eight-point plan on trade and investment, which largely amounts to a request for China to change the way it manages the economy.

The plan laid out requests from China including cutting the bilateral trade imbalance by $200 billion by the end of 2020, slashing tariffs on American products, and agreeing not to retaliate against U.S. actions, according to a document containing the plan reviewed by The Wall Street Journal.

The U.S. also demanded that China immediately stop providing subsidies and other assistance for advanced technologies outlined in the government's Made in China 2025 plan. The initiative, backed by Mr. Xi, aims for China to dominate future frontiers of manufacturing and industry, from robotics and aviation to new-energy vehicles.

Washington also pressed Beijing not to target U.S. farmers for retaliation. Farmers are an important part of the Republican Party's base and will have an outsize impact in the midterm elections in November.

Chinese officials believed the U.S. proposal was unfair, according to people with knowledge of the negotiations. "If the Chinese side had harbored any hopes of a quick resolution to the trade conflict, those hopes are now gone," one of the people said.

In response, Chinese negotiators, led by Vice Premier Liu He, presented the U.S. side a trade framework also consisting of eight points. The Chinese plan, reviewed by The Journal, demanded that the Trump administration end its investigation into allegations that China forces U.S. companies to transfer technology to Chinese partners and to cease its threats to impose tariffs on as much as $150 billion worth of Chinese goods.

The plan also requests better treatment for Chinese technology companies--a sharpening irritant in relations. It asks that the U.S. "adjust" its sales ban on ZTE Corp., a large Chinese maker of telecom gears, and allow U.S. companies and government agencies to buy technology equipment from Chinese firms, which would include Huawei Technologies Co.

Washington has been trying to block the sale of phones made by Huawei and ZTE in the U.S., citing potential security threats. Last month, the U.S. barred American businesses from supplying technology to ZTE for seven years, saying the company had broken a year-old settlement to resolve alleged sanctions-busting sales to Iran and other countries. Chinese officials have said the ban would have a crippling impact on a wide swath of the state-owned sector, including China's three large telecom carriers and their suppliers.

The Chinese plan also asks the U.S. to allow Chinese companies to buy more American high-tech products including semiconductors.

In its plan, the Chinese side offered some mild concessions similar to pledges made by President Xi last month. For instance, China would agree to meaningfully cut levies on imported autos nationwide. Beijing would also agree to talk to the U.S. about easing the quota on imported films shown in China.

Overall, the duelling plans gave trade watchers the impression that both sides talked past each other.

"The U.S. position is that China must become a genuine market economy," said Scott Kennedy, a China scholar at the Washington-based Center for Strategic and International Studies. "By contrast, China wants to keep its entire state-capitalist system in place and have the U.S. entirely open up its market to Chinese products and investment and sell China anything it wants."

Senior officials on the U.S. team have expressed varying views on China, with Mr. Mnuchin seen as looking for a deal on financial services to calm markets. The group took a united position in the document, which reflected the more hard-line views about China held by Mr. Lighthizer and White House trade adviser Peter Navarro. Mr. Trump has taken a tough line toward China since his presidential campaign.