Exclusive: U.S. waters down demand China axe subsidies in push for trade deal - sources

[webfact]

Exclusive: U.S. waters down demand China axe subsidies in push for trade deal - sources

By Alexandra Alper, Chris Prentice and Michael Martina

 

Chinese staffers adjust U.S. and Chinese flags before the opening session of trade negotiations between U.S. and Chinese trade representatives at the Diaoyutai State Guesthouse in Beijing, Thursday, Feb. 14, 2019. Mark Schiefelbein/Pool via REUTERS/File Photo

 

WASHINGTON/BEIJING (Reuters) - U.S. negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, according to two sources briefed on discussions, marking a retreat on a core U.S. objective for the trade talks.

 

The world's two biggest economies are nine months into a trade war that has cost billions of dollars, roiled financial markets and upended supply chains.

 

U.S. President Donald Trump's administration has slapped tariffs on $250 billion (191.18 billion pounds) worth of imports of Chinese goods to press demands for an end to policies - including industrial subsidies - that Washington says hurt U.S. companies competing with Chinese firms. China responded with its own tit-for-tat tariffs on U.S. goods.

 

The issue of industrial subsidies is thorny because they are intertwined with the Chinese government's industrial policy. Beijing grants subsidies and tax breaks to state-owned firms and to sectors seen as strategic for long-term development. Chinese President Xi Jinping has strengthened the state's role in parts of the economy.

 

In the push to secure a deal in the next month or so, U.S. negotiators have become resigned to securing less than they would like on curbing those subsidies and are focused instead on other areas where they consider demands are more achievable, the sources said.

 

Those include ending forced technology transfers, improving intellectual property protection and widening access to China's markets, the sources said. China has already given ground on those issues.

 

"It's not that there won't be some language on it, but it is not going to be very detailed or specific," one source familiar with the talks said in reference to the subsidies issue.

 

A representative for the White House referred Reuters to the U.S. Trade Representative's Office, which did not respond to a request for comment.

 

"If U.S. negotiators define success as changing the way China's economy operates, that will never happen," said the other source with knowledge of the trade talks.

 

"A deal that makes Xi look weak is not a worthwhile deal for Xi. Whatever deal we get, it's going to be better than what we've had, and it's not going to be sufficient for some people. But that's politics," that source said.

 

China pledged earlier this year to end market-distorting subsidies for its domestic industries but offered no details on how it would achieve that goal, three people familiar with the trade talks told Reuters in February.

 

MIXED MESSAGES

One of the key sticking points in the negotiations is the removal of the $250 billion in U.S. tariffs. It is broadly expected in the trade community that U.S. negotiators want to keep some tariffs on Chinese goods, which Washington sees as retaliation for the years of damage done to its economy by Beijing's unfair trade practices.

 

The role of the state firms may benefit the United States in another part of the trade deal. The Trump administration wants China to make big-ticket purchases of over a trillion dollars of U.S. goods in the next six years to reduce its trade surplus. The companies likely to make the purchases are the state-run firms, both sources said.

 

"The purchasing, for example, reinforces the role of the state sector because the purchasing is all being done through state enterprises," one of the sources said.

 

Another point of contention between the two countries, telecommunications, may drive China to increase the state's role rather than reduce it, the source said.

 

Pressure from the United States on allies to reduce cooperation with Chinese telecommunications champions such as Huawei Technologies could push the government into raising state support to develop technology at home.

 

DECADES OF FRICTION

Subsidies and tax breaks have been a source of friction between the two countries for years.

 

Washington says Beijing has failed to comply with its World Trade Organization obligations on subsidies that affect both imports and exports.

 

China has taken steps to address some U.S. concerns in cases brought before the WTO. It has also begun to publicly downplay its push to dominate the future of high-tech industries under its "Made in China 2025" policy, although few expect it to jettison those ambitions.

 

But the USTR complains of a catalog of other subsidies and supports, including preferential access to capital and land.

 

The United States says China has failed to disclose subsidies as required by the WTO. Washington has detailed more than 500 different subsidies it says China applies in notifications to the WTO.

 

The scope of China's local government subsidy programs is largely unknown, and even the Chinese negotiators have said in recent discussions they do not know the details of all those programs.

 

"China continues to shield massive sub-central government subsidies from the scrutiny of WTO members," the USTR said in a February 2019 report to Congress on China's WTO compliance.

 

(Reporting by Alexandra Alper and Chris Prentice in Washington and Michael Martina in Beijing; Editing by Chris Sanders and Peter Cooney)

 

-- © Copyright Reuters 2019-04-15

[zydeco]

Yes, Trump is caving. He began to do so on trade six months ago. All bark, no bite. He is a calamity. All he cares about is juicing up the stock market. He holds an ETF that makes him money when it does so. Yes, he's manipulating markets and foreign/trade policy for his own personal gain.

[Paul Henry]

Donald Trump quote "ITS EASY TO WIN A TRADE WAR". More Bulls--t from the master bulls--ter. Did not have a clue what is involved in a trade war especially with a country who is currently a lot smarter than the USA and a leader who could play POTUS off in a break. 

[Pedrogaz]

There will be a lot of words in these treaty..... but it is only the actions that mean anything and I doubt China will sign anything that forces them to change what they are doing, unless it is something they had already planned to do. 

Xi knows that Trump needs a 'win' here to get reelected next year....and so it will probably be like NAFTA, with Trump claiming something a major victory but the results will only come in after he leaves office. Rumour has it that the Chinese will have until 2025 to comply.

[Ulic]

China has not lived up to its commitments to change for 50 years yet they want tariffs to end now in exchange for a promise to change in the future. China has had 50 years. The US should start with that as a frame of reference. Tariffs will end 50 years after change, and negotiate from there. Perhaps tariffs will end 5 years after all commitments have been 100% lived up to.   

[Srikcir]

31 minutes ago, Pedrogaz said:

There will be a lot of words in these treaty..... but it is only the actions that mean anything and I doubt China will sign anything that forces them to change what they are doing, unless it is something they had already planned to do. 

Xi knows that Trump needs a 'win' here to get reelected next year....and so it will probably be like NAFTA, with Trump claiming something a major victory but the results will only come in after he leaves office. Rumour has it that the Chinese will have until 2025 to comply.

China also knows that for Trump to get an enforceable trade treaty, he needs Congress to ratify it.

And the Democrat majority in the House also knows that. Note that the UMCA treaty hasn't yet been ratified. Trump's negotiations might have to include the Democrats on a broader political plain to approve his treaty with China.

[bristolboy]

54 minutes ago, Srikcir said:

China also knows that for Trump to get an enforceable trade treaty, he needs Congress to ratify it.

And the Democrat majority in the House also knows that. Note that the UMCA treaty hasn't yet been ratified. Trump's negotiations might have to include the Democrats on a broader political plain to approve his treaty with China.

Actually, neither the USMCA or whatever agreement Trump arrives at with China will be treaties, which require a 2/3 approval by the Senate. These only require majorites in both Houses. That said, it seems a lot of Democrats and Republicans don't think much of the USMCA agreement.  It's certainly going to have very very very little effect on the US economy. Most economists predict maybe 0.1 percent improvement in GDP. As for the Chinese agreement, it looks like it's headed for exactly what most realists predicted: basically China will commit to buying x amount of commodities from the US in exchange for concessions from the US. The trouble with that is it gives the Chinese government a fair amount of leverage in the future. Anyway, it doesn't sound like the agreement is going to be a disaster. Just that it's probably not going to amount to much.,Just like the USMCA.

[Dumbastheycome]

2 hours ago, Ulic said:

China has not lived up to its commitments to change for 50 years yet they want tariffs to end now in exchange for a promise to change in the future. China has had 50 years. The US should start with that as a frame of reference. Tariffs will end 50 years after change, and negotiate from there. Perhaps tariffs will end 5 years after all commitments have been 100% lived up to.   

What  has  changed  in the USA with regard  to  any international policies let alone trade in the last  50 years? 

Nothing.

Now it is its own victim to that .

But  would like to insist  that  others are making it a  victim.

 

 

[farcanell]

2 hours ago, Ulic said:

China has not lived up to its commitments to change for 50 years yet they want tariffs to end now in exchange for a promise to change in the future. China has had 50 years. The US should start with that as a frame of reference. Tariffs will end 50 years after change, and negotiate from there. Perhaps tariffs will end 5 years after all commitments have been 100% lived up to.   

But... the World trade organization is only 23 years old.... and one could argue that the west has (and still is) exploited Chinese labor markets for its own gain..... and should therefore apologies and compensate China for said exploitation.

[Bluespunk]

15 hours ago, webfact said:

marking a retreat on a core U.S. objective for the trade talks.

What a surprise, the great negotiator has caved...

[zydeco]

8 hours ago, Bluespunk said:

What a surprise, the great negotiator has caved...

So easy even a caveman can do it.

[Sealbash]

What a surprise, the great negotiator has caved...

Please share your definition of “negotiate”


Sent from my iPad using Thailand Forum - Thaivisa mobile app

[Bluespunk]

5 minutes ago, Sealbash said:

Please share your definition of “negotiate”


Sent from my iPad using Thailand Forum - Thaivisa mobile app

Why?

 

My post merely highlighted trump’s claims or that of his supporters that he was a “great negotiator” who would negotiate deals that benefit the USA and reverse what he claims were unfair practices. 

 

Something he has yet to significantly do. 

 

Caving won’t achieve these goals. 

 

Hence my post. 

[bristolboy]

Just now, Bluespunk said:

Why?

 

My post merely highlighted trump’s claims or that of his supporters that he was a “great negotiator” who would negotiate deals that benefit the USA and reverse what he claims were unfair practices. 

 

Something he has yet to significantly do. 

 

Caving won’t achieve these goals. 

 

Hence my post. 

What about his great success with North Korea? I got you there.