Exclusive: U.S., China sketch outlines of
deal to end trade war - sources
Send a link to a friend
[February 21, 2019]
By Jeff Mason
WASHINGTON (Reuters) - The United States
and China have started to outline commitments in principle on the
stickiest issues in their trade dispute, marking the most significant
progress yet toward ending a seven-month trade war, according to sources
familiar with the negotiations.
The world's two largest economies have slapped tit-for-tat tariffs on
hundreds of billions of dollars of goods, slowing global economic
growth, skewing supply chains and disrupting manufacturing.
As officials hold high level talks on Thursday and Friday in Washington,
they remain far apart on demands made by U.S. President Donald Trump's
administration for structural changes to China's economy.
But the broad outline of what could make up a deal is beginning to
emerge from the talks, the sources said, as the two sides push for an
agreement by March 1. That marks the end of a 90-day truce that Trump
and Chinese President Xi Jinping agreed to when they met in Argentina
late last year.
Negotiators are drawing up six memorandums of understanding on
structural issues: forced technology transfer and cyber theft,
intellectual property rights, services, currency, agriculture and
non-tariff barriers to trade, according to two sources familiar with the
progress of the talks.
At meetings between U.S. and Chinese officials last week in Beijing the
two sides traded texts and worked on outlining obligations on paper,
according to one of the sources.
The process has become a real trade negotiation, the source said, so
much so that at the end of the week the participants considered staying
in Beijing to keep working. Instead they agreed to take a few days off
and reconvene in Washington.
The sources requested anonymity to speak candidly about the talks.
Chinese Commerce Ministry spokesman Gao Feng on Thursday declined to
comment on the MOUs.
GETTING COMMITMENTS IN WRITING
The MOUs cover the most complex issues affecting the trading
relationship between the two countries and are meant, from the U.S.
perspective, to end the practices that led Trump to start levying duties
on Chinese imports in the first place.
One source cautioned that the talks could still end in failure. But the
work on the MOUs was a significant step in getting China to sign up both
to broad principles and to specific commitments on key issues, he said.
Several Chinese government sources told Reuters that the two countries
have basically reached a consensus on alleviating the trade imbalances,
but there were still some differences on each other's "core demands"
that they were seeking to narrow.
"It can be said that we are now in the sprint phase, and both
negotiating teams are working towards the goal of reaching an agreement
within the deadline, but some problems are still quite complicated to
resolve," said one Chinese official familiar with the situation.
The United States has accused Beijing of forcing U.S. companies doing
business in China to share their technology with local partners and hand
over intellectual property secrets. China denies it engages in such
[to top of second column]
U.S. Treasury Secretary Steven Mnuchin, second from left, U.S. Trade
Representative Robert Lighthizer, third from left, and Chinese Vice
Premier and lead trade negotiator Liu He, second from right, pose
for a photo before the opening session of trade negotiations at the
Diaoyutai State Guesthouse in Beijing, Thursday, Feb. 14, 2019. Mark
Schiefelbein/Pool via REUTERS
Trump administration officials also object to non-tariff barriers in
China, including industrial subsidies, regulations, business
licensing procedures, product standards reviews and other practices
that they say keep U.S. goods out of China or give an unfair
advantage to domestic firms.
U.S. Treasury Secretary Steven Mnuchin has pushed for China to open
its financial services markets to more foreign firms, including
credit card giants Visa and MasterCard, which have waited years for
China to make good on promises to allow them to operate there.
On currency, U.S. officials including Mnuchin have warned China
against devaluing its yuan to gain a competitive advantage after the
Chinese currency weakened significantly against the dollar last
year, partly counteracting Trump's tariffs.
The two sides were discussing an enforcement mechanism for the deal,
the source said. Reuters reported last month that the United States
was pushing for regular reviews of China's progress on pledged trade
reforms and could reinstate tariffs if it deems Beijing has violated
The parties also were looking at a 10-item list of ways that China
could reduce its trade surplus with the United States, including by
buying agricultural produce, energy and goods such as
semiconductors, according to two other sources familiar with the
CLOCK IS TICKING
Time is running short ahead of the March 1 deadline to resolve the
dispute or see U.S. tariffs on $200 billion worth of Chinese goods
rise from 10 percent to 25 percent. Trump said on Tuesday he thought
China had an incentive to move swiftly.
"I think they're trying to move fast so that doesn’t happen," he
told reporters in the Oval Office, while not ruling out the
possibility of extending the deadline.
Lower-level officials held a round of talks in Washington on Tuesday
and Wednesday. They will be joined on Thursday by the top level
negotiators, led by U.S. Trade Representative Robert Lighthizer and
Chinese Vice Premier Liu He.
One senior Chinese government official familiar with the talks said
that extending the deadline was an option, though both sides were
trying to reach agreement before March 1 and any extension would not
be too long.
It is possible the talks won't resolve all the differences, and it
will be up to the two heads of state to make a final decision, the
(Reporting by Jeff Mason; Additional reporting by Michael Martina,
Jing Xu, Muyu Xu and Martin Pollard in BEIJING and David Lawder in
WASHINGTON; Editing by Simon Webb and Sonya Hepinstall)
[© 2019 Thomson Reuters. All rights
Copyright 2019 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed.
Thompson Reuters is solely responsible for this content.