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Sunday, October 10, 2021
ANBOUND's Observation: An Update on U.S.-China Trade Talks
Chan Kung

U.S. Trade Representative Katherine Tai spoke with Chinese Vice Premier Liu He on October 8 to review the implementation of the U.S.-China Economic and Trade Agreement and agreed to discuss some outstanding issues.

"Ambassador Tai and Vice Premier Liu reviewed implementation of the U.S.-China Economic and Trade Agreement and agreed that the two sides would consult on certain outstanding issues," the Office of the United States Trade Representative (USTR) said in a statement.

"During their candid exchange, Ambassador Tai and Vice Premier Liu acknowledged the importance of the bilateral trade relationship and the impact that it has not only on the United States and China but also the global economy", the statement added.

In addition, Katherine Tai emphasized U.S. concerns relating to China's state-led, non-market policies and practices that harm American workers, farmers, and businesses. Katherine Tai noted that she looks forward to following up with Liu He in the near future.

This was the second phone call between Katherine Tai and Liu He since she took office. On October 4, Katherine Tai delivered a long-awaited speech on the U.S. administration's trade policy toward China at a Washington think tank. Although she proposed new terms such as "recoupling" and "durable coexistence" with China in her speech, most experts and analysts agree that the Biden administration will essentially continue the Trump administration's trade policies toward China, including tariffs.

Katherine Tai said on Monday that she would discuss with Beijing about China's performance under the Phase 1 trade deal and hold China to its commitments under the trade deal. She also would raise broader policy concerns with Beijing, including China's state-centric policies and non-market economic practices

The call between the two sides took place Friday evening EST. In a briefing ahead of the call, a senior USTR official said Katherine Tai would give Liu He an assessment of China's performance in implementing the Phase 1 deal, including promised purchases of U.S. goods that are falling short of targets. Katherine Tai would also raise concerns about China's "non-market" economic practices, the U.S. official said.

The U.S. official said Katherine Tai will emphasize in her call with Liu He that the U.S. and China are committed to a responsible trade relationship that affects not only the people of both countries but also the world; Katherine Tai will also discuss with Liu He the next steps in the coming weeks and months.

The U.S. official said Friday's call was also a test of whether bilateral engagement between Washington and Beijing could address U.S. complaints about Chinese trade and subsidy practices. "We recognize that Beijing is increasingly explicit that it is doubling down on its authoritarian state-centric approach and is resistant to addressing our structural concerns," the official said, adding that consequently, Washington would focus on improving U.S. competitiveness, diversifying markets, and "limiting the impact of Beijing's harmful practices".

The U.S. official said Katherine Tai's future engagement with China would depend on "how China responds to tonight's call" and declined to discuss possible next steps, but added that Katherine Tai would not seek Phase 2 negotiations with Beijing on state subsidies and other structural issues.

The Phase 1 deal in January 2020 eased a long running tariff war between the world's two largest economies. It focused largely on China's promise to boost purchases of U.S. farm and manufactured goods, energy, and services by USD 200 billion over two years, along with increased protections for copyright, trademarks, and other forms of intellectual property.

The Trump administration envisioned a Phase 2 negotiation to follow to tackle more difficult issues such as subsidies to state enterprises and China's strategic industrial policies.

Asked whether the U.S. would resort to another Section 301 investigation that would lead to more tariffs on Chinese goods if the Biden administration's engagement with the Chinese government failed, the official responded that the U.S. would use "the full range of tools to protect American workers, farmers, and businesses from unfair trade practices".

The official said Katherine Tai intended to use the call to "test" of "whether this type of engagement can help secure the outcome that the United States is seeking, and the United States hopes that the Chinese will respond positively".

In terms of the two countries' negotiating goals, China seeks to renegotiate the trade deal and to roll back at least some of the Trump-era agreements, including tariffs; the United States, on the other hand, seeks to resume bilateral trade negotiations, and the price that the United States can accept is to increase the scope and content of tariff reduction agreed upon in the previous negotiations. The two sides are expected to be "stuck" on the Chinese demand that the trade agreement must be "renegotiated", a demand the U.S. side is unlikely to understand.

The various explanations and "new terms" that the United States makes for its own efforts are basically the self-centered creation of President Joe Biden's team. It is expected that the U.S. Democratic Party will continue to adopt and promote some interactive actions based on its "pro-business" stance in the future, but it will still hold a moderate attitude on the substantive business aspect. In addition, the level of trade negotiations between China and the United States has actually stepped up to a higher level, and Vice Premier Liu He has to report to higher-level policy officials. This means that the various information revealed by the U.S. negotiating team is not reliable in terms of validity, and at best, it only indicates the understanding of the U.S. side.

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