World

China says economy czar to visit Washington for trade talks

China's economy czar, Vice-Premier Liu He, will visit Washington on Jan. 30-31 for talks aimed at ending a costly tariff war over U.S. complaints about Beijing's technology ambitions.

U.S. and China have been imposing substantial tariffs on each other's products

A shipping container is offloaded from the Hong Kong based CSCL East China Sea container ship in Oakland, Calif., last June. Tariffs on goods travelling between the two country have become a major issue on the global stage. (Justin Sullivan/Getty Images)

China's economy czar, Vice-Premier Liu He, will visit Washington on Jan. 30-31 for talks aimed at ending a costly tariff war over U.S. complaints about Beijing's technology ambitions.

Liu's participation reflects involvement at a higher political level than talks earlier this month in Beijing between lower-level officials. No details were released, but economists and business groups said a decision by Liu and U.S. Trade Representative Robert Lighthizer to join them would indicate enough progress to require higher-level political decisions.

The two sides have imposed tariff hikes of up to 25 per cent on tens of billions of dollars of each other's goods in the fight over U.S. complaints that Beijing steals or pressures companies to hand over technology. Washington is also pressing China to roll back plans for state-led industry development that its trading partners say violate its market-opening obligations.

The Washington talks are aimed at carrying out the Dec. 1 agreement by Presidents Donald Trump and Xi Jinping to suspend further tariff increases for 90 days while they negotiate, said Chinese Ministry of Commerce spokesperson Gao Feng.

The talks are likely to take up more complex and politically charged U.S. complaints about Chinese economic policy, said Yu Chunhai, a trade expert at Renmin University in Beijing. He said China must insist on a "bottom line" beyond which it won't go.

Chinese officials have suggested Beijing might adjust its industry plans. But they reject pressure to abandon what they consider a path to prosperity and greater global influence.

Trading demands

For their part, Chinese leaders want Washington to relax export controls on "dual use" technology with possible military uses. They say Chinese companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

"It can't be denied that China has trade interests," said Yu. "Such communication must be made between officials at a higher level."

Trade Representative Robert Lighthizer may participate in the next round of talks about the ongoing dispute between China and the U.S. (Mandel Ngan/AFP/Getty Images)

Chinese exports to the United States held up through much of 2018 despite Trump's tariff hikes but contracted by 3.5 per cent in December compared with a year earlier as the penalties began to depress demand.

Liu held talks in June in Beijing with U.S. Commerce Secretary Wilbur Ross as trade tensions mounted. That meeting failed to produce a settlement and Trump went ahead the next month with his first round of tariff hikes.

Liu also made a surprise appearance at this month's talks in Beijing, which financial markets took as a positive sign. Global stock markets rose but then fell back after the meeting produced no agreements.

Tensions mount after Huawei arrest

U.S.-Chinese relations are increasingly strained over technology, trade and cyber-spying.

An executive of Chinese technology giant Huawei Technologies Ltd., Meng Wanzhou, was arrested Dec. 1 in Canada on U.S. charges related to possible violations of trade sanctions on Iran.

This month's talks in Beijing went ahead despite Chinese warnings of severe consequences over Meng's arrest. Economists said that reflected how much importance Xi attaches to restoring access to the U.S. market for Chinese exporters.

On Thursday, the Wall Street Journal reported that U.S. prosecutors are investigating whether Huawei stole trade secrets from U.S. companies.

Huawei chief financial officer Meng Wanzhou, right, was arrested at the request of U.S. officials during a stopover in Vancouver on Dec. 1, ramping up tensions between Beijing and Washington. (Canadian Press/Darryl Dyck)

The investigation was prompted in part by a lawsuit brought by T-Mobile U.S. Inc. that accused two Huawei employees of stealing technology for a robotic arm used to test mobile phones, the Journal said, citing unidentified sources. The two companies settled their dispute in 2017.

The U.S. demands strike at the heart of a state-led development model the ruling Communist Party sees as a great success over the past three decades and is reluctant to give up.

90 days not enough?

Neither side has shown any sign of changing its basic position and economists say the 90-day window is too short to resolve all the conflicts between the biggest and second-biggest global economies.

Even if negotiators agree to a deal that resolves some of their disputes, U.S. hardliners might persuade Trump to reject it.

A U.S. government statement after the Beijing talks said they focused on Chinese promises to buy more American exports and addressed the need for any deal to be subject to "ongoing verification" — a reflection of U.S. frustration that the Chinese have failed to live up to past commitments.

Trump has complained repeatedly about the U.S. trade deficit with China. China reported Monday its 2018 trade surplus with the United States swelled to a record $323.3 billion US.

Beijing has sought to defuse pressure for more sweeping changes by emphasizing its growing importance as an import market and promising to open further its auto and some other industries.

Lighthizer has pressed Beijing to scrap or change rules Washington says block market access or improperly help Chinese companies.

U.S. companies also want action on Chinese policies they complain improperly favor local companies. Those include subsidies and other favors for high-tech and state-owned industry, rules on technology licensing and preferential treatment of domestic suppliers in government procurement.

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