Top trade negotiators from China and the Biden administration may hold their first conversation soon to review the phase one trade deal, two sources familiar with the discussion said.
“The talk at the principal level may come soon. Both sides need to review the progress of the deal and put on the table the divergence and conflicts”, said one of the sources.
Katherine Tai, who was sworn in as the US Trade Representative on March 18, has held over 20 virtual meetings with her counterparts, covering all major economies apart from China.
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The last time the two biggest economies discussed the phase one deal – a two-year agreement signed in January last year that took effect one month later – was in August last year.
The deal stipulates that senior level consultations take place every six months.
Tai said on Wednesday that she expects to engage “in the near term” with the Chinese side, led by vice-premier Liu He, to assess the implementation of the trade deal.
“It is our responsibility in the Biden-Harris administration to carry forward the relationship, where we do not shy away from being tough, but where we also know we must be fair and must be future focus-oriented,” she told an online event hosted by the Financial Times.
Beijing and Washington have held talks on climate change, diplomacy and strategic topics since March, despite ongoing tensions over issues such as the South China Sea, Taiwan and human rights.
Tai said last week that her office has yet to start a comprehensive review of US trade policy toward China, but she would closely monitor how China follows through on its commitments.
China agreed to increase imports from the US by at least US$200 billion over the two years covered by the deal in exchange for the removal of tariffs on its exports to US, but actual purchases have fallen behind, partly due to the coronavirus pandemic.
“China is expected to inform the US side of the actual procurement situation and the consultation will focus on discussing how to address the difficulties and how to put forward the deal for the rest of the year”, said Lu Xiang, a senior researcher on China-US relations with the Chinese Academy of Social Sciences.
“Bilateral trade has spiked so far this year, but there are still difficulties in fully making up for the shortfall last year. Both sides, especially the US, need to show the utmost sincerity in cooperation,” said Lu.
“We will be outspoken on problems but also stick to cooperation. The deal is not perfect for either side, and now it is time for the US to propose solutions”.
In a report released last Friday, the US Trade Representative admitted China had improved its intellectual property protections but those steps “fall short of the full range of fundamental changes needed to improve the IP landscape in China”.
Beijing has repeatedly urged the US to roll back its punitive tariffs on Chinese products and called on the American business community to push Washington to remove the tariffs. But US officials, including Tai, have said the tariffs will remain in place for now.
“The situation when the deal was signed was altered dramatically by the pandemic. Exchanges have been reduced, and service trade – such as students and tourism – are unlikely to return to pre-pandemic levels”, said one of the sources.
Chinese observers have said the purchase targets in the phase one deal are unrealistically high and expect the deal to disappear over time.
Shi Yinhong, a professor at international relations with Renmin University, said it’s not “too much of a problem” for China to continue buying US products as long as China has the purchasing ability and it does need meat, grains and energy products.
He noted that Tai has expressed concerns over China’s intellectual property protection practices, but he does not expect there to be a serious disagreement over the topic.
“At most China will say we are doing a good job and the US will say China is not doing a good job, but China will also accept the request to strengthen the protection of intellectual property rights,” he said.
However, Shi said tensions over trade are less serious than other conflicts.
“So even if there is less of a clash on trade, it will not make the overall US-China relationship significantly better. Even if the talk between Liu and Tai goes well, it will not have a significant impact on the overall situation,” he said.
Lu also noted that the heightened political hostility against China in the US and said that security and political considerations would have an impact on trade decisions.
Wang Huiyao, president of the Centre for China and Globalisation, a Beijing think tank, said this is an opportunity for both sides to talk about trade.
“It is really hard to get rid of this tariff and that’s probably the concern of the Chinese side as well. On the US side, all the companies are paying a big price for that, which is not good for the US economy.
“When President Trump was doing that, he was trying to help farmers. But of course, what the Biden administration wants is more about IP protections, market-entry, equal market access and so on,” he said.
Chinese foreign ministry spokesman Wang Wenbin said on Thursday that both China and the US can benefit from economic and trade ties, and their differences should be resolved on an equal basis.
Additional reporting by Catherine Wong
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