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China to buy more American goods, but warns structural trade problems will take time to fix

The United States and China agreed to take measures to reduce the US trade deficit in goods by having China purchase more American goods - particularly agriculture and energy products, according to a joint statement the two nations released on Saturday.

"There was a consensus on taking effective measures to substantially reduce the United States trade deficit in goods with China," the joint statement said.

This was a top demand of the Trump administration during two days of trade talks in Washington with the Chinese delegation led by Vice Premier Liu He. The United States intends to send a team to China to hammer out the details.

"To meet the growing consumption needs of the Chinese people and the need for high-quality economic development, China will significantly increase purchases of United States goods and services. This will help support growth and employment in the United States."

The statement said that China will "advance relevant amendments to its laws and regulations" to allow for more American imports, including changes to patent laws.

The pledge for more cooperation comes as the United States and China, the world's two largest economies, have threatened tens of billions of dollars in tariffs that could lead to a trade war.

Liu was quoted by China's Xinhua News Agency as saying: "This is a positive, pragmatic, constructive and fruitful visit. Both sides have reached a lot of consensus on the healthy development of Sino-US trade relations."

The news agency said Liu pledged to deepen cooperation in bilateral investment and intellectual property protection, but added that it will take time to solve the structural problems facing the Sino-US trade relationship.

The Trump administration has taken a hard line against China since the president took office, and the United States has made a series of moves focused on trade, including threatening tariffs on Chinese products and restrictions on Chinese investment flowing into the country. Among the claims that the United States has made is that Beijing has unfairly stolen intellectual property.

The announcement released on Saturday made no reference to whether the Trump administration would walk away from tariffs imposed this year on roughly $50 billion of Chinese imports. But Liu suggested that both sides would stop recently imposed tariffs, according to Xinhua.

US officials on Thursday told CNN that Beijing had proposed boosting Chinese purchases of American goods by around $200 billion. But at a regular news briefing in Beijing on Friday, Chinese Foreign Ministry spokesman Lu Kang denied such an offer had been made.

On Friday, the People's Daily, the mouthpiece of the Communist Party of China, reposted a statement on its official WeChat account denying the media reports, calling the $200 billion figure a "misinterpretation" and "total nonsense".

"I don't think China would offer a US$200 billion cut in the trade deficit in the near future; this is a much more long-term effort," said Suisheng Zhao, director of University of Denver's Center for China-US Cooperation.

"Both sides want to reach some kind of deal. It's just that each side is trying to push the other side make more concessions," said Zhao, who is on the board of governors of the Council for Security Cooperation in the Asia-Pacific, a regional dialogue forum.

"People were expecting, if not some overall agreement, then at least some kind of announcement saying the consultations would continue. If these negotiations drag on, I don't see that as a bad thing because there's no quick solution for their outstanding issues at this moment."

America's possible concessions

American officials have clashed in recent days over what to offer Beijing in return for increasing its purchases of American goods and services.

One issue is whether the United States should relax so-called export controls on certain products and technology, according to two people who were familiar with the negotiations but were not authorized to speak publicly about them. The controls determine where — and in what quantity — products with military applications or advanced technologies, like semiconductors that power smartphones and computers, can be exported to other countries.

US Treasury Secretary Steven Mnuchin, who has been leading the negotiations, has pushed for relaxing the rules in order to forestall the possibility of a trade war and secure China's purchase of additional goods from the United States in the coming years. Mnuchin's plan has faced stiff opposition from US Defense Department officials, who fear such sales could compromise American national security, one of the people said.

Another point of contention has been whether to offer relief for ZTE, which halted its main operations after the Trump administration banned American companies from selling it vital product components. The United States said that ZTE had lied to American officials about punishing employees who violated US sanctions against North Korea and Iran.

But Saturday's statement did not mention the telecommunications company and its lack of firm targets highlighted a continuing gap between both sides' priorities.

Resolving the ZTE issue was a top priority for Liu, China's top economic official, during his visit to Washington this week. Ahead of the trip, Trump had tweeted that he and his Chinese counterpart, Xi Jinping, were working to give ZTE "a way to get back into business, fast".

But Trump's tweet provoked a backlash from both Republicans and Democrats in Congress who pointed to US intelligence agencies' longstanding security concerns about ZTE. Politicians across the US political spectrum warned the president on Friday not to cave in to China.

"The president's negotiating space has been shrinking with all the pressure that has been coming out of [Congress]. He lit a fire with that [ZTE] tweet," said one person familiar with this week's talks.

Larry Kudlow, chairman of the National Economic Council, insisted that ZTE would still face stiff penalties from the United States and may have to change its board and management. "We're not talking about letting them off scot-free by any stretch," he told Fox Business in an interview.

'Vague' statement

Scott Kennedy, an expert on the Chinese economy at the Center for Strategic and International Studies, said that the joint statement is "too vague to be binding on its own." "It commits neither side to any specific action, either to expand trade and investment, constrain industrial policy or not adopt penalties," he said.

The key, according to Kennedy, is whether the US decided to drop its tariffs linked to the intellectual property investigation. "If yes, China got a huge win," he said. "If not, we at most have a temporary respite in hostilities."

Scott Paul, the president of the Alliance for American Manufacturing, an industry group, said that judging from the announcement, the talks did not appear to have moved American businesses toward a level playing field in China.

"Sometimes it's better to walk away from the negotiating table to reinforce the point to China that our resolve is strong," he said. "We need more details, but I'm not encouraged by the direction these talks are headed."


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