U.S., China discuss tricky enforcement proposals in trade talks round

WASHINGTON (Reuters) – U.S. and Chinese negotiators were discussing the thorny issue of how to enforce a potential trade deal on Sunday after making progress on structural issues that have divided the two countries as they work to end a trade war, a source familiar with the talks said.

FILE PHOTO: China’s Vice Premier Liu He turns with U.S. Trade Representative Robert Lighthizer during a meeting with U.S. President Donald Trump in the Oval Office at the White House in Washington, U.S., February 22, 2019. REUTERS/Carlos Barria/File Photo

The two sides, representing the world’s largest economies, were discussing tariffs on Sunday as well as commodities, the source said, adding that progress was being made across the board.

U.S. officials said on Friday that talks would extend into the weekend after negotiators produced a deal on currency during talks last week. Chinese officials are eager to avoid a planned increase in U.S. tariffs on Chinese goods set for the end of this week unless a deal is reached.

U.S. President Donald Trump lauded progress between the two sides in a tweet on Sunday morning.

“Very productive talks yesterday with China on Trade. Will continue today!” he wrote.

Talks were extended through the weekend in a bid to iron out

differences on changes to China’s treatment of state-owned enterprises, subsidies, forced technology transfers and cyber theft.

The source said Chinese officials were still scheduled to return home on Monday.

Another round of talks, either in Washington or Beijing, may be needed as a March 1 deadline approaches by the end of this week.

The two sides have had no agreement on an enforcement mechanism. Washington wants a strong mechanism to ensure that Chinese reform commitments were followed through to completion, while Beijing insisted on what it called a “fair and objective” process. Another source briefed on the talks said that enforcement remained a major sticking point as of Saturday.

Earlier on Sunday, top officials including U.S. Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He arrived for talks at the Winder Building, which houses the headquarters of the United States Trade Representative, an hour later than usual.

Both Mnuchin and Liu went inside without commenting, with Liu smiling when asked if the two sides would have a deal by the end of the day.

DEADLINE EXTENSION?

Trump said on Friday there was a “good chance” a deal would emerge, and that he might extend the March 1 deadline and move forward with a meeting with Chinese President Xi Jinping.

Extending the deadline would mean putting on hold a scheduled increase in tariffs to 25 percent from 10 percent on $200 billion worth of Chinese imports into the United States.

An extension would hold off a worsening of the trade war that has already disrupted commerce worth hundreds of billions of dollars of goods, slowed global economic growth and roiled financial markets.

On Friday, Trump and Mnuchin said U.S. and Chinese officials had reached an agreement on currency issues, but did not give details. U.S. officials have long argued that China’s yuan is undervalued, giving it a trade advantage and partly offsetting U.S. tariffs.

China has committed to buying an additional 10 million metric tonnes of U.S. soybeans.

Reuters reported exclusively on Wednesday that both sides were drafting memorandums of understanding (MOUs) on cyber theft, intellectual property rights, services, agriculture and non-tariff barriers to trade, including subsidies.

But Trump said he did not like MOUs because they are short-term, and he wanted a long-term deal. That sparked a back-and-forth with U.S. Trade Representative Robert Lighthizer, who argued that MOUs were binding contracts, before saying they would abandon the term altogether going forward.

The source familiar with the talks played down the apparent tension between the top trade negotiator and the president, saying Trump, a former New York businessman, had viewed MOUs from a real estate perspective, while Lighthizer had done so from a trade perspective. There was no daylight between the two men, the source said.

Trump said on Friday the biggest decisions could be agreed upon when he meets with Xi, probably in Florida next month, and that their talks may extend beyond trade to encompass Chinese telecommunications companies Huawei Technologies and ZTE Corp.

Reporting by Jeff Mason in Washington and Rajesh Kumar Singh; Additional reporting by Howard Schneider and David Lawder; Editing by Peter Cooney



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