Policy Update U.S. – China Trade Negotiations

Friday, February 22nd, 2019
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The Hardwood Federation has released an update about the current state of tariff trade negotiations between the U.S. and China. This is an ongoing process, so updates will continue.

Overview: 

  • The U.S. and China wrapped up a week of negotiations in China last Friday. 
  • Both sides reported that they made “progress,” including more substantive discussions and reported Chinese concessions on key structural issues that are a priority for the United States. Discussions continue this week in Washington, D.C. 
  • President Trump has indicated a willingness to suspend increases in tariff levels if discussions continue to be positive and a deal is close.  However, we do not anticipate a decision will be made until very close to the March 1 deadline.

Background:

On Friday, U.S. and Chinese negotiators wrapped up five days of bilateral trade negotiations in Beijing.  The White House described these discussions as “detailed and intensive” and the Chinese government also indicated progress. 
 
Coming into these talks, the U.S. delegation was expected to continue pushing for changes that roughly fall into three “buckets” – increased purchases of U.S. commodities, Chinese policy changes to address structural concerns raised by the United States (such as intellectual property theft, cyber-hacking and industrial policy), and specific mechanisms to hold China accountable for meeting specific commitments.  Of those areas, the first area (increased purchases of commodities) was both the easiest issue to resolve and the area in which the Chinese have been most willing to offer concessions.  Verification and monitoring are considered the most difficult.
 
Following discussions, the White House issued a statement noting that the U.S. delegation focused first on structural issues, including a series of issues where discussions continued from earlier rounds: forced technology transfer, intellectual property rights, cyber theft, agriculture, services, non-tariff barriers, and currency. The statement also makes references to increased purchases of U.S. goods and services; Chinese negotiators had previously offered agricultural products in this bucket but also reportedly offered semiconductors as another potential area. Interestingly, the U.S. statement does not make any explicit reference to verification and monitoring mechanisms.  U.S. officials have purportedly suggested various mechanisms to enforce any commitment made, including “snap-back” tariffs, rotating lists of retaliatory tariffs, trade remedy actions, or even the re-imposition of WTO safeguards against import surges.
 
The White House statement also hints more explicitly than in the past about the form of any potential deal, noting that any commitments would be included as a memorandum of understanding (MOU) between the two countries, a form that is more substantial than just a joint statement.  It does not, however, provide any clear indication of a postponement or extension of the negotiating period, stating only that the two sides were working hard to strike a deal in advance of the March 1 deadline set by the two leaders. The two sides will meet again next week in Washington to continue talks – both at the lead negotiator level as well as the working-level.

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