WASHINGTON (Reuters) – The United States and China have begun to formulate fundamental commitments to the toughest issues in their trade dispute. This is the biggest advance yet in ending a seven-month trade war, sources familiar with the US negotiate.
FILE PHOTO: US Treasury Secretary Steven Mnuchin (second from left), US Representative Robert Lighthizer (third from left) and Chinese Vice Premier and Commercial Agent Liu He (second from right) posing for a photo before the opening session of trade negotiations in the US Diaoyutai State Guesthouse in Beijing, Thursday, February 14, 2019. Mark Schiefelbein / Pool via REUTERS
The world's two largest economies have cost tariffs on hundreds of billions of dollars, thereby mitigating global economic growth, supply chain distortion and disruption of production ,
As high-level talks are held on Thursday and Friday in Washington, they remain far removed from the demands of US President Donald Trump's government for structural changes in China's economy.
But the floor plan of what could make a deal begins to emerge from the talks, the sources said, as the two sides press for an agreement by March 1. This marks the end of a 90-day truce that Trump and Chinese President Xi Jinping agreed to when they met in Argentina at the end of last year.
Negotiators are drafting six memorandums of understanding on structural issues: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture and non-tariff barriers, according to two sources familiar with the progress of the talks.
At meetings between US and Chinese officials in Beijing last week, both sides have been working on texts and outlining commitments on paper, according to one source.
The process has become a true trade negotiation, the source said. So much so that at the end of the week the participants considered staying in Beijing to continue working. Instead, they agreed to take a few days off and reunite in Washington.
The sources demanded anonymity to speak openly about the talks.
UNDERTAKINGS IN WRITING PROCEDURE
The MOUs address the most complex issues affecting trade relations between the two countries and, from the US point of view, end the practices that led Trump to impose tariffs on Chinese imports in the EU first place.
One source warned that talks could still fail. However, work on the MOUs is an important step in getting China to commit to both general principles and specific commitments on key issues, he said.
The United States has accused Beijing of forcing US companies doing business in China to share their technology with local partners and to divulge intellectual property secrets. China denies participating in such practices.
Trump administration officials also reject non-tariff barriers in China, including industrial subsidies, regulations, corporate licensing procedures, product testing and other practices that they claim are keeping US goods out of China or giving unfair advantage to domestic companies gain.
US. Finance Minister Steven Mnuchin has urged China to open its financial services markets to more foreign companies, including credit card giants Visa and MasterCard, who have been waiting for years for China to deliver on its promises to operate.
The US government, including Mnuchin, warned China against a devaluation of its yuan to gain a competitive advantage, after the Chinese currency weakened significantly against the dollar over the past year and partially fought against the Trump tariffs.
The two sides discussed an enforcement mechanism for the business, the source said. Reuters reported last month that the US could demand a regular review of China's progress on promised trade reforms and reintroduce tariffs if Beijing believes the agreement has not been honored.
The parties also examined a list of ten elements of how China could reduce its trade surplus with the United States, including through the purchase of agricultural products, energy and goods such as semiconductors, two sources familiar with the talks said.
Time passes just before March A deadline to settle the dispute or raise US $ 200 billion in Chinese goods increases from 10 percent to 25 percent , Trump said on Tuesday he believes China has an incentive to move quickly.
"I think they're trying to move fast so it does not happen," he told reporters in the Oval Office, without excluding the possibility of extending the deadline.
Lower level officials conducted a round of talks in Washington on Tuesday and Wednesday. On Thursday, high-level negotiators will be added, led by US Commercial Representative Robert Lighthizer and Chinese Vice Premier Liu He.
Report by Jeff Mason; Additional reports by Michael Martina in BEIJING and David Lawder in WASHINGTON; Editing by Simon Webb and Sonya Hepinstall