Chinese commitments to buy additional agricultural, energy and other products from the US are not sufficient for securing a lasting trade deal between two countries, US trade representative Robert Lighthizer said today.
"The issues on the table are too serious to be resolved with promises of additional purchases," Lighthizer told the House of Representatives Ways and Means Committee today. "This administration is pressing for significant structural changes that would allow for a more level playing field, especially when it comes to issues of intellectual property rights and technology transfers."
The most recent round of US-China trade talks concluded on 24 February in Washington. President Donald Trump has delayed a scheduled increase in tariffs to allow talks to continue and reach what he outlined as a comprehensive deal addressing all of bilateral issues — preferably in a one-on-one session with Chinese president Xi Jinping.
But Lighthizer said securing a grand deal will be a major challenge. "I am not bullish enough to think there is one negotiation that will change all of the practices," he told lawmakers. "We have to take all the major issues and we have to preclude all practices. At the end of this negotiation, if we are successful, there will be a signing (ceremony)."
And then, "other problems will arise — I see it as a process," he said.
Lighthizer said Beijing has previously given such assurances to US and other trading partners without following through with enforcement. "Thus, the administration is focused on making sure that we have the ability to enforce any new agreement."
Ways and Means Committee chairman Richard Neal (D-Massachusetts) and ranking member Kevin Brady (R-Texas) said they approved of that approach. But both expressed concerns about the negative effect of tariffs on the US economy.
The terms of the agreement that Lighthizer outlined to lawmakers today include a 30-page chapter on intellectual property rights, a prohibition on forced technology transfers by national and provincial Chinese authorities, and the removal of restrictions on US banking services in the country. The US also is pressing for the removal of non-tariff barriers, targeted industrial subsidies and a commitment on stabilization of the renminbi exchange rate.
The enforcement mechanism will include monthly meetings between the US Trade Representative's (USTR) office and the Chinese Commerce Ministry, quarterly meetings at the deputy ministerial level, and a semi-annual meeting between Lighthizer and his Chinese counterpart to review complaints from companies. The US will reserve the right to "respond proportionately" if it is unable to resolve the complaints.
The trade commitments agreed upon by Beijing will be matched by the US — but only through executive action, not an act of Congress, Lighthizer said. "We have no intention of submitting it to Congress for approval. It is an executive agreement, a settlement of (section 301) action. We are not changing any tariff line." The administration also does not plan to lift tariffs on imports of steel and aluminum from China, he said.
"To the extent any agreement is binding, agreements between nations — like flowers and children — last while they last," Lighthizer said, attributing the quote to French president Charles de Gaulle.
US tariffs on $200bn/yr of Chinese imports had been due to increase to 25pc from 10pc if a trade deal was not reached by 1 March. Beijing had promised to impose an equivalent increase in tariffs on around $60bn/yr of US products, including LNG.
US energy and agricultural industry groups have asked Lighthizer to formally confirm the delay in the tariff hike, which was scheduled to take effect on 2 March, through the Federal Register. USTR will do so in the next two days, Lighthizer said.
China imported just 258,000t of US LNG in the fourth quarter of 2018, all in November, after taking 2.04mn t in the first nine months of the year. Crude is not subject to the tariffs. But US crude exports to China have slumped as a result of the political uncertainty. China took a total of 250,000 bl of US crude or 8,300 b/d in November after exports stopped in the previous three months, US government data show. This compares with an average of 377,000 b/d of US crude in January-July 2018.
Existing tariffs remain in place. In total, US tariffs affect about half of the $506bn/yr in imports from China, including many chemical and industrial products. Reciprocal tariffs imposed by Beijing cover 85pc of the $130bn/yr of China's imports from the US, including most energy commodities.
Beijing is pushing for the removal of the tariffs at the conclusion of talks. "The working teams of two sides will make full preparations for the relevant matters of the summit between the two leaders," China's Foreign Ministry said.
