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BEIJING / WASHINGTON – US calls for regular review of China's progress on announced trade reforms as a precondition for a trade deal – and could again resort to tariffs if they believe Beijing has violated the agreement according to informed sources of negotiations to end the trade war between the two nations.
A persistent threat of trade tariffs between the two largest economies in the world would mean that an agreement would not put an end to the risk of investing in companies or badets that have been affected by the trade war.
"The threat of tariffs will not go away, even if there is an agreement," said one of the three informed sources of the talks who spoke under cover of anonymity.
Chinese negotiators were not enthusiastic about regular compliance checks, the source said, but the US proposal "did not derail the negotiations."
A Chinese source said the United States wanted "periodic badessments", but it is not known how many times.
"It sounds like humiliation," said the source. "But maybe both sides could find a way to save face for the Chinese government."
The administration of US President Donald Trump has imposed import duties on Chinese products to pressure Beijing to respond to a long list of demands rewriting the terms of trade between the two countries. These include changes in China's policy on intellectual property protection, technology transfer, industry subsidies and other trade barriers.
An enforcement and verification process is unusual for trade agreements and apparent in the process used to impose punitive economic sanctions, such as those imposed on North Korea and Iran.
Trade disputes are usually handled by the courts, the World Trade Organization or arbitration groups and other dispute settlement mechanisms embedded in trade agreements.
Trump's team blamed the WTO for not blaming China for failing to comply with promised market reforms. The United States has also criticized the WTO dispute settlement process and is seeking reforms within the organization.
Regular reviews would be a potential solution to respond to US Trade Representative Robert Lighthizer's request for ongoing verification of any trade pact between the two countries, three sources close to the talks said. The threat of tariffs would be used to keep the reform on track, the sources said.
Lighthizer leads negotiations with China. A spokesman for the USTR declined to comment on the possibility of regular evaluations.
The idea was part of a US negotiating document that was released after talks in May 2018, before the US imposed its first round of tariffs on Chinese goods worth $ 50 billion.
The renewed focus on regular reviews in ongoing negotiations – threatening tariffs this time – underlines the growing mistrust between the two countries.
Further scrutiny is necessary and must be based on clear criteria – with consequences for not respecting them, said Erin Ennis, Senior Vice President of the US and China Business Council, a professional group representing corporations. companies operating in China.
"This must be related to the removal or reduction of tariffs," Ennis said. "If China could demonstrate compliance through a process like this, it would also be a measure to build trust on both sides."
The Trump administration has accused China of failing to meet previous commitments to implement the reforms the United States wants. For example, Washington often cites the difficulties that foreign credit card operators still face in penetrating the Chinese market despite the 2012 WTO ruling that Beijing discriminated against them.
A separate industry source stated that it was likely that different agreements on separate issues – forced technology transfers, intellectual property, changes in the Chinese legal system – would require separate verification processes, all of which will need to be developed by the negotiators. .
"The challenge of verification and enforcement stems from the fact that China has made promises that it has not kept," the source said.
Trump and Chinese President Xi Jinping agreed in December of a 90-day truce in the trade war to give their teams time to negotiate an agreement. Nearly 50 days later, there is no indication that China is making the concessions the United States is seeking.
Lighthizer has seen no progress on structural issues after three days of mid-level talks in Beijing the previous week, Republican Senator Chuck Grbadley said Tuesday.
Chinese Vice Premier and Chief Negotiator Liu He is due to travel to Washington for the next round of talks with Lighthizer and US Treasury Secretary Steven Mnuchin at the end of the month.
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