The United States demands a periodic review of China's trade reform



By Michael Martina and Chris Prentice

BEIJING / WASHINGTON (Reuters) – The United States is pushing for periodic reviews of China's progress on trade reforms promised as a condition for a trade agreement, and could resort to tariffs again if it considers that Beijing has violated the agreement, according to the sources informed. Negotiations to end the trade war between the two nations.

A continuing threat of tariffs looming over trade between the two largest economies in the world would mean that an agreement would not end the risk of investing in businesses or badets that have been affected by the trade war.

"The threat of tariffs will not disappear, even if there is an agreement," said one of the three sources informed of the talks that they spoke with Reuters on condition of anonymity.

Chinese negotiators were not interested in the idea of ​​regular compliance controls, the source said, but the US proposal "did not derail the negotiations."

A Chinese source said the United States wants "periodic evaluations" but it is not yet clear how often.

"It seems like a humiliation," said the source. "But maybe the two sides could find a way to save the face of the Chinese government."

The administration of the president of the United States, Donald Trump, imposed import tariffs on Chinese products to pressure Beijing to comply with a long list of demands that would rewrite the terms of trade between the two countries.

The demands include changes in China's policies on intellectual property protection, technology transfers, industrial subsidies and other trade barriers.

A compliance and verification process is unusual for trade agreements and is similar to the process around punitive economic sanctions such as those imposed on North Korea and Iran.

Disputes over trade are most typically dealt with through the courts, the World Trade Organization (WTO) or through arbitration panels and other dispute resolution mechanisms incorporated in trade agreements.

Trump's team has criticized the WTO for not holding China accountable for failing to implement the promised market reforms. The United States has also criticized the WTO dispute settlement process and is seeking reforms in the organization.

The regular reviews would be a potential solution to meet the demand of the United States Trade Representative, Robert Lighthizer, for the ongoing verification of any trade pact between the two countries, three sources familiar with the talks told Reuters. The threat of tariffs would be used to keep the reform going, the sources said.

Lighthizer is leading the negotiations with China. A USTR spokesperson declined to comment on the possibility of regular evaluations.

The idea of ​​the quarterly revisions of the quarterly revisions was part of a US negotiating document leaked after the talks in May 2018, before the United States imposed its first round of tariffs on Chinese products worth $ 50. one billion

The renewed focus on the regular revisions in the current negotiations, this time with the threat of tariffs, underscores the growing distrust between the two countries.

Additional control is necessary and must be based on clear benchmarks, with the consequence of not meeting them, said Erin Ennis, Senior Vice President of the Business Council of the United States and China, a trade group representing US companies doing business. in China.

"It must be linked to the elimination or reduction of tariffs," said Ennis. "If China can demonstrate compliance through a process like this, it would also be a confidence-building measure for both sides."

BROKEN PROMISES

The Trump administration has accused China of repeatedly failing to comply with previous commitments to implement the reforms sought by the United States.

Washington often cites as an example the difficulties still faced by foreign payment card operators to enter the Chinese market despite the fact that the WTO ruled in 2012 that Beijing was discriminating against them.

An independent industry source said that a different agreement on separate issues (forced transfer of technology, intellectual property, changes to China's legal system) is likely to require separate verification processes, all of which must be resolved by the negotiators.

"The challenge of verification and enforcement is due to the fact that China has made promises that it has not fulfilled," the source said.

Trump and Chinese President Xi Jinping agreed to a 90-day truce in the trade war in December to give their teams time to negotiate an agreement. Almost 50 days later, there are few signs that China makes the concessions that the United States is seeking.

Lighthizer saw no progress on structural issues in three days of mid-level talks in Beijing last week, Republican Senator Chuck Grbadley said on Tuesday.

China's deputy prime minister and negotiator, Liu He, will visit Washington for the next round of talks with Lighthizer and US Treasury Secretary Steven Mnuchin at the end of the month.

(Reporting by Michael Martina in Beijing and Chris Prentice in Washington, Additional reporting by David Lawder in Washington, Edited by Simon Webb and Brian Thevenot)


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