(Bloomberg) -- U.S. Commerce Secretary Wilbur Ross plans to head back to Beijing early next month to continue talks on trade. There’s a long list of outstanding topics that can either ease tensions between the two sides further -- or ramp them up again.
The negotiations between Beijing’s special envoy and the White House in Washington last week ended with an agreement for China to buy more imports from the U.S., particularly agriculture and energy products. But there was no dollar figure attached, and other bones of contention like intellectual property protection were left vague.
President Donald Trump on Wednesday even suggested a change of direction for the talks, saying on Twitter that a final deal under the current “structure” will be hard to get done.
That means there’s a lot to work out for both sides, and there’s still potential for unilateral moves. Here’s a rundown of the pressure points:
First on the list is the promise by China to import significantly more from the U.S. -- particularly in energy and farming goods -- as a way to reduce the $375-billion U.S. goods trade deficit. While the Trump administration has demanded a reduction in that figure of more than $200 billion, it seems a tall order. Morgan Stanley estimated this week that China could buy an additional $60 billion to $90 billion worth of American goods over the next several years -- it’s a dent in the deficit, but not a major reduction.
China’s Tariff Cuts
Those should come on top of the reductions for 187 categories of consumer goods announced in November. The measures, though not specifically tailored to please the U.S., would help China fulfill its pledge to boost U.S. imports.
Steel and Sorghum
Ross’s trip to China will come shortly after a key deadline on the U.S. imposition of steel and aluminum tariffs on June 1. Without those duties being dropped, or China being given exemption, it’s unlikely that Beijing’s countervailing measures on $3 billion worth of U.S. goods including pork, nuts, and fresh fruit, will be suspended.
On the other hand, Beijing has already scrapped an anti-dumping and anti-subsidy investigation into U.S. imports of sorghum, a month after it imposed a 178.6 percent deposit -- pending the outcome of the probe -- on cargoes. The Ministry of Commerce has said it will return the deposits already paid.
The fate of telecommunications giant ZTE Corp. still hangs in the balance, after the Shenzhen-based company that violated U.S. sanctions became a bargaining chip in the trade dispute. Trump has said he’s considering lifting a ban on the company doing business in the U.S. -- but what the price will be for that hasn’t been set yet.
The trade dispute actually started with a U.S. investigation into China’s treatment of intellectual property. The Trump administration says Beijing flouts American IP rights in a variety of ways, such as by forcing U.S. companies to transfer technology when they do business in China. The two sides have promised to work more closely on this front, and Beijing has pledged to change laws and regulations in this area, including its patent law. But the U.S. will be looking for more specifics, especially on technology transfers.
Proposed tariffs on $50 billion of Chinese goods were put on hold after the trade talks in Washington pulled back from the brink on a trade war, but there is no word on the accompanying potential investment restrictions. Both have been threatened by the Trump administration in its Section 301 investigation over China’s alleged malpractice in intellectual property protection. A progress report on the matter hasn’t come out as expected, but Mnuchin still discussed options with Trump, according to a Treasury spokeswoman this week.
In parallel to the bilateral negotiations going on, the U.S. has filed a dispute complaint against China at the World Trade Organization in Geneva for alleged infringements of intellectual property rules. A WTO-mandated consultation period between the U.S. and China ended this week. And while Washington didn’t request a WTO investigation into the matter it could still do so at a later date.
©2018 Bloomberg L.P.
With assistance from Editorial Board