Here's What the U.S., China Demanded of Each Other on Trade

(Bloomberg) -- The U.S. and China issued long lists of demands at talks in Beijing this week to resolve the simmering trade dispute between the world’s two biggest economies.

In a document entitled “Balancing the Trade Relationship,” seen by Bloomberg News, the U.S. divided its demands into eight sections, ranging from trade-deficit reduction to tariff barriers to implementation. Here’s a synopsis of the U.S. requests, which were presented to China at the outset of the talks:

Trade Deficit Reduction

• The U.S. wants China to cut the two nations’ trade deficit by at least $200 billion by the end of 2020 from 2018 levels.
• Chinese purchases of U.S. goods will represent at least 75 percent of a commitment to a $100 billion increase in purchases of U.S. exports for the 12 months beginning June 1, 2018, and at least 50 percent of China’s commitment to an additional $100 billion increase in purchases of U.S. exports in the 12 months beginning June 1, 2019.

Protection of American Technology and Intellectual Property

• China to immediately cease providing subsidies and government support that fuels excess capacity in industries targeted by the Made in China 2025 plan.
• Specific policies and practices linked to technology transfer are eliminated.
• A cessation of government-sponsored cyber intrusion and cyber theft.
• Strengthened intellectual property rights protection and enforcement.
• By Jan. 1, 2019, China will eliminate provisions of the Regulations on the Administration of the Import and Export of Technologies and the Regulations on the Implementation of the Law on Chinese-Foreign Equity Joint Ventures identified in the U.S.
• By July 1, 2018, China will withdraw its request for WTO consultations in United States – Tariff Measures on Certain Goods from China and take no further action on the matter
• The document also calls on China to take no retaliatory action in response to actions taken or to be taken by the U.S.

Restrictions on Investment in Sensitive Technology

• A demand that China does not “oppose, challenge, or otherwise retaliate against the United States’ imposition of restrictions on investments from China in sensitive U.S. technology sectors or sectors critical to U.S. national security.”

U.S. Investment in China

• A demand that China does not distort trade through investment restrictions and any restrictions are narrow and transparent
• U.S. investors in China to receive “fair, effective and non-discriminatory market access and treatment, including removal of the application of foreign investment restrictions and foreign ownership/shareholding requirements.”
• China to issue an improved nationwide negative list for foreign investment by July 1, 2018. Within 90 days the U.S. will identify existing investment restrictions that deny U.S. investors market access. China is then to remove all identified investment restrictions on a timetable to be decided by both nations.

Tariff and non-tariff barriers

• By July 1, 2020, China will reduce tariffs on all products in non-critical sectors to levels that are no higher than the levels of the U.S.’ corresponding tariffs
• China to remove specified non-tariff barriers and recognizes that the U.S. may impose import restrictions and tariffs on products in critical sectors, including sectors identified in the Made in China 2025 industrial plan.

U.S. Services and Services Suppliers

• A demand for China to improve market access in specified ways

U.S. Agricultural Products

• A demand for China to improve market access in specified ways

Implementation

• Both countries to meet quarterly to review targets and reforms
• If the U.S. declares China is not complying with the framework, the U.S. can impose tariffs or other restrictions on Chinese products or restrict supply of services
• A demand that China does not “oppose, challenge or take any form of action against the United States’ imposition of additional tariffs or restrictions.”
• China to withdraw its WTO complaints regarding designations of China as a non-market economy and will refrain from future challenges
• Within 15 days of receiving written notice of a prohibited product that may have been transshipped through one or more countries, China will provide full details of every shipment. Failure to do so will trigger tariffs.
• If China fails to uphold commitments the U.S. will impose tariffs on imports from China and will confiscate counterfeit and pirated goods or levy tariffs to compensate for lost technologies and intellectual property.
• A demand that China does not take any retaliatory action in response.

The following is a synopsis of China’s demands:

• In an official document seen by Bloomberg News, China stated that measures to open up its economy will not be applicable to U.S. investors if the U.S. doesn’t meet China’s request on equal treatment of Chinese investment. Other requests of the U.S. included:
  • Lift bans on exports of integrated circuits to China.
  • Stop imposing 25 percent extra tariffs against Chinese products.
  • Open government procurement to Chinese technology products and services.
  • Give equal treatment to Chinese companies in national security review.
  • Adjust the export ban on ZTE. Corp.
  • Drop surrogate-country approach in anti-dumping, anti-remedy cases.
  • Not to initiate any Section 301 investigation against China in the future.
  • Open its e-payment market to Chinese companies.
  • Approve China International Capital Corp.’s application for a financial license.
  • Open the e-payment market to Chinese companies

--With assistance from Miao Han

To contact the reporters on this story: Enda Curran in Hong Kong at ecurran8@bloomberg.net, Keith Zhai in Singapore at qzhai4@bloomberg.net.

To contact the editors responsible for this story: Malcolm Scott at mscott23@bloomberg.net, Daniel Ten Kate at dtenkate@bloomberg.net, Emma O'Brien, Jeff Kearns

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