The MSC Oliver container ship, operated by Mediterranean Shipping Co. (MSC) sits moored in this aerial photograph taken above the Port of Ningbo-Zhoushan in Ningbo, China. (Photographer: Qilai Shen/Bloomberg)

Ross Says Trade Deal to Hinge on China Accepting Deeper Reforms

(Bloomberg) -- Sign up for our new China newsletter, a weekly dispatch coming soon on where China stands now and where it's going next.

Commerce Secretary Wilbur Ross said the U.S. and China are eager to end their trade war, but the outcome will hinge on whether Beijing will deepen economic reforms and further open up its markets.

Ross said he expects that negotiators will release a statement on their progress after Chinese Vice Premier Liu He meets with U.S. Trade Representative Robert Lighthizer in Washington from Jan. 30-31.

“The harder issues are the ones that deal with structural reforms, particularly intellectual property rights,” said Ross in an interview on Bloomberg TV on Thursday, adding that China is moving up the technology value chain and also has an interest in protecting its own IP. “The equal market access is another very big issue. The idea of forced technology transfers is a huge issue.”

Ross said negotiators are making progress on “easier” issues like how much of certain American products the Chinese will agree to buy, such as soybeans and liquefied natural gas. China has offered to go on a six-year buying spree to ramp up imports from the U.S. by more than $1 trillion, Bloomberg News. reported.

Ross Says Trade Deal to Hinge on China Accepting Deeper Reforms

Goodwill, Preparation

“All we know right now is we have some goodwill, a lot of preparatory work, we’re having several days of meetings including with Liu He next week,” Ross said in a separate interview. “Let’s see what comes out of that because that’s what will determine what comes next."

Earlier in the day, Ross downplayed expectations for an end to the U.S.-China trade war, saying the world’s two largest economies are a long way from resolving their differences.

“We’re miles and miles from getting a resolution,” he said in an interview on CNBC on Thursday. “Trade is very complicated. There are lots and lots of issues.”

Ross added that he sees a “fair chance we do get to a deal” eventually.

White House economic adviser Larry Kudlow said the conversations with Liu’s team next week will be a crucial test of whether the two sides can come to an agreement.

“The Liu He talks will be determinative,” Kudlow told Fox News on Thursday, adding that Trump has told him that he remains “rather optimistic.”

“The scope of the talks are huge and the talks are going to continue at the highest level,” said Kudlow. Right now “we have nothing on paper, there is no contract, there is no deal.”

Ross Says Trade Deal to Hinge on China Accepting Deeper Reforms

The comments from the senior Trump administration officials come with just over five weeks to go before a deadline to conclude a deal. If that doesn’t happen, the Trump administration has threatened to raise the tariff rate on $200 billion in Chinese good to 25 percent from 10 percent.

While the two sides appear to be in close contact as the deadline approaches, it’s also apparent that there’s some way to go before they resolve their differences. Investors have been jittery this week about the prospects of a deal, as news trickled out that substantial differences remain, including a Bloomberg News report that the governments are struggling to bridge the gap on intellectual-property issues.

The IMF this week downgraded its global outlook for the second time in three months, warning of mounting risks including an escalation of the trade war and tightening credit.

©2019 Bloomberg L.P.