By William Mauldin and Josh Zumbrun
WASHINGTON -- Trade talks between the U.S. and China are in
danger of hitting an impasse, threatening to derail the Trump
administration's plan for a limited "phase-one" pact this year,
according to former administration officials and others following
the talks.
Both sides remain divided over core issues -- including
Beijing's demand for removing tariffs and the U.S.'s insistence on
China buying farm products -- nearly six weeks after an "agreement
in principle" was announced by the White House on Oct. 11.
"China is going to have to make a deal that I like," President
Trump said Tuesday at a cabinet meeting. "If we don't make a deal
with China, I'll just raise the tariffs even higher."
Mr. Trump is facing pressure from people within and close to the
administration who blame the lack of progress on what they describe
as Beijing's refusal to follow through on commitments at the
bargaining table.
"Any impasse in the talks would likely result from an
unwillingness by China to address longstanding U.S. concerns," said
Stephen Vaughn, former top deputy to U.S. Trade Representative
Robert Lighthizer who is now a partner at law firm King &
Spalding in Washington. "The administration has been very clear
about the changes it needs to see from China. Now China has to
decide whether it is finally prepared to show real progress."
Stephen Bannon, the former White House chief strategist,
believes the U.S. needs to keep tariffs in place as leverage to
ensure China follows through on its promises. "The only constants
in these negotiations are the Chinese backtracking and reneging,
and Trump standing firm on his principles -- and his tariffs are
key," Mr. Bannon said.
China's Ministry of Commerce said over the weekend that Vice
Premier Liu He spoke with Mr. Lighthizer and U.S. Treasury
Secretary Steven Mnuchin at the U.S.'s request, and the officials
held "constructive discussions" about their concerns.
Mr. Lighthizer's office declined to comment on the delay in
reaching a deal. The Chinese embassy didn't immediately respond to
a request for comment.
Mr. Trump in October laid out a framework that involved large
agricultural purchases by China, along with tighter Chinese
intellectual-property rules and a currency pact in exchange for
tariff relief. At the time, the president said a final deal would
be finished in three to five weeks.
Since then, there have been few signs of progress. Terry
Branstad, U.S. ambassador to China who was at the White House on
Tuesday, was asked about the progress of talks. "They're going," he
said.
Trade negotiators had originally hoped a deal could be signed by
Mr. Trump and China's President Xi Jinping on the sidelines of an
economic summit in Chile on Nov. 16-17. But that summit was
canceled, effectively removing what had served as a de facto
deadline.
Derek Scissors, a trade expert at the American Enterprise
Institute who has advised the Trump administration said he doesn't
expect the deal to close this month and sees a U.S. political
battle over the president's call for a truce in the China trade
war.
Looming now are plans by the Trump administration to impose 15%
tariffs on smartphones, toys and other products from China on Dec.
15. The levies are expected to directly hit consumers as Mr. Trump
gears up for his 2020 re-election campaign.
Not everyone is pessimistic, though. Some say the delay reflects
the challenges inherent in even a limited accord.
"Trying to negotiate a tariff rollback is a complicated issue
and takes longer than people in the market would like," said Clete
Willems, who formerly worked on trade issues in the Trump
administration and is now a partner at law firm Akin, Gump,
Strauss, Hauer & Feld LLP.
Sen. Chuck Grassley (R., Iowa), chairman of the Senate committee
that oversees trade, said he is taking at face value China's
statement that senior officials had a productive call on Saturday.
"I'm going to have to go by that as the latest report being
positive news," Mr. Grassley told reporters.
Talks also hit an impasse in the spring, when the U.S. accused
China of backing away from earlier commitments. The pact being
negotiated at that time, however, was far more comprehensive than
the much narrower agreement deal now on the table.
Although limited in scope, U.S. business groups see the current
phase-one agreement as the key to unlocking Chinese concessions
before advancing toward more meaningful economic overhauls by
Beijing. These groups believe tariff rollbacks are a key to any
deal.
China, for its part, is reluctant to commit to buying a specific
amount of American agricultural products, The Wall Street Journal
reported last week. When he announced the agreement in principle
last month, Mr. Trump said China would buy between $40 billion and
$50 billion of farm goods annually, but China has resisted
specifying a dollar commitment.
Still, the Trump administration can't easily abandon the talks
and impose more tariffs on China because such a move would risk
hurting U.S. farmers further.
U.S. agricultural exports to China collapsed when the trade war
heated up last year, with Beijing raising tariffs on such goods and
directing companies to halt purchases of American commodities.
The moves sent the prices for U.S. commodities into a downward
spiral and severely dented farm income. The U.S. Department of
Agriculture initiated two large-scale rescue programs in 2018 and
2019, authorized at $28 billion, to mitigate the losses.
In recent weeks, China has stepped up agricultural purchases
again as the two sides moved toward a limited deal. Last week, it
said i t would allow chickens from the U.S. to be shipped to China
for the first time in four years.
"The stakes are pretty high for Trump now of getting something
because of the agriculture problem, because of farmers," said Rufus
Yerxa, president of the National Foreign Trade Council.
The challenge for Mr. Trump is that farmers and key farm-state
lawmakers are largely happy if a phase-one deal leads to China
again buying large amounts of U.S. agricultural products. But if a
deal falls through, China could again shut off its purchases and
send U.S. prices into a new tailspin.
"When they talk about a purchase commitment of some magnitude,
they're not talking about letting the purchases happen naturally,
they're talking about state-directed purchases," said Craig Thorn,
a partner at DTB Associates and a former official with the Foreign
Agricultural Service of the USDA. That would mean the deal would
"almost certainly concentrate on big-ticket commodities like
soybeans and pork," he said.
But that would mean continued purchases -- on the scale the
president hopes to see -- depends on keeping China engaged in the
discussions.
--Alex Leary contributed to this article.
Write to William Mauldin at william.mauldin@wsj.com and Josh
Zumbrun at Josh.Zumbrun@wsj.com
(END) Dow Jones Newswires
November 19, 2019 18:41 ET (23:41 GMT)
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