‘Frank conversations’: US to resume trade talks with China

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The Biden administration on Monday signalled the resumption of US-China trade talks. Katherine Tai, the top American trade official, said she plans to have “frank conversations” with her Chinese counterpart about “shortfalls” in Beijing meeting its commitments under Phase One agreement signed with the Trump administration in 2020.

US trade representative Tai also made clear these talks were not intended to “inflame trade tensions” but America will be prepared and willing to “use the full range of tools we have, and develop new tools as needed to defend American economic interests from harmful policies and practices”.

The resumption of trade talks comes as part of a new strategy based on a review of the bilateral trade relationship and the agreement that was signed by President Donald Trump and Chinese negotiators in January 2020 that ended months of tensions accompanied by an escalating tariff war between the world’s two largest economies.

“I intend to have frank conversations with my counterpart in China that will include discussion over China’s performance under the Phase One agreement. We will also directly engage with China on its industrial policies,” Tai said in a widely anticipated speech at the Center for Strategic and International Studies (CSIS), a leading US think-tank.

“Our objective is not to inflame trade tensions with China (but) durable coexistence requires accountability and respect for the enormous consequences of our actions,” she added.

The official said “our objective is not to escalate trade tensions with China or double down on the previous administration’s flawed strategy” but the same time, we’re trying to continue to pursue an unfair endorser practices. We will use the full range of our tools to help ensure that the US China trade relationship works for American workers, our industries, and our supply chain”.

Tai did not detail these “shortfalls” but indicated they may be in the commitments China made to purchase at least $200 billion of Americans goods and services over two years of the signing of the agreement. She also did not say when she expects to hold these conversations, except that they will be “soon”.

Under the deal signed in January 2020, China had committed to buying at least $200 billion worth of American goods and services over the next two years, above the 2017 levels; stronger legal protections for patents, trademarks, copyrights, including improved criminal and civil procedures to combat online infringement, pirated and counterfeit goods; and pledged to desist from competitive currency manipulations.

Tai said the 2020 agreement stabilised the market, especially for US agricultural exports, but “our analysis indicates that while commitments in certain areas have been met, there have also been shortfalls in others”.

According to the Pietersen Institute for International Economics, a US think tank that runs a tracker of the Phase One deal, China has met only 62% of its purchase commitments for American goods.

But the “shortfalls” will only be a part of the conversation as the US trade representative said the Phase One agreement was limited in size and scope. “The reality is this agreement did not meaningfully address the fundamental concerns that we have with China’s trade practices and their harmful impacts on the US economy.”

Even with this agreement in place, China’s government “continues to pour billions of dollars into targeted industries, and continues to shape its economy, to the will of the state, hurting the interests of workers here in the US and around the world”.

Katherine Tai practically ruled out a Phase Two agreement, which the Trump administration had planned to address structural issues in bilateral trade. Asked if there will be a Phase Two agreement, Tai said, “I’m not quite sure. You’ll have to ask my predecessor, and the previous administration in setting this up as Phase One, what they were thinking about as a Phase Two.”

A senior Biden administration official, who previewed Tai’s speech on condition of anonymity on Sunday, said, “We are not looking to seek a Phase Two negotiation.”