Biodun.BBC: Analysis: Sticking points in US-China trade talks

Monday, December 3, 2018

Analysis: Sticking points in US-China trade talks

03 December 2018 - 13H35 GMT/UTC/ZULU TIME

by Xian Wan and Biodun Iginla, France24 News Analysts, Beijing

BEIJING -

The US and Chinese leaders have agreed to a truce in their trade war. Now comes the hard part for negotiators who will have 90 days to resolve major differences.

The White House announced after talks between President Donald Trump and Chinese counterpart Xi Jinping on Saturday that a tariff hike that had been due on January 1 would be suspended for three months while the two sides negotiate a resolution.

Here are four key issues that could be stumbling blocks in efforts between the world's two biggest economies to reach an agreement:

- Deficit gap -

Trump desperately wants China to reduce its $335 billion trade surplus.

US officials say China unfairly uses subsidies and other tactics to flood US markets with goods too cheap for American companies to compete with, including steel and aluminium.

As part of the truce, China has agreed to purchase substantial amounts of agricultural, energy, and industrial products from the US to reduce the huge trade gap, according to the White House.

But no target dollar amount was announced -- an omission that shows the two sides will have to haggle over how much China is willing to import from the United States.

China's agreement to "immediately" restart buying products from US farmers could prove a boon to Trump, who needs the support of his rural base as the 2020 Presidential election approaches.

Beijing had in July announced a 25 percent increase in tariffs on soybeans, dealing a blow to Trump's rural electoral base.

- Intellectual property -

The US side will likely look for reassurances from China that it will crack down on the alleged theft of intellectual property.

Trump in March imposed tariffs on $50 billion worth of imports from China for punishment over alleged IP theft, which the US says costs its companies as much as $600 billion a year -- which China has denied.

A recent report by US Trade Representative Robert Lighthizer's office accused China of continuing a campaign of state-backed cyber-attacks on American companies.

Seeking to shake its reputation for counterfeit goods, China has in recent years taken steps to improve IP protections, including establishing specialised IP courts to handle matters including patent disputes, copyright and trademark infringement.

China also launched a nationwide campaign to protect foreign firms' international property rights in 2017.

- Know-how transfer -

The United States and European nations have also long accused China of forcing foreign firms to transfer their know-how to local partners in order to do business in the country.

Lighthizer's report accused China of using foreign ownership restrictions, administrative licensing and approvals, as well as a "non-transparent and discretionary" foreign investment approvals system to pressure firms to transfer technology.

Xi vowed on Wednesday to boost protection of intellectual property, but foreign firms in China complain that the promise is too routine and rings hollow.

- China's high-tech ambitions -

China is dependent on countries such as the US and South Korea for high-end microchips, a weakness in its bid to become a global tech leader.

The trade truce makes no mention of China's "Made in China 2025" plan to develop high-tech prowess to a level rivalling the United States.

But Oxford Economics said in a note that it is "possible that China has hinted at a willingness to change certain aspects of the 'Made in China 2025' plan".

Aiming to reduce reliance on foreign technology, the policy targets key sectors including robotics, new energy vehicles, and telecommunications equipment.

The US has targeted Chinese tech companies, citing national security concerns.

In October the US restricted sales of crucial technology to state-owned chipmaker Fujian Jinhua, accusing it of stealing trade secrets.

Telecoms equipment maker ZTE collapsed 40 percent in June after Washington banned US companies from selling crucial hardware and software components to it for seven years, though the ban was lifted after it agreed to pay a huge fine.

According to the White House, China is open to reconsidering Qualcomm's bid to buy Dutch chip rival NXP, which it previously blocked.