China Suggests a Trade Compromise With the Trump Administration

China’s vice minister of commerce, Wang Shouwen, right, said on Saturday that Beijing could accept a deal giving each side an equal right to take trade actions against the other. CreditFred Dufour/Agence France-Presse — Getty Images

A senior Chinese trade official called on Saturday for a compromise between the United States and China that could make a trade deal easier to reach this spring. But it could also lead to a more fragile agreement, which could fall apart quickly should trade frictions rise again.

Over the past year, the most contentious issue in the countries’ trade talks has been the Trump administration’s demand for what it calls an enforcement provision, which it says China must accept in exchange for any reduction in the extra tariffs President Trump imposed last year on $250 billion in imports from China.

Under an enforcement mechanism, the United States could reimpose tariffs if it concluded that China had not gone through with whatever structural changes to its economy it agrees to make in the trade talks. In the past month, the administration has also pushed for a broader enforcement mechanism, which would include the right to reimpose tariffs for any category of goods in which imports from China surge.

Chinese officials have strongly resisted the idea of an enforcement provision. They worry that the Trump administration, or future administrations, could invoke it at any time to restart trade frictions.

But Wang Shouwen, China’s vice minister of commerce for international trade negotiations, raised a possible compromise at a news conference in Beijing on Saturday morning. He said China would be amenable to an agreement that gave each side an equal right to take trade actions against the other side after an agreement was struck.

“Any implementation mechanism must go in both directions, fair and equal,” Mr. Wang said, using China’s preferred term for an enforcement mechanism. He spoke at an annual news conference given by the Chinese Commerce Ministry’s top officials, in conjunction with the 11-day session of the country’s rubber-stamp legislature, the National People’s Congress.

Mr. Wang did not address another aspect of the enforcement mechanism question that has deeply divided the United States and China. While the Trump administration wants the right to reimpose tariffs unilaterally, China’s Commerce Ministry has favored creating a lengthy process of bilateral consultations if either side has a grievance.

Mr. Wang did not answer a question about whether Mr. Trump and President Xi Jinping might meet in Florida this month to seal a trade deal. Tentative plans for such a summit meeting have been put in doubt by continued disagreement over an enforcement mechanism, and over what limits China might accept on its ability to subsidize high-tech manufacturing.

If the two sides agree on an enforcement provision that covers import surges, it might be more useful to the United States than to China.

Research by Brad Setser, who was a Treasury economist in the Obama administration and is now at the Council on Foreign Relations in New York, has found broad stagnation in American exports of manufactured goods over the past few years, a possible sign of eroding American competitiveness. By contrast, Chinese exports to countries all over the world have been surging.

China wants the United States to remove all of the extra tariffs that Mr. Trump imposed last year. That would leave China with its average tariffs of 7.5 percent on imports from all over the world, compared to 5 percent for the European Union and 3 percent for the United States.

China contends that it is still a developing country and therefore should not have to operate under the same trade rules as the West. Commerce Minister Zhong Shan said at the news conference on Saturday that any reform of the World Trade Organization, which the Trump administration has sought to overhaul, should respect the different needs of developing countries.

At a separate news conference, Xiao Yaqing, the director of China’s powerful State-Owned Assets Supervision and Administration Commission, denied the common perception in the West that China heavily subsidized its state-owned enterprises, including their exports. “State-owned enterprises are independent market players — they are self-employed, self-financing, self-sustaining, self-restrained and self-developing,” he said.

Mr. Trump has promised an ambitious agreement that would address ever-rising American trade deficits with China at a time when Beijing poses a growing geopolitical challenge to the United States. China has built the world’s largest navy and an archipelago of air bases on artificial islands in the South China Sea, and it has tried to promote its combination of single-party authoritarianism and state-led economic growth as a global alternative to democracy and free markets.

But the overall United States trade deficit, and specifically its deficit with China, further increased last year. Congressional Democrats have become increasingly critical of Mr. Trump on trade in recent days, accusing him of having become too willing to accept a weak deal just to have an agreement.

“The president was right to target China,” Chuck Schumer, the New York Democrat who is the Senate minority leader, said on Friday. “President Trump will have taken defeat out of the jaws of an almost victory if he now backs off for the sake of a photo-op or some brief changes in what China purchases.”

Mr. Trump and his advisers continued to present a tough front on Friday, even as the president predicted a jump in the stock market if a trade deal were to be reached with China. “If this isn’t a great deal, we won’t make a deal,” he added.

Speaking on CNBC on Friday, Larry Kudlow, the director of the National Economic Council, pointed to Mr. Trump’s recent talks with the North Korean leader Kim Jong-un over the North’s nuclear arms, which ended abruptly without an agreement.

“And you saw him walk away from North Korea,” Mr. Kudlow said. “I’m just saying that’s a directive moment, it could apply to trade, I’m not forecasting. I’m just saying, it has got to be a good deal for the U.S.A.”

“If it doesn’t measure up, the United States will stick to its guns, believe me on that,” he added.

Mr. Wang said there had been progress during trade talks last month in Washington — and at least one moment of harmony. Vice Premier Liu He of China ordered a hamburger, while the United States trade representative Robert E. Lighthizer had a Chinese dish, chicken with eggplant sauce. Mr. Wang said the two men turned down offers of tea and coffee.

“They were both drinking water, they wanted to find common ground,” he said.

By Keith Bradsher and Ana Swanson
The New York Times


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