Jeremy Page WSJ
Bob Davis WSJ
A U.S.-China trade accord is facing a new roadblock, as Chinese officials balk at committing to a presidential summit until the two countries have a firm deal in hand, according to people familiar with Beijing’s thinking.
A week ago, the sides appeared to be closing in on a draft accord. But Chinese leaders were taken aback by President Trump’s failed meeting in Vietnam with North Korean leader Kim Jong Un, the people said.
Mr. Trump’s decision to break off those talks and walk away sparked concern that China’s President Xi Jinping could be pressured with take-it-or-leave-it demands at a potential summit at Mr. Trump’s Mar-a-Lago estate in Florida late this month, these people said.
As a result, China wants a summit to be more of a signing ceremony than a final negotiating session that could break down, the people familiar with the leadership’s thinking said.
“What Chinese minister wants to say, ‘Yes, Xi Jinping. Go to the U.S. for a visit, which isn’t a state visit, and hope that Trump doesn’t embarrass you?’” said Evan Medeiros, a Georgetown University scholar who was a senior China adviser to President Barack Obama.
The U.S. ambassador to China, Terry Branstad, suggested in an interview with The Wall Street Journal Friday that U.S. officials wanted some leeway for additional negotiations.
The U.S. side aims to have “the agreement pretty much worked out, and maybe a few final touches, or final things resolved by the two leaders,” he said, adding there was “good chemistry” between the two men.
Looming over the summit negotiations is the history of the late-1990s negotiations over Beijing’s entry into the World Trade Organization. In 1999, Chinese Premier Zhu Rongji traveled to Washington for final negotiations for a WTO deal and came up empty-handed after President Bill Clinton judged it wasn’t the right time politically to conclude a deal, say former advisers of Mr. Clinton.
A humiliated Mr. Zhu faced a chorus of criticism at home that threatened to derail negotiations.
It is hard to know whether the current Chinese objections represent a serious roadblock or are simply negotiating tactics, Mr. Medeiros said. Mr. Xi is scheduled to travel to Europe around March 22 and U.S. officials for the past three weeks have urged Beijing to tack on a trip to Mar-a-Lago to finish a trade deal.
Initially, the two sides had been thinking of a summit around March 27. Now National Economic Council Director Larry Kudlow says it could slip to early April.
“Both governments are under tremendous pressure to reach an agreement,” said Myron Brilliant, executive director of the U.S. Chamber of Commerce, in the face of market volatility and a weakening global economy.
Getting Mr. Xi to come to the U.S. to conclude a deal could give the U.S. leverage in any last-minute talks between the two men because Mr. Xi would be under pressure to bring home a deal. The U.S. has been pressing hard for such a meeting.
On Feb. 12, Mr. Trump told reporters before a cabinet meeting that he expected to meet Mr. Xi “and make the parts of the deal that the [negotiating] group is unable to make. That’s the way deals happen.”
Since then, Mr. Trump and his top cabinet officials have publicly kept up the pressure for a Mar-a-Lago meeting, including in a Feb. 22 Oval Office meeting with Liu He, China’s top trade envoy. “We’re planning it with your schedule, Mr. President,” Treasury Secretary Steven Mnuchin said, as Mr. Liu looked on.
The Trump administration also canceled plans to raise tariffs on March 2 on $200 billion of Chinese goods to 25% from 10%, as a way to recognize that the two sides were making progress toward resolving their dispute.
Now the administration officials are acting less certain. Mr. Trump on Friday predicted a bump in the stock market if a trade deal is reached but added that “if this isn’t a great deal, we won’t make a deal.”
Mr. Branstad, the U.S. envoy to Beijing, said “a date hasn’t been finalized.” Negotiators need to further narrow the gap in their positions, including on enforcement of an eventual deal, before summit arrangements are made, he said.
“Both sides agree that there has to be significant progress, meaning a feeling that they’re very close before that happens,” the U.S. envoy said in his office at the U.S. Embassy in Beijing. “We’re not there yet. But we’re closer than we’ve been for a very long time.”
Clete Willems, a White House trade official who is part of the U.S. negotiating team, said the Chinese should learn from Mr. Trump’s willingness to walk away from the Hanoi summit with Mr. Kim that the president won’t accept a bad deal.
“A key part of being a good negotiator is sensing when you can get across the finish line and figuring out a way to do that,” Mr. Willems said at a Georgetown Law School conference. “But it’s also walking away.”
The two sides have been negotiating by vidoeconference, including sessions on Thursday and Friday. Mr. Willems said there weren’t plans at this point to send U.S. negotiators to Beijing.
As part of the potential deal, Beijing so far has offered to purchase more U.S. agricultural and energy products, allow American businesses greater access to certain sectors such as financial services and autos, and better protect U.S. intellectual-property rights.
Mindful of what it sees as China’s poor follow-up record, Washington also is pressing for an enforcement mechanism to ensure Beijing keeps its promises. The plan under discussion calls for meetings of officials from both countries to adjudicate disputes. If those don’t produce agreement, U.S. Trade Representative Robert Lighthizer has said the U.S. would then impose tariffs.
U.S. officials are asking Beijing to agree not to retaliate—at least in some cases—should the U.S. take such actions. That would be a big concession for Beijing, as the leadership fears being criticized domestically for agreeing to an “unequal treaty” of the sort imposed by Western powers in the 19th century.
“That’s been a challenge and a problem that the Chinese did indeed retaliate,” Mr. Branstad said, referring to the sanctions Beijing imposed on American products in response to the U.S. tariffs last year.
Any enforcement mechanism needs to be sustainable and not one in which industry “risks a return to a constant escalation of tariffs,” said Erin Ennis, senior vice president of the U.S.-China Business Council, a trade association of big exporters.
Another disagreement involves subsidies and other government support that the U.S. argues give an advantage to Chinese domestic firms, especially state-owned enterprises.
In a key national address this week, Chinese Premier Li Keqiang dropped any mention of “Made in China 2025,” a policy savaged by the Trump administration as protectionist. Mr. Li, however, committed the government to nurturing key emerging industries—the same goals pursued by “Made in China 2025.”
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