China-US relations

Trade on Donald Trump’s trip agenda but foreign firms fear no progress on the big sticking points

The US president’s visit is expected to lead to a range of contracts but American business groups say the deals should not overshadow demands for equal access to Chinese markets

PUBLISHED : Saturday, 04 November, 2017, 9:31pm
UPDATED : Saturday, 04 November, 2017, 11:30pm

Trade talks between China and the United States have slowed to a crawl as US officials have lost faith in the existing process to resolve disputes between the world’s two biggest economies, according to US business representatives.

Talks over a treaty to ensure equal investment opportunities for both countries also appear to have stalled, and businesses are concerned that little will come from US President Donald Trump’s trip to China this week.

It’s a long way from two years ago when there were high hopes of a big step towards a bilateral investment treaty, an agreement that would be key to addressing equal investment treatment.

William Zarit, chairman of the American Chamber of Commerce in China, said the treaty talks seemed to be on the back-burner, with each side seeing the other as the cause of the slow progress.

“The US thinks China’s negative list [on market restrictions] is too long. China thinks the US has stopped talking about it,” he said.

Foreign companies dissatisfied with China’s slow progress in opening up investment markets

Economic cooperation is widely seen as the bedrock of ties between China and the United States. For now, the Trump administration’s biggest economic concern is still the US trade deficit with China, which stood at US$347 billion last year. Although the deficit is down 5.5 per cent year on year, the US president is expected to aim to further narrow the gap and fulfill some of his election campaign promises.

Beijing has shown willingness to make some trade concessions and open some – but not all – of its domestic markets wider to outside players. It said the decades-old deficit cannot be resolved overnight, and called on Washington to have patience and relax its restrictions on sales of hi-tech products to China.

Trump will be accompanied on the trip this week by a delegation of more than two dozen US companies. The firms are expected to sign a range of contracts, including deals on US liquefied natural gas, symbolising renewed efforts to narrow the trade gap.

That could be the start of more to come, with former vice-commerce minister Wei Jianguo forecasting that the US could overtake the European Union this year or in 2018 to become China’s biggest trade partner.

Speaking in Beijing on Tuesday, Wei said more exports from the US, such as in the new materials sector, were expected and would help China’s import growth outpace exports by five to six percentage points over the coming five years.

But the US business community in China fears that any deals reached during Trump’s trip could overshadow other concerns such as the lack of reciprocal investment treatment and limited market access for foreign companies in China.

“The trade deficit is not a good proxy for fair and open trade,” US-China Business Council chairman Evan Greenberg said in Beijing on Tuesday.

Greenberg also said there had been little progress on bilateral talks since the end of 100 days of negotiations launched after President Xi Jinping and Trump’s first summit in Mar-a-Lago in April. During those 100 days, China agreed to import US beef, natural gas and oil, but most of the agreements had been in the works for years.

Both countries then agreed to a year of further negotiations but top-level talks in July ended in an impasse.

“Following the 100-day plan, there has been no further initiative. The one-year plan has been drifting,” Greenberg said.

Why foreign companies are shutting shop in China

Jacob Parker, vice-president of the US-China Business Council’s China operations, said the level of engagement between the two countries had tailed off since the first half of the year.

“The new US administration believes that the negotiating strategy [used in previous administrations] has not been effective. So they are unwilling to participate in that type of negotiation going forward,” he said.

Parker said the US administration thought China needed to take steps to prove it was serious about trade talks. “If China does not unilaterally take those actions, the Trump administration appears to be signalling they would be more assertive in taking a different strategy to encourage China to take action,” he said.

Is China making life difficult for foreign companies?

Zarit also said he hoped any contracts signed during Trump’s trip would not overshadow other issues, such as the lack of equal market access for foreign businesses in China and Beijing’s industrial policy favouring state-owned enterprises and protecting the domestic market.

“What we are hoping for and we are urging is something we call proactive reciprocal treatment. It means China would open up areas of the economy to US investment and exports, similar to areas that are open in the US,” Zarit said.

“Our concern is that if the administration doesn’t see proactive reciprocal treatment, there may be a response on the US side which we call reactive reciprocal treatment, meaning a closing down [of markets in the US].

Beijing industry minister says no discrimination against foreign companies

“This administration will be taking a different approach to the visit than the past presidents had taken in terms of preparation, in terms of signalling what the president is going to ask for and what the administration wants to discuss.”

Zarit said he was concerned that there was not enough communication between both countries in the run-up to the visit.

“We have no real sense of what will be discussed. And that is my fear,” he said.

Additional reporting by Frank Tang