The main barriers to a US-China trade deal: from US$200 billion deficit cuts to better market access

China and the United States wrapped up their trade talks on Friday without reaching a consensus.

Documents prepared by the two nations before the talks, which have been seen by the South China Morning Post, shed further light on the main areas of disagreement. 

These include the US belief that the current trade relationship with China is “significantly imbalanced”, with a demand for major cuts to the trade deficit and an end to “improper tariffs” on American exports. 

Meanwhile, Beijing’s negotiators demanded greater access to the US market and fewer restrictions on Chinese companies. 

Here are the two sides’ main demands. 

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What the US wants

1) China must reduce the trade deficit by US$200 billion over the next two years. 

2) China must immediately cease giving out market-distorting subsidies and other types of government support to industries under the “Made in China 2025” plan. 

Immediate and verifiable steps must be taken to end government-sponsored cyber-enabled intellectual property theft and snooping on confidential information.

3) China will not challenge US restrictions on investments from China in sensitive technology sectors or sectors critical to American national security.

4) China must give fair and non-discriminatory market access to US investors and update and improve the list of blacklisted foreign investors by July 1.

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5) China will reduce tariffs on all products in non-critical sectors, while recognising that Washington can impose tariffs on Chinese products that benefit from the “Made in China 2025” industrial plan.

6) China should commit to improving market access in specified ways and give fair treatment to US agricultural products.

7) The two nations will review the implementation of the targets. China will withdraw its World Trade Organisation complaints regarding the designation of China as a non-market economy.

What China wants

The document prepared by China said that maintaining a healthy trade relationship is beneficial to both nations. It said it would further open up the free-trade zone of Hainan province, increase imports of American films and reduce tariffs on US cars. 

But China also raised a series of demands:

1) The US must stop its intellectual property infringement investigation under section 301 of the 1974 Trade Act and scrap the plan to impose 25 per cent tariffs on Chinese products that was announced on April 3.

2) The US must remove restrictions on hi-tech exports to China, including on integrated circuit designs.

3) The US will resume buying cooked poultry by May 31.

4) The US must open up its civil aviation security equipment market to China.

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5) Both nations will set up a working group to study expanding market access.

6) Give China the same treatment as other investor nations when conducting security assessments on Chinese businesses and stop imposing new investment restrictions.

7) Allow Chinese enterprises to participate in US infrastructure projects without demanding that they procure local products.

8) Allow Chinese companies to participate in the American e-payment market and supporting cross-border clearances between China and the US.

9) Allow Chinese insurance companies to set up branch organisations in the US.