Beijing is ‘meeting many US demands’ says Larry Kudlow, White House economic adviser, as talks continue

Kudlow, a top White House official, said there ‘is no deal yet to be sure’ but that China is ‘coming to play. I believe they want to make a deal’

PUBLISHED : Saturday, 19 May, 2018, 4:58am
UPDATED : Saturday, 19 May, 2018, 9:56pm

China and the US have made progress in meeting Washington’s demands for a more balanced trade relationship, a top White House official said on Friday. 

“They are meeting many of our demands,” White House economic adviser Larry Kudlow told reporters near the end of two days of high-level meetings in Washington aimed at averting a trade war. 

“There is no deal yet to be sure, and it’s probably going to take a while to process, but they’re coming to play. I believe they want to make a deal.”

Kudlow’s comments follow several weeks of negotiations between teams led by Chinese Vice-Premier Liu He and US Treasury Secretary Steven Mnuchin aimed at averting an economic war that threatens more than US$200 billion in bilateral trade. 

Liu arrived in Washington this week to continue talks that began when Mnuchin, US Commerce Secretary Wilbur Ross, White House trade adviser Peter Navarro and US Trade Representative Robert Lighthizer travelled to Beijing on May 3. 

Tough US sanctions against Chinese telecommunications equipment maker ZTE and a planned summit meeting between US President Donald Trump and North Korean leader Kim Jong-un have also been discussed during Liu’s visit. 

All these issues could be in play during efforts to address a record trade imbalance, market restrictions faced by foreign companies operating in China and the significant financial support Beijing is marshaling to build “national champions” in the technology space. 

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

Trump has used these issues to justify his order to Lighthizer to impose punitive tariffs on US$50 billion worth of annual imports from China and his threat to target another US$100 billion in imports if the two sides don’t find a way to address them to his satisfaction. China has announced new import tariffs on US$50 billion of US goods.

Liu’s talks, after several gestures on both sides regarding trade, ZTE and North Korea, signal a willingness by the two nations to continue negotiating, said Suisheng Zhao, director of University of Denver’s Centre for China-US Cooperation.

“Trump was very tough on China, especially with his comment about China being ‘spoiled’, but softened his tone yesterday after he met Liu He,” said Zhao, who is on the board of governors of the Council for Security Cooperation in the Asia-Pacific, a regional dialogue forum.

Zhao was referring to Trump’s remark, shortly before meeting Liu at the White House on Thursday, that China was “spoiled” by the way it had been able to take advantage of the US in its trade policies.

Trump also suggested that Chinese President Xi Jinping might be prompting Kim to take a tougher line against America as the US president and the North Korean leader move toward their planned June 12 meeting in Singapore. 

A guide to the trade talks: can the powerhouses defuse the tension?

Meanwhile, Trump has sent mixed signals about sanctions his Commerce Department recently imposed on ZTE, which, according to Reuters, sources up to 30 per cent of its components from US manufacturers. 

The sanctions prevent ZTE from receiving products from US chip suppliers Qualcomm, Intel and Micron Technology, optical component suppliers Maynard, Acacia, Oclaro and Lumentum, as well as software suppliers Microsoft and Oracle, among others.

“We may be seeing conflicting signals, but one thing I’m cautiously optimistic about is that negotiations are moving on and both sides are examining the bottom lines of the other side, and it looks like each side will need to make some compromises,” Zhao added.

Trump announced earlier this week that he was looking for ways to drop the ZTE sanctions. 

China faces challenge by US to legitimate development goals

In a Fox Business Network interview on Friday, Kudlow clarified the Trump administration’s position on ZTE, saying: “We’re not talking about letting them off scot-free by any stretch. ... Commerce Secretary Wilbur Ross is having a second look at remedies. 

“If there are any structural changes in their case they will be very harsh: Change of management. Change of board. Change of everything.”

One concession to China this week was unambiguous.

A leading White House trade adviser, Peter Navarro, who is known for taking the hardest line against China among Trump’s team, has not been involved in this week’s talks with Liu, according to CNBC and other US media.

“China’s reaction to Mr Trump’s legitimate defence of the American homeland has been a Great Wall of denial – despite incontrovertible evidence of Beijing’s illicit and protectionist behaviour,” Navarro said in an editorial published last month in the Financial Times.

For its part, China has dropped an anti-dumping levy it imposed on US sorghum imports a month ago. A notice by the Chinese Commerce Ministry said the anti-dumping duty of 178.6 per cent imposed on April 18 has increased costs for consumers and was against the public interest.

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“Increasingly, Americans and other national leaders see China’s trade practices as unsustainable and as harmful to their interests. China’s willing to adjust a little bit and to deal, but not to cave,” Robert Daly, of the Kissinger Institute on China and the United States at the Washington-based Woodrow Wilson Centre, said in a National Public Radio interview.

“China does have room to buy more from the United States,” Daly said. “They could import more and lower year-on-year the trade deficit.

“The problem with that for many members of the American Congress and many businesses it’s a transactional approach. It doesn’t address the fundamental structural issues.”

Those issues include the fact that “the Chinese economy is not open, that American corporations are not able to invest in China the way Chinese corporations are able to invest here,” as well as forced technology transfers and state subsidies supporting companies that compete with American companies globally, Daly added.