Myron Brilliant (right), head of international affairs at the US Chamber of Commerce, shakes hands with Chinese Foreign Minister Wang Yi in February. Photo: EPA-EFE
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https://scmp.com/news/world/united-states-canada/article/3008653/hope-fades-us-china-deal-will-substantively-tackle United States & Canada
Hope fades that US-China deal will substantively tackle subsidies
- US Chamber of Commerce’s head of international affairs Myron Brilliant says two sides are struggling to close the gap issues such as how to roll back tariffs
- Chinese delegation led by Vice-Premier Liu He is set to arrive in Washington next week to begin what could be final round of talks
Chinese and American flags displayed on top of a trishaw in Beijing in September 2018. Photo: AP
This story is published in a content partnership with POLITICO. It was originally reported by Adam Behsudi on politico.com on May 2, 2019.
US businesses are tempering their expectations that a trade deal with Beijing will force China to significantly cut back on its state subsidies.
“We’re likely to get language that … touches on transparency, but we’re not likely to get the commitment that we want from the Chinese, in terms of they’re really cutting back and eliminating subsidy practices, not just in the steel and aluminium sectors but in a range of sectors,” said Myron Brilliant, the US Chamber of Commerce’s head of international affairs.
China’s complex web of subsidies and tax preferences are central to the US argument that American firms operate at a competitive disadvantage in one of the world’s largest markets. They are also blamed for massive overcapacity in China’s industrial sectors, fuelling a flood of steel, aluminium and other goods that have saturated the world market in recent years.
Brilliant, who spoke on a call to reporters on Thursday, said the chamber was “sanguine” about the amount of progress that could be made on subsidies in the context of the US-China trade talks, but he added that the issue is not likely to go away.
“I’m not sure we’re going to get all the progress we want,” he said.
A large delegation of Chinese officials, led by Vice-Premier Liu He, is set to arrive in Washington next week to begin what could be a final round of talks on May 8.
US President Donald Trump’s increasing desire to strike a quick agreement could result in a deal in principle announced by the end of next week, according to several people close to the discussions.
Brilliant, who gets regular briefings on the talks from US and Chinese officials, acknowledged that the talks are “certainly in the endgame” and said 94.5 per cent of the issues were settled, according to his own estimate.
Still, he said the two sides are struggling to close the gap on several issues, including specifics on how the US and China will roll back a portion of the tariffs on a collective US$360 billion worth of exports.
Divisions also remain on the extent to which China will open its market to US cloud computing firms, issues related to pharmaceutical intellectual property, approval of genetically modified crops and the extent to which Beijing will make good on a promise to buy significant amounts of US energy and agricultural goods, Brilliant said.
US Trade Representative Robert Lighthizer (left) listens as Chinese Vice-Premier Liu He talks while they line up for a group photo at the Diaoyutai State Guesthouse in Beijing in February. Photo: Reuters
On the issue of subsidies, China has made commitments related to state aid at the national level and with respect to its Made in China 2025 initiative, which was initially targeted in the US investigation, said Jeremie Waterman, head of the Chamber’s China centre.
He said the Chinese system has evolved to the point that many subsidies are now offered at the provincial and local levels.
“One of the sticking points now is the subsidies at the provincial and local levels and to what degree China is willing to include [those] in the commitments it makes,” Waterman said on the press call.
The chamber is also being pragmatic when it comes to the commitments China will make in terms of allowing the free flow of data.
“It’s not clear we’ll get as much as we’d like in that area,” Brilliant said.
China’s tight restrictions on the internet prevent foreign companies from moving valuable data offshore.
US and Chinese officials before the start of US-China trade talks at the White House in February. Photo: Reuters
The chamber is also pushing for a deal that includes greater access for cloud computing firms in a market dominated by domestic platforms like Alibaba and Tencent. US companies like Amazon, Microsoft and Apple have limited or no access in China and face onerous licensing requirements and other regulatory barriers related to data storage, privacy and censorship. Alibaba is the owner of the South China Morning Post.
“We expect greater market access opening than was initially provided by the Chinese in these negotiations, which was through a pilot zone,” Brilliant said.
“We very much want to see work done to ensure that companies get licences granted, that they can have some management control and that they have greater access into the market.”