US sees trade deal within reach as China dispatches top aide

US sees trade deal within reach as China dispatches top aide

US President Donald Trump

US President Donald Trump (NICHOLAS KAMM / AFP)

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The Trump administration expressed optimism it can reach a “reasonable” trade deal with China as President Xi
Jinping dispatched one of his top aides to negotiations in Beijing on a lasting
truce to a conflict that has roiled financial markets.

“There’s a very good chance that we’ll get a reasonable
settlement that China can live with, that we can live with, and that addresses
all the key issues,” Commerce Secretary Wilbur Ross told CNBC Monday.

Such a deal could involve the Chinese buying more American
soybeans and liquefied natural gas, while agreeing to deeper “structural
reforms” on issues such as intellectual-property rights and market access,
Ross said.

His remarks came hours after a positive development on the
ground in Beijing, where Vice Premier Liu He showed up to what were expected to
be mid-level talks between US and Chinese officials.

Liu has been Xi’s top trade emissary in the dispute with the
US, which has seen the world’s two biggest economies impose tariffs on a
combined $360bn in each others’ imports.

Economic cost

Six months since President Donald Trump first slapped
tariffs on Chinese goods, signs are growing that the trade war is exacting an
economic and financial cost, increasing the incentive for both sides to end the
conflict.

Apple cut its revenue outlook last week as sales of the
iPhone were slower than expected in China, while data on factory activity and
retail sales in the Asian nation were also weak.

READ: Asia markets rally after Wall St surge as US-China trade talks begin

Liu’s appearance at the talks is a “symbol of Xi’s
personal buy-in” in the effort to reach a deal, said Leland Miller, chief
executive officer of China Beige Book, a data-analytics firm that surveys
companies across the Chinese economy. “Beijing wants to show this is
supported at the very highest level.”

But much work remains before the two economic powers climb
down. Trump has given US Trade Representative Robert Lighthizer until March 1
to negotiate an accord with the Chinese on “structural changes” to
Beijing’s state-driven economic model.

The two sides have shown signs of common ground over the
last few months, only for progress to stall.

Thorny issue

Even if an initial settlement is reached, enforcement will
be a thorny issue, Ross said. US officials have complained that China has
failed to live up to past promises of reform, including pledges to open up the
nation to more imports and foreign investment after it joined the World Trade
Organisation in 2001.

“An agreement is fine, but the history here has not
been so good on compliance,” Ross said. “So the real issue is what
are the enforcement mechanisms, what are the punishments if people don’t do
what they were supposed to do?”

READ: Seven key issues to determine success of US-China
trade talks

Talks in Beijing are scheduled to continue through Tuesday,
with Lighthizer expected to meet Liu later this month.

The discussions are the first face-to-face interactions
between the US and China since both presidents met in Argentina on December 1
and agreed to a temporary truce in their tit-for-tat tariff war.

More senior-level discussions could take place this month,
with the South China Morning Post reporting that Trump and Chinese Vice
President Wang Qishan may meet at the World Economic Forum in Davos,
Switzerland.

China’s foreign ministry on Monday confirmed that Wang would
deliver a keynote speech at Davos.

Lu Kang, a spokesman for the ministry, told reporters he’s
unaware of any plans for Wang to meet Trump. He also said he had no further
information on this week’s trade talks.

Deputy US Trade Representative Jeffrey Gerrish is leading
the American delegation in Beijing. Preliminary discussions were “a little
more optimistic than usual,” White House economic adviser Larry Kudlow
told Bloomberg TV Friday.

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