August 18, 2019

U.S.-China Trade Talks Stumble on Beijing’s Spending at Home

In his news briefing last Monday, Mr. Lighthizer said China’s trade negotiators had made significant, enforceable commitments to the United States, but added that “some people” in China had objected to them, without saying who. China’s trade negotiators are heavily drawn from the ranks of the country’s market-oriented economic reformers and have long been at odds with officials who want greater reliance on heavily subsidized state-owned enterprises.

The Trump administration insists on leaving in place tariffs on imports from heavily subsidized Chinese industries, at least for this year. That would protect the American market in industries that trade hawks within the administration see as strategically crucial.

Chinese officials oppose those tariffs. Mr. Liu told Chinese state-controlled media on Saturday that the Chinese government “believes that tariffs are the starting point for trade disputes between the two sides — if an agreement is to be reached, the tariffs must all be canceled.”

Chad Bown, a senior fellow at the Peterson Institute for International Economics, said that tariffs imposed bilaterally were a poor tool to address a global problem like overcapacity. Even if the United States successfully kept part of the tariffs in place, they would protect only American business at home. Subsidized Chinese business could still compete at home, in Europe and almost everywhere else around the globe, hurting prospects for American exporters.

In the United States, Democrats have been increasingly critical of the Trump administration for not obtaining more trade policy concessions. Yet even some Democrats said they saw limited prospects that China will agree to reduce subsidies.

“To expect the end of essentially a planned or a centralized economy would be awfully ambitious,” Senator Chris Coons, Democrat of Delaware, said in a recent interview in Beijing.

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