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Tariffs may live on as Trump's best bet to enforce a China deal

[WASHINGTON] American tariffs are what got China to the negotiating table in the first place, the Trump administration argues. Those same tariffs may be needed even after a trade deal is reached – to ensure that China sticks to it.

That's the view of several former US officials who've dealt with Beijing in the past. They're looking a step ahead, because the world's biggest economies need to reach a trade accord first, before worrying about policing it.

But they inched closer this week, and President Donald Trump - speaking after two days of talks in Washington - pledged that any deal will contain "strong enforcement language.'' His aides are still figuring out what that should be - and how to get China to sign off.

Trump advisers say China has failed to meet commitments in the past, one reason they decided early in the president's term to emphasise the stick over the carrot. US tariffs on Chinese goods have upended financial markets, shaken the world economy, and caused businesses to reconsider their supply chains. They're due to more than double on Mar 2 if the countries can't reach a deal.

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But even if they can, analysts say, that doesn't mean the import duties will disappear forever.

Any accord is likely to include assurances by China on issues such as granting licenses to US companies without hidden regulations that undermine them; buying more American goods over the long run, rather than just conceding a one-time feelgood boost; and punishing theft of US commercial secrets. And all those commitments will need to be monitored by the US.

"They have to be prepared to snap back tariffs if there's a really serious problem,'' said Claire Reade, a former chief counsel for China enforcement at the Office of the US Trade Representative.

Robert Lighthizer, the chief US trade negotiator, said enforcement was "the foundational issue'' in any agreement, and was discussed in detail at this week's talks. The topic is also being debated within the Trump administration, people familiar with the process said, in an attempt to come up with effective mechanisms.

"Our objective is to make the commitments more specific, all-encompassing and enforceable,'' Mr Lighthizer said Thursday. "It has to be something where we are prepared to take action if China doesn't follow through."

Beijing has repeatedly denied that forced technology transfers and other alleged trade misbehaviour exist.

‘SAME TACTICS'

In the past, the US has raised complaints about Chinese practices at a range of forums, from the World Trade Organization (WTO) to the Comprehensive Economic Dialogue that broke down during Mr Trump's first year.

The problem, according to Jeff Moon, another former USTR official who worked on the China file, is that when something went wrong there was no enforcement mechanism – except more talks.

"The Chinese officials across the table have been there for decades,'' said Mr Moon. They "use the same tactics with successive generations of American negotiators, to perpetuate dialogue and delay effective enforcement.''

Mr Lighthizer isn't a fan of the talking-shop approach to violations, people familiar with the administration's thinking say.

‘AN OBAMA DEAL'

Instead, he'll "try to get as many tripwires into the deal as he can,'' so it's void if China doesn't play by the rules, said Derek Scissors, a China analyst at the American Enterprise Institute.

That will have to involve "unilateral US action without the Chinese being involved,'' Mr Scissors said. Any arrangement that involves bilateral reviews of compliance will pose risks for the president, as US sentiment hardens, he said. "Trump may not be aware of the outcry that's going to happen if this reads like an Obama deal or a Bush deal.''

The WTO is another arena for enforcing China's obligations. But the administration has little patience with it - and concluded last year that China should never have been allowed to join in the first place.

Another mechanism for settling disputes that's commonplace in trade deals is an independent arbitration panel. But Lighthizer is said not to like them much, while China may be reluctant to cede sovereignty to foreign adjudicators.

The enforcement question becomes even more complicated because it will have to address situations that aren't clear-cut, says Ms Reade, the former USTR official.

‘GIVE AND TAKE'

"What if they promised 10 things and they're making modest progress on seven of them but you see nothing on three?'' she says. "You're getting a grade C- on compliance, but it's not an F yet - what do we do about that?''

And she warned that there are risks for the US if it pushes too hard for an aggressive enforcement regime, leaving its counterparty feeling humiliated.

"China negotiates always with the notion that there has to be an equal give and take,'' Ms Reade said.

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