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US negotiators heading to China on Monday for in-person talks

[WASHINGTON] US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to travel to China Monday for the first high-level, face-to-face trade negotiations between the world’s two biggest economies since talks broke down in May.

The duo will be in Shanghai through Wednesday, according to people familiar with the plans who asked not to be identified. The meeting will involve a broad discussion of the issues outstanding and isn’t expected to yield major breakthroughs, a senior administration official said.

President Donald Trump and Chinese counterpart Xi Jinping met at the Group of 20 summit in Japan last month and declared a tentative truce in their year-long trade war. The leaders directed their negotiators to resume trade talks. Since then Mr Mnuchin, Mr Lighthizer and their Chinese counterparts have spoken by phone.

According to a senior administration official, the Chinese requested that the meeting take place in Shanghai, rather than Beijing. Mr Mnuchin told CNBC Wednesday that he and Mr Lighthizer are departing Monday for China and hope to make progress while there.The Chinese foreign affairs and commerce ministries didn’t immediately respond to a request for comment.

The talks will restart at a sensitive political moment, as Mr Xi gathers party elders in the Yellow Sea resort area Beidaihe for an annual policy retreat.

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The American negotiators will be returning to a country that has seen criticism of the US escalate markedly since their last visit, as the Communist Party grows more impatient with what it sees as the Trump administration’s meddling in its internal affairs. On Tuesday, China’s foreign ministry accused the US of being a “black hand” behind Hong Kong unrest while the military said in a sweeping white paper that Washington had “undermined global strategic stability.”

Stocks jumped on the news, and the S&P 500 closed up almost 0.7 per cent in New York. Chinese stocks gained Wednesday with all major indexes jumping in the morning on the news of renewed talks before pulling back later in the day.

STRUCTURAL ISSUES

US officials have played down the likelihood of a quick deal with China.

“It is impossible to judge how long it will take when the president’s objective is to get a proper deal or go ahead with tariffs,” Secretary of Commerce Wilbur Ross told Bloomberg TV on Tuesday. “What is important is if we make a deal, it’s a proper deal, a really good deal. That’s his overriding objective. And that’s much more important than exact timing.”

The sides remain at odds over significant issues like Washington’s demands for structural reforms to China’s economy and Beijing’s call for the US to remove existing punitive tariffs on imported Chinese goods.

The talks in recent weeks have focused on Huawei licenses and agriculture purchases, and lacked engagement on structural issues that the US wants addressed in any trade deal.

People familiar with next week’s meeting say it’s a positive step for talks overall but caution that it’s likely to feature a wide-ranging discussion of where things stand, rather than a chance for substantive negotiations. It’s still unclear what the starting point will be for deeper discussions. Talks collapsed in May because the two countries disagreed on draft terms of a deal.

TRADE NEGOTIATORS

Chinese Commerce Minister Zhong Shan will be part of the core group of negotiators, which on the Chinese side has been led by Vice Premier Liu He. Mr Zhong was part of the Chinese team at previous rounds of negotiations, but recently he’s been specifically mentioned in the official readouts of phone calls between the two sides, spurring speculation that he may now have a more prominent role in the talks.

Mr Zhong is seen as more of a hardliner than Liu and some China watchers say he was added to the talks to ensure that a more hawkish view is represented at the table. Mr Zhong is a known quantity for many US officials, including Mr Lighthizer who has met him several times over the past two years at international meetings such as Asia-Pacific Economic Cooperation summits.

On Monday, Mr Trump and senior White House officials, including Mr Mnuchin and Mr Lighthizer, met with chief executives of US technology companies in a step toward easing a ban on sales to China’s Huawei Technologies, which has been another point of tension in the relationship.

National Economic Council Director Larry Kudlow told reporters Tuesday that the meeting was positive and cited it as one reason he’s optimistic that in-person talks with China were likely to resume soon.

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