US ‘close to finalizing’ parts of trade deal with China: USTR

WASHINGTON: US and Chinese trade officials are "close to finalizing" some parts of an agreement after high-level telephone discussions on Friday (Oct 25), the US Trade Representative's office said, adding that deputy-level talks would proceed "continuously."

In a statement issued after the call, the USTR provided no details on the areas of progress.

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"They made headway on specific issues and the two sides are close to finalizing some sections of the agreement. Discussions will go on continuously at the deputy level, and the principals will have another call in the near future," it said.

The call came as Washington and Beijing are working to agree on the text for a "Phase 1" trade agreement announced by US President Donald Trump on Oct 11. Trump has said he hopes to sign the deal with China's President Xi Jinping next month at a summit in Chile.

Beijing was expected to request cancellation of some planned and existing US tariffs on Chinese imports during the phone call, people briefed on the negotiations told Reuters.

In return, China was expected to pledge to step up its purchases of US agricultural products.

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The world's two largest economies are trying to calm a nearly 16-month trade war that is roiling financial markets, disrupting supply chains and slowing global economic growth.

"They want to make a deal very badly," Trump told reporters at the White House. "They're going to be buying much more farm products than anybody thought possible."

So far, Trump has agreed only to cancel an Oct 15 increase in tariffs on US$250 billion in Chinese goods as part of understandings reached on agricultural purchases, increased access to China's financial services markets, improved protections for intellectual property rights and a currency pact.

But to seal the deal, Beijing is expected to ask Washington to drop its plan to impose tariffs on US$156 billion worth of Chinese goods, including cell phones, laptop computers and toys, on Dec 15, two US-based sources told Reuters.

Beijing also is likely to seek removal of 15 per cent tariffs imposed on Sep 1 on about US$125 billion of Chinese goods, one of the sources said. Trump imposed the tariffs in August after a failed round of talks, effectively setting up punitive duties on nearly all of the US$550 billion in US imports from China.

"The Chinese want to get back to tariffs on just the original US$250 billion in goods," the source said.

Derek Scissors, a resident scholar and China expert at the American Enterprise Institute in Washington, said the original goal of the early October talks was to finalize a text on intellectual property, agriculture and market access to pave the way for a postponement of the Dec. 15 tariffs.

"It's odd that (the president) was so upbeat with (Chinese Vice-Premier) Liu He and yet we still don't have the Dec 15 tariffs taken off the table," Scissors said.

US Treasury Secretary Steven Mnuchin last week said no decisions were made about the Dec 15 tariffs, but added: "We'll address that as we continue to have conversations."

SMALLER PURCHASES?

If a text can be sealed, Beijing in return would exempt some US agricultural products from tariffs, including soybeans, wheat and corn, a China-based source told Reuters. Buyers would be exempt from extra tariffs for future buying and get returns for tariffs they already paid in previous purchases of the products on the list.

But the ultimate amounts of China's purchases are uncertain.

Trump has touted purchases of US$40 billion to US$50 billion annually – far above China's 2017 purchases of US$19.5 billion as measured by the American Farm Bureau.

One of the sources briefed on the talks said China's offer would start at around US$20 billion in annual purchases, largely restoring the pre-trade-war status quo, but this could rise over time. Purchases also would depend on market conditions and pricing.

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