US, China face deep trade, IP differences in high-level talks

Trump has threatened to raise tariffs on $200b worth of goods on March 2

WASHINGTON: The United States and China are set to launch a critical round of trade talks later on Wednesday amid deep differences over Washington's demands for structural economic reforms from Beijing that will make it difficult to reach a deal before a March 2 US tariff hike.

The two sides will meet next door to the White House in the highest-level talks since US President Donald Trump and Chinese President Xi Jinping agreed a 90-day truce in their trade war in December.

People familiar with the talks and trade experts watching them say that, so far, there has been little indication that Chinese officials are willing to address core US demands to protect American intellectual property rights and end policies that Washington says force US companies to transfer technology to Chinese firms.



The US complaints, along with accusations of Chinese cyber theft of US trade secrets and a systematic campaign to acquire US technology firms, were used by the Trump administration to justify punitive US tariffs on $250 billion worth of Chinese imports.

Trump has threatened to raise tariffs on $200 billion of goods to 25% from 10% on March 2 if an agreement cannot be reached. He has also threatened new tariffs on the remainder of Chinese goods shipped to the US.

"Clearly on the structural concerns, on forced technology transfer, there remains a significant gap if not a wide chasm between the two sides," a person familiar with the talks told Reuters.

Chinese officials deny that their policies coerce technology transfers. They have emphasised the steps already taken, including reduced automotive tariffs and a draft foreign investment law that improves access for foreign firms and promises to outlaw "administrative means to force the transfer of technology."

China is fast-tracking that new law, with the country's parliament likely to approve it in March. A crucial component of any progress in the talks, according to top administration officials, is agreement on a mechanism to verify and "enforce" China's follow-through on any reform pledges that it makes.



This could maintain the threat of US tariffs on Chinese goods in the long term.

Some business groups watching the talks were tempering expectations for a breakthrough this week.

With a month to go before the deadline, it was unlikely that the best offers from either side would be put on the table in the next two days, said Erin Ennis, Senior Vice President of the US-China Business Council.

"I don't think there's going to be any big outcome," Ennis said of the talks scheduled for Wednesday and Thursday. "Hopefully, they make some good progress that will set them up to be able to get to completion at the end of the 90 days."