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China hopes to placate Trump with promise to buy billions more in US goods

Secretary of the Treasury Steven Mnuchin attends a roundtable discussion on April 16, 2018, in Hialeah, Fla.

JOHNNY LOUIS/SIPA/TNS

By DON LEE AND NOAH BIERMAN | Tribune News Service | Published: May 18, 2018

WASHINGTON (Tribune News Service) -- Chinese officials are hoping to mollify President Donald Trump's oft-stated displeasure with America's huge trade imbalance with China by pledging to import at least $200 billion more in American-made products, the director of the White House National Economic Council said Friday.

Larry Kudlow, the president's chief economic adviser, said meetings Thursday and Friday with Chinese trade officials went well and that Trump was more optimistic "than I've seen him" that a deal can be reached to avert a global trade war.

"China's come to trade," Kudlow said Friday. "They are meeting many of our demands. There's no deal yet to be sure. It's probably going to take a while. It's a process. But they're coming to play. I believe they want to make a deal."

Analysts doubted, however, that China would be able to increase imports fast enough or in the amounts needed to meet earlier demands by Trump to cut more than half the $370 billion merchandise trade surplus with the U.S. by 2020.

More important, analysts said, warn such purchases would do little to address systemic problems in the trading relationship and American grievances involving China's aggressive industrial policies. Many U.S. businesses have complained about China's theft of intellectual property and forced technology transfers to do business there.

Senate Minority Leader Charles E. Schumer, D-N.Y., urged Trump to reject the offer. "Don't let President Xi play you," Schumer wrote on Twitter Friday. "Trading some short-term purchases of American goods and giving up on China's theft of American intellectual property (which are our family jewels that will create millions of good paying jobs) is the art of a bad deal."

Kudlow said such issues were still on the table. "I think just as important, they have to lower their tariff rates, they have to lower their non-tariff barriers," he said. "We have to have a verifiable process whereby the technology transfers and the theft of intellectual property stops."

Some Chinese officials cast doubt on the $200 billion offer. According to Bloomberg, a Chinese Foreign Ministry official said he was unaware of such an agreement.

Still, American business groups with interests in China were encouraged by the continuing dialogue and noted that the latest visit by the Beijing delegation, led by Vice Premier Liu He, was in sharp contrast to Liu's meeting in Washington in February, when he was practically snubbed by Trump. The president announced tariffs targeting Chinese steel on the day Liu was talking with administration officials.

On Thursday, Trump received Liu in the Oval Office and posted on Twitter a photo of the two men gripped in a handshake.

Two weeks ago, Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer and other senior administration officials, in a visit to Beijing, came away empty after exchanging unusually tough demands with Liu and other Chinese officials.

"They were pretty far apart and (had) a wide gap to overcome, so I think it's good that on a pretty quick basis that Vice Premier Liu comes here to continue discussions," said John Frisbie, president of the U.S.-China Business Council, which represents about 200 large companies doing business in China, including General Motors, Walmart and FedEx.

He said he hoped for an "early harvest," or some immediate outcomes, to emerge from the two days of talks that could defuse tensions and help lead both sides to step back from threats of large tariffs that have stoked fears of a trade war between the world's two biggest economies.

At the same time, Frisbie said, any short-term results should not come at the expense of dealing squarely with the structural issues in the relationship, such as market access and protection of intellectual property.

At the top of the Trump administration's demands outlined two weeks ago was a $200 billion reduction in China's trade surplus with the United States, even though economists widely view the U.S. trade deficit to be caused largely by a mismatch between the nation's savings and investments.

China's response in committing to increases purchases of American goods was clearly aimed at soothing Trump's personal sore point with China, but experts said it was hard to see how Beijing could make a big dent in the deficit anytime soon.

For one thing, China can buy only so many Boeing airplanes and soybeans, its top two U.S. imports. Beijing could direct Chinese firms to shift purchases from other countries to the U.S., but that would present problems for China's relations with other nations and also risk putting too much dependence on America.

The Chinese proposal was said to include importing U.S. energy resources such as natural gas, but a lack of pipeline and other U.S. infrastructure constraints would limit such purchases in the near term.

For years Chinese officials have argued that the U.S. could improve its trade balance with China by relaxing export controls prohibiting the sale of various U.S. software, equipment and other products that could contribute to the Asian country's military capabilities.

But the recent trend has been to tighten these controls, not ease them, the latest example being the recent ban on U.S. companies' selling products to ZTE, the giant Chinese telecom-equipment maker. The Trump administration last month sanctioned ZTE for violating a previous settlement over illegal shipments to Iran, although the president this week indicated that those restrictions could be softened as a favor to Chinese President Xi Jinping.

Trump's reversal of position on ZTE helped pave the way for the talks this week but also perpetuated confusion and questions about what Trump would be willing to accept and what would be considered in that decision.

As before, the president Thursday referred to his special relationship with Xi. At the same time, he criticized China and other U.S. trading partners as "very spoiled." He also suggested that China was behind North Korea's recent second thoughts about attending a June summit with Trump, to increase China's leverage in the U.S. trade talks.

Previously Trump offered to ease U.S. trade demands on China if Xi would help the U.S. rein in North Korea's nuclear program.

"I'm at a loss as to understand what the administration's priorities are with China," said Wendy Cutler, who has led trade negotiations for Presidents George W. Bush and Obama and is now vice president of the Asia Society Policy Institute.

"They've put so many issues on the table, and it's unclear to me whether they would be willing to settle for a deal if China agrees to buy more U.S. goods and lower the trade deficit," she said. "Is that sufficient for a deal with some market access commitments, or do they need to see underlying structural changes? ... All of these issues were in their proposal, and they just don't lend themselves to a quick deal."

Sharp differences in the upper levels of the Trump administration have complicated matters. The U.S. side is led by Mnuchin, who analysts say has been eager to seek a deal with Liu. But other senior administration officials, Lighthizer, especially trade adviser Peter Navarro, have been more vocal critics of the Chinese and have preferred a more antagonistic approach.
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