- The Washington Times
Wednesday, July 24, 2019

Treasury Secretary Steven Mnuchin said Wednesday he will return to China on Monday to restart trade talks after negotiations fell apart in May, saying the symbol-laden setting of Shanghai gives him hope the two countries can make progress in dealing with Chinese tech company Huawei and other sticking points.

Mr. Mnuchin said the Chinese put a lot of stock into the Shanghai Communique that began to normalize relations between the U.S. and China in 1972, which made him optimistic about the new round of negotiations.

“I’ll take that as good news that we’ll be making progress next week,” Mr. Mnuchin told CNBC.

The talks are slated for Tuesday and Wednesday and will include U.S. Trade Representative Robert E. Lighthizer. Vice Premier Liu He will lead the talks for China, according to the White House, which outlined a series of topics to tackle.

“The discussions will cover a range of issues, including intellectual property, forced technology transfer, nontariff barriers, agriculture, services, the trade deficit and enforcement,” said press secretary Stephanie Grisham.

Trade negotiations between the world’s two largest economies stalled in the spring, after the White House accused the Chinese of reneging on previously negotiated details.

Mr. Trump imposed tariffs on more than $200 billion worth of Chinese imports, saying it will bring China back to the table as companies move their operations elsewhere.

He has threatened to impose tariffs on $300 billion of additional goods unless the two sides make progress, saying the levies bring “billions and billions” into U.S. coffers, despite widespread belief the costs are passed down to American consumers.

Mr. Mnuchin said he doesn’t expect to fly out of Shanghai with a deal, though he said it should set the table for a visit from Chinese officials to Washington.

“There’s a lot of issues,” he told CNBC’s “Squawk Box.” “Hopefully, we’ll continue to progress.”

Robert Spalding, a senior fellow at the Hudson Institute, said it’s hard for him to see the two sides striking a deal as long as the U.S. demands structural changes to the Chinese economy and mechanisms that enforce the deal.

China’s reliance on state-owned companies and heavy subsidies makes it difficult for the U.S. to land a deal, he said.

“If you have a command economy, it’s not a market economy, so how can you have any trade agreement with that?” he said.

Mr. Trump touted a possible thaw during his meeting with Chinese President Xi Jinping at the Group of 20 Summit in Osaka, Japan, last month. Since then, however, the president has accused China of failing to buy U.S. farm products, as they had discussed.

Mr. Spalding said he thinks the Chinese are trying to wait Mr. Trump out, so both sides will go “round and round” with U.S. negotiators to avoid additional levies.

“Basically what the Chinese don’t want to happen is have the extra tariffs, the extra $300 billion,” he said.

“They’re betting Trump won’t be elected. That’s why they walked away from the agreement. They can just wait for a change in the administration.”

Riley Walters, a Heritage Foundation policy analyst for Asia economy and technology, said that’s a risky strategy that assumes Mr. Trump won’t be reelected and that a future president will have a more relaxed attitude toward China.

He thinks there will be a deal, it’s just a matter of when. Congressional approval of the U.S.-Mexico-Canada trade deal seems to be taking priority now, and the administration may deal with Japan, which just finished up domestic elections, before it strikes a pact with China.

One of the key sticking points with Beijing is Huawei, a major Chinese telecom business that has effectively been blacklisted by the Commerce Department over fears it is too cozy with the communist government and poses security risks — a charge the company denies.

The administration says it will try to soften the dispute by granting waivers for U.S. companies that want to sell components to Huawei, so long as sales don’t pose a risk.

“Where there are commodity products, or issues, that don’t impact national security, Commerce will be proceeding with that,” Mr. Mnuchin said.

Sen. Tom Cotton, Arkansas Republican, said it might be OK for companies to sell components for Huawei’s line of handheld devices.

“Those are not really a threat to America’s security or prosperity or privacy,” he told CNBC.

He said any help for Huawei’s 5G wireless networks is a non-starter and shouldn’t be part of an eventual deal.

Huawei is essentially an arm of the Chinese Communist Party,” Mr. Cotton said. “They are operating in a market to set up the fifth-generation wireless network around the world that is essentially akin to some of the critical weapons of war in the Cold War, like tanks and aircraft carriers. That’s why we shouldn’t allow American companies to do business in setting up [their network].”

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