A sour note creeps into eco­nomic talks

The Star Early Edition - - BUSINESS REPORT - An­drew Mayeda Washington

THE BRIEF hon­ey­moon be­tween the world’s two largest economies ap­pears to be over.

Three months ago, Pres­i­dent Don­ald Trump had warm words for his Chi­nese coun­ter­part Xi Jin­ping af­ter the two lead­ers bonded at Trump’s Mar-a-Lago re­sort in Florida. Within weeks, the Trump ad­min­is­tra­tion was tout­ing early wins in talks with China, in­clud­ing more ac­cess for US beef and fi­nan­cial ser­vices as well as help in try­ing to rein in North Korea.

Now, the two sides can barely agree how to de­scribe their dis­agree­ments.

High-level eco­nomic talks in Washington broke up on Wed­nes­day with the two su­per­pow­ers un­able to pro­duce a joint state­ment.

Com­merce Sec­re­tary Wil­bur Ross scolded China over its trade im­bal­ance with the US in his open­ing re­marks, and then both sides can­celled a planned clos­ing news con­fer­ence.

Both sides later made separate state­ments fol­low­ing the talks. Trea­sury Sec­re­tary Steven Mnuchin and Ross said China “ac­knowl­edged our shared ob­jec­tive to re­duce the trade deficit which both sides will work co-op­er­a­tively to achieve.”

China’s for­eign min­istry is­sued a re­cip­ro­cal state­ment, say­ing both sides agree to start “con­struc­tive co-op­er­a­tion” to nar­row the trade gap.

Trump cam­paigned on “pro­tect­ing the for­got­ten man and putting Amer­ica first, but if you can’t de­liver their jobs back to them, the next best thing is to get them some ret­ri­bu­tion and that’s what’s hap­pen­ing here,” said Stephen My­row, man­ag­ing part­ner at re­search firm Bea­con Pol­icy Ad­vi­sors in Washington.

It was the first meet­ing un­der the Trump ad­min­is­tra­tion of the two coun­tries’ most se­nior eco­nomic of­fi­cials, a rit­ual that be­gan in 2008. Re­branded as the Com­pre­hen­sive Eco­nomic Di­a­logue this year, the dis­cus­sions were led by Mnuchin and Ross on the US side, and vice pre­mier Wang Yang for the Chi­nese. Fed­eral Re­serve chair­per­son Janet Yellen took part in the talks, and ex­ec­u­tives in­clud­ing Alibaba’s Jack Ma and Black­stone’s Stephen Sch­warz­man met on the side­lines.

Af­ter last year’s fo­rum, the two coun­tries re­leased a 6 589word state­ment as­sert­ing the mu­tual in­ter­est they share in each other’s pros­per­ity. The doc­u­ment also in­cluded com­mit­ments, such as one by China to re­duce ex­cess ca­pac­ity in its steel in­dus­try – still a ma­jor ir­ri­tant as the Trump ad­min­is­tra­tion weighs whether to im­pose tar­iffs and quo­tas on steel im­ports.

“The Trump ad­min­is­tra­tion may have had un­re­al­is­tic ex­pec­ta­tions of what China will do to bal­ance trade,” said Shen Jian­guang, chief Asia econ­o­mist at Mizuho Se­cu­ri­ties Asia in Hong Kong. “Now it is the start of real hard ne­go­ti­a­tions.”

At open­ing re­marks by the two sides on Wed­nes­day, Ross com­plained about the trade gap with China in un­usu­ally blunt terms. While US ex­ports to China have grown in re­cent years, im­ports from the Asian coun­try have ex­panded even faster, lead­ing to a $309 bil­lion (R4 tril­lion) trade deficit, Ross said.

“If this were just the nat­u­ral prod­uct of free-mar­ket forces, we could understand it, but it’s not,” Ross said, as Wang looked on.

“So it’s time to re­bal­ance in our trade and in­vest­ment re­la­tion­ship in a more fair, eq­ui­table and re­cip­ro­cal man­ner.” – Bloomberg

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