China, U.S. far apart after trade talks

BEIJING — Two days of inconclusive U.S.-China talks ended Friday amid signs that President Donald Trump’s administration is demanding dramatic concessions that challenge core elements of China’s economic system and its ambitions for future development.

China said “big differences” remained as a high-level U.S. government delegation headed home, although consensus had been reached on some issues.

It was unclear where the two sides had found common ground, but U.S. envoys’ overall aims are likely to have met stiff resistance, given their demands for fundamental revisions in how the Chinese leadership manages foreign trade and its domestic economy. The demands included a $200 billion cut in the U.S. trade deficit with China by 2020.

“The United States-China trade relationship is significantly imbalanced” and “immediate” action is needed to reduce the U.S. trade deficit with China, said a U.S. briefing paper presented to Chinese officials. The paper appeared on the social media site Weibo before being deleted by Chinese government censors.

The meetings marked an attempt by the Trump administration to leverage changes from China without sparking a potentially disastrous trade war, after threatening to impose tariffs on up to $150 billion in Chinese imports.

U.S. negotiators entered the talks with a set of demands that called for China to drop its tariffs to match lower U.S. levels; eliminate limits on U.S. investment in key industries; end state-sponsored cyberattacks on U.S. targets; strengthen intellectual property safeguards; and halt subsidies for several advanced technology industries.

“Each side has staked out positions the other side will not reach,” said John Frisbie,

president of the U.S.-China Business Council. “The gap’s pretty wide right now.”

The talks ended with no details on next steps. But some analysts predicted tough bargaining in the weeks to come.

“The Trump administration is making very strong demands upfront which is likely to offend the Chinese,” said Andrew Collier, managing director of Orient Capital Research in Hong Kong. “It may take them some time to formulate an answer, as they don’t react well to ‘in your face’ demands, particularly from the U.S.”

Chinese President Xi Jinping is unlikely to give ground on subsidies for key technology industries, which can be difficult to measure and which involve China’s ambitions to match the world’s most advanced economies, Collier said.

As he headed into the second day of meetings, Treasury Secretary Steven Mnuchin told reporters that the two sides

were having “very good conversations,” according to the Reuters news agency.

But it was not a surprise to learn later Friday that the talks had ended without a deal that addresses U.S. concerns over China’s trade and investment practices, as well as over state subsidies to high-tech industries.

“The two sides fully exchanged views on expanding U.S. exports to China, bilateral trade in services, two-way investment, protection of intellectual property rights, resolution of tariffs and non-tariff measures, and reached consensus in some areas,” the state news agency Xinhua reported.

“The two sides recognized that there are still big differences on some issues and that they need to continue to step up their work and make more

progress,” it said.

Xinhua reported that two sides agreed to establish a “working mechanism” to maintain close communication on the issues discussed in the talks.

In a document supplied by the U.S. delegation to the Chinese side ahead of the talks, and which quickly leaked to Weibo, Washington asked China to take action to cut the $375 billion U.S. trade deficit by $100 billion over the next

12 months, and by another $100 billion by the end of 2020, chiefly by importing from the United States.

The document, the authenticity of which was confirmed by a U.S. official, was cast as a draft agreement provided ahead of the talks “solely to help facilitate candid and constructive exchanges between the two sides.”