US demands regular review of China trade reform

The United States is pushing for regular reviews of China’s progress on pledged trade reforms as a condition for a trade deal—and could again resort to tariffs if it deems Beijing has violated the agreement, according to sources briefed on negotiations to end the trade war between the two nations.

A continuing threat of tariffs hanging over commerce between the world’s two largest economies would mean a deal would not end the risk of investing in businesses or assets that have been impacted by the trade war.

“The threat of tariffs is not going away, even if there is a deal,” said one of three sources briefed on the talks who spoke with Reuters on condition of anonymity.

Chinese negotiators were not keen on the idea of regular compliance checks, the source said, but the US proposal “didn’t derail negotiations.”

A Chinese source said the United States wants “periodic assessments” but it’s not yet clear how often.

“It looks like humiliation,” the source said. “But perhaps the two sides could find a way to save face for the Chinese government.”

The administration of US President Donald Trump has imposed import tariffs on Chinese goods to put pressure on Beijing to meet a long list of demands that would rewrite the terms of trade between the two countries.

The demands include changes to China’s policies on intellectual property protection, technology transfers, industrial subsidies and other trade barriers.

An enforcement and verification process is unusual for trade deals and is akin to the process around punitive economic sanctions such as those imposed on North Korea and Iran. Disputes over trade are more typically dealt with through courts, the World Trade Organisation (WTO) or through arbitration panels and other dispute settlement mechanisms built into trade agreements.

Trump’s team has criticised the WTO for failing to hold China accountable for not executing on promised market reforms. US has also criticized the WTO’S dispute settlement process and is seeking reforms at the organisation.

Regular reviews would be one potential solution to address a demand from US Trade Representative Robert Lighthizer for ongoing verification of any trade pact between the two countries, three sources familiar with the talks told Reuters. The threat of tariffs would be used to keep reform on track, the sources said.

Lighthizer is leading negotiations with China. A USTR spokesman declined to comment on the possibility of regular assessments.