Tue, Apr 16, 2019 - Page 10 News List

US watering down demand that China ax subsidies

TRADE NEGOTIATIONS:The US has shifted its focused to other areas, such as ending forced technology transfers, improving IP protection and widening access to markets

Reuters, WASHINGTON and BEIJING

US negotiators have tempered demands that China curb industrial subsidies as a condition for a trade deal after strong resistance from Beijing, according to two sources briefed on discussions, marking a retreat on a core US objective for the trade talks.

The issue of industrial subsidies is thorny, because they are intertwined with the Chinese government’s industrial policy.

Beijing grants subsidies and tax breaks to state-owned firms and to sectors seen as strategic for long-term development.

Chinese President Xi Jinping (習近平) has strengthened the state’s role in parts of the economy.

In the push to secure a deal in the next month or so, US negotiators have become resigned to securing less than they would like on curbing those subsidies and are focused instead on other areas where they consider demands are more achievable, the sources said.

Those include ending forced technology transfers, improving intellectual property (IP) protection and widening access to China’s markets, the sources said.

China has already given ground on those issues.

“It’s not that there won’t be some language on it, but it is not going to be very detailed or specific,” one source familiar with the talks said in reference to the subsidies issue.

A representative for the White House referred reporters to the US Trade Representative’s Office (USTR), which did not respond to a request for comment.

“If US negotiators define success as changing the way China’s economy operates, that will never happen,” said the other source with knowledge of the trade talks.

“A deal that makes Xi look weak is not a worthwhile deal for Xi. Whatever deal we get, it’s going to be better than what we’ve had, and it’s not going to be sufficient for some people. But that’s politics,” that source said.

China earlier this year pledged to end market-distorting subsidies for its domestic industries, but offered no details on how it would achieve that goal, three people familiar with the trade talks told reporters in February.

Subsidies and tax breaks have been a source of friction between the two countries for years.

Washington says Beijing has failed to comply with its WTO obligations on subsidies that affect imports and exports.

China has taken steps to address some US concerns in cases brought before the WTO. It has also begun to publicly downplay its push to dominate the future of high-tech industries under its “Made in China 2025” policy, although few expect it to jettison those ambitions.

However, the USTR has complained of a catalog of other subsidies and supports, including preferential access to capital and land.

The US has said China has failed to disclose subsidies as required by the WTO.

Washington has detailed more than 500 different subsidies it says China applies in notifications to the WTO.

The scope of China’s local government subsidy programs is largely unknown and even the Chinese negotiators have said in recent discussions they do not know the details of all those programs.

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