Concerns grow as Team Trump kicks off trade talks with China

In a blunt warning, the European Union has called on the United States and China to avoid a trade war as high-level talks began in Beijing on Thursday. The executive arm of the EU underlined the importance of a deal in a brief communique.

Delivered by Pierre Moscovici, who heads the Economic and Financial Affairs department of the European Commission, it read:

“Europe continues to enjoy robust growth, which has helped drive unemployment to a 10-year low.

“Investment is rising and public finances are improving, with the deficit in the euro area set to drop to just 0.7% of GDP [gross domestic product] this year.

“The biggest risk to this rosy outlook is protectionism, which must not become the new normal: that would only hurt those of our citizens we most need to protect.”

With 28-member countries and a combined population of 510 million, the EU has waded into the controversy after hopes of finding a quick fix to the US-China trade row appeared to be fading.

At stake are punitive taxes on billions of dollars of American and Chinese goods, which, if ratified, could derail global economic growth.

During the past month, the US President Donald Trump has threatened to levy new tariffs on US$150 billion of Chinese imports, while Beijing has so far retaliated with a list of $50 billion in targeted products.

“It is not realistic to resolve all issues through only one round of negotiations, but we believe that, as long as the US is sincere to resolve the relevant issues, the negotiation will be a positive one,” Hua Chunying, a spokeswoman for China’s Foreign Ministry, told a  news briefing on the eve of the summit.

The US delegation is made up of seven senior officials, including the Treasury Secretary Steven Mnuchin, the Commerce Secretary Wilbur Ross and the US Trade Representative Robert Lighthizer. White House economic advisers Peter Navarro, Larry Kudlow and Everett Eissenstat, along with the US Ambassador to China Terry Branstad, make up the party.

“I’m always hoping but not always hopeful,” Lighthizer said earlier this week before departing for Beijing. “It’s a big, big challenge.”

In Washington, Trump put his cards on the table through his favorite social media site, Twitter.

He stressed the enormity of the task ahead but still exhibited his usually confident persona.

“Delegation heading to China to begin talks on the Massive Trade Deficit that has been created with our Country,” he tweeted as the team prepared to leave.

“Very much like North Korea, this should have been fixed years ago, not now … Great Potential for [the] USA!”

Last year, the trade deficit with China reached a record $375.2 billion. But there is another vital issue to address – the move by the world’s second largest-economy into advanced technologies.

Delegation heading to China to begin talks on the Massive Trade Deficit that has been created with our Country. Very much like North Korea, this should have been fixed years ago, not now. Same with other countries and NAFTA…but it will all get done. Great Potential for USA!

— Donald J. Trump (@realDonaldTrump) May 1, 2018

Both could end up proving to be sticking points with President Xi Jinping’s team, which will be led by Beijing heavyweights, Liu He, the vice-premier, and the vice-president Wang Qishan. Liu is a close friend of Xi and the administration’s leading economic advisor.

“[He will] exchange views with the US delegation on economic and trade issues of common concern to the US and China”, Xinhua, the news agency run by the Chinese government, reported.

Earlier this year, Liu made a brief visit to Washington for trade talks but made little headway in a series of meetings.

Since then, the rhetoric has increased from both sides after tit-for-tat trade tariffs were rolled out in an escalating dispute.

At the heart of the problem is Washington’s concerns about Beijing’s ‘Made in China 2025’ industrial policy, which would turn the country into a high tech powerhouse.

Last week, Xi told scientists that China must develop its own core technology. “To tackle the next key problems in science and technology, we should abandon fantasies and rely on ourselves,” he said.

His view has been echoed in the tightly-controlled state media during the past 10 days

Academics and economists have been wheeled out to back the ruling Communist Party line in a series of opinion pieces.

“Washington had better not expect that its trade-war stick will force Beijing to take whatever the US delegation offers. The imminent dialogue must be held on an equal footing and the US delegation has to come with sincerity,” said a Global Times editorial published on Wednesday.

Lu Xiang, an American affairs expert at the Chinese Academy of Social Sciences, went even further.

“China’s bottom line is that the US will not get anything through blackmail,” he told the Financial Times. “China is waiting to see what [requests] the US will put on the table. But if they pull out a gun and point it at us, then they can finish their tea and leave.”

In a bizarre twist, Bloomberg reported that China’s state-run news outlets have been ordered to refrain from reporting any material beyond official press releases related to the talks, according to people familiar with the matter.

“The Communist Party’s propaganda department has told news websites to strictly use statements released by the official Xinhua News Agency, without any extra interpretation, according to the people, who asked not to be named,” Bloomberg stated. “The propaganda department did not immediately respond to a fax seeking comment.”

– with reporting from AFP and Reuters