Rhetoric shows U.S., China still far apart as trade talks continue

NEW YORK — President Donald Trump espoused “America First.” Chinese Foreign Minister Wang Yi warned that a decoupling of the U.S. and Chinese economies would only impose pain on both sides.

The rhetorical divide between the world’s two largest economies was in plain view at the United Nations General Assembly meeting this week, providing little indication that a comprehensive trade deal is imminent.

Trump held no public meetings with Chinese officials in New York and pivoted his attention to smaller-scale trade deals with Japan and India. Yet Beijing never seemed to be far from his mind as he railed against China during his speech to the assembly, exposing bilateral frustrations on a multilateral stage.

“Not only has China declined to adopt promised reforms, it has embraced an economic model dependent on massive market barriers, heavy state subsidies, currency manipulation, product dumping, forced technology transfers and the theft of intellectual property and also trade secrets on a grand scale,” Trump said Tuesday.

The president relished his role as a defender of American interests, saying he would “not accept a bad deal for the American people.”

Rejection of a subpar deal has become a more consistent refrain from Trump. Maintaining a winner-takes-all approach to a deal may score more political points in his 2020 reelection race than having to defend an agreement that will inevitably become a target for Democrats.

“President Trump and President Xi [Jinping] will have to own this agreement. They’ll have to own it very publicly,” Craig Allen, president of the U.S.-China Business Council, said in an interview. “There’s a lot more politics involved now than policy.”

Wang stressed the interdependence of both countries and robustly defended the country’s model of government and development. Beijing is preparing to validate its position as a world superpower with the celebration of the 70th anniversary of the People’s Republic of China on Oct. 1.

“Negotiation cannot take place under the threat or at the expense of China’s legitimate right to development,” Wang said at an event Tuesday night organized by the U.S.-China Business Council and the National Committee on U.S.-China Relations.

He said both sides have recently shown goodwill on tariffs. But Wang also warned that decoupling from the Chinese economy “would be to decouple from opportunity and from the future.”

“The U.S. business community should well appreciate this logic,” he said.

Wang also panned Trump’s accusation that China is ripping off the U.S.

“Of course this is not the fact. The truth is that both countries have benefited tremendously from cooperation in the past 40 years," Wang added.

The remarks came as the two sides prepare for the first round of high-level trade talks since a meeting in Shanghai in late July that ended with little progress. Treasury Secretary Steven Mnuchin said Monday the talks would be held the week of Oct. 6, and others more specifically expect them to take place Oct. 10-11.

The trade fight escalated dramatically after Mnuchin and U.S. Trade Representative Robert Lighthizer returned from Shanghai empty-handed. Trump was further rankled by China's refusal to step up purchases of U.S. agricultural goods, prompting him to impose and threaten additional duties on Chinese exports.

The two countries have shown some willingness to ease trade tensions that have roiled world markets for more than a year. China increased purchases of U.S. soybeans while the U.S. delayed for two weeks a tariff increase on $250 billion worth of Chinese goods initially scheduled to take effect on Oct. 1.

Deputy-level officials met in Washington last week, with discussions described as “productive” by the U.S. Trade Representative’s Office.

Chatter has also increased around a so-called interim deal that could establish a détente in the trade fight. That could provide some breathing room as the two sides figure out how to get China to move toward core U.S. complaints over intellectual property, technology transfer, subsidies and other issues the administration says have resulted in the wholesale theft of American innovation.

The upcoming talks, and an expected follow-up meeting in Beijing, could produce a partial agreement that cancels Trump’s Sept. 1 tariff increase on more than $100 billion worth Chinese goods, as well as another tariff hike planned for Dec. 15 on another $100 billion-plus, in exchange for Chinese action on intellectual property rights legal reforms, said Derek Scissors, a China expert at the American Enterprise Institute.

If Beijing throws in a promise to purchase billions of dollars of American farm goods, that “could keep Trump happy” for a while, while leaving in place previously imposed U.S. duties on about $250 billion worth of Chinese goods, Scissors added.

But politics may soon start to overtake the process.

Depending on the course of the Democratic presidential primaries, Trump might walk away from any deal he strikes this fall. Sen. Elizabeth Warren (D-Mass.), for example, is more likely than former Vice President Joe Biden to try to outflank Trump by promising even tougher action against Beijing. “I believe if Warren wins the nomination, then Trump will abandon any deal he has with China,” Scissors said.

A person familiar with the negotiations, who asked not to be identified, said he expected any deal reached this fall to be low-quality because of Beijing’s reluctance to make meaningful concessions to cut subsidies, allow the free flow of digital data across borders and to rein in practices that force companies to transfer technology to access China’s market.

Beijing is only willing to make commitments to protect intellectual property rights that would have been helpful for the United States 20 years ago, rather than address the cutting-edge concerns that many American companies have, the person said.

Allen said some of the key outstanding issues in the talks have to do with U.S. demands on China’s subsidies and state-owned enterprises, which are important to China for ideological and economic reasons.

For U.S. businesses that have whiplash from the administration’s tactics, incremental progress might be more desirable.

Allen said a good option would be to get China to make a “political commitment” to tackle the tough issues as one step in the process of securing a larger agreement.

“This is not a birthday cake where you get to eat the whole thing,” he said.

Former Secretary of State Henry Kissinger, who made remarks via video at the event where Wang spoke, urged the two sides to continue substantive talks. He also warned that a conflict could quickly spiral out of control given the technology that both sides possess.

“A constructive dialogue must respect the core interests of both countries,” he said. “It will keep in mind the necessities for peace.”

CORRECTION: A previous version of this article incorrectly stated Oct. 1 is the 70th anniversary of the Chinese Communist Party.