April 2, 2019 / 6:09 PM / 16 days ago

White House sees 'headway' on U.S.-China trade ahead of new talks this week

WASHINGTON (Reuters) - The United States and China “expect to make more headway” in trade talks this week, White House economic adviser Larry Kudlow said on Tuesday as the top U.S. business lobbying group said differences over an enforcement mechanism and the removal of U.S. tariffs were still obstacles to a deal.

FILE PHOTO: Myron Brilliant, executive vice president and head of International Affairs at the U.S. Chamber of Commerce speaks during a meeting with Chinese State Councilor and Foreign Minister Wang Yi (not pictured) at the Ministry of Foreign Affairs in Beijing, China February 19, 2019. Wu Hong/Pool via REUTERS

“We expect to make more headway. I can’t report any of the details, but it’s a larger, grander discussion than anything we’ve had before in U.S.-China trade relations, and there’s a certain amount of optimism,” Kudlow said in remarks at the U.S. Chamber of Commerce.

Kudlow, who directs the White House National Economic Council, acknowledged that there are still issues to be resolved, and the Trump administration will focus heavily on ways to hold China to keep its reform promises and curbing intellectual property theft and forced technology transfers and lowering tariff and non-tariff barriers.

U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are due to resume talks with Chinese vice premier Liu He on Wednesday, just days after the two sides reported progress in talks last week in Beijing.

The Chamber, the largest and most influential business lobbying group, sees increasing chances that Washington and Beijing will reach a deal to end a nine-month tariff war.

“We’re getting to the point where it’s clear that both governments want a deal,” Myron Brilliant, the Chamber’s head of international affairs, told reporters. “The presidents want a deal, and they need to get through the end-game issues. This is a critical week.”

The United States and China have levied tariffs on hundreds of billions of dollars’ worth of two-way trade since July 2018, raising costs, disrupting supply chains and roiling global markets.

U.S. President Donald Trump’s administration is pressuring Beijing to meet a long list of demands that would rewrite the terms of trade between the two countries, including changes to China’s policies on intellectual property protection, technology transfers, industrial subsidies and other trade barriers.

Trump on Tuesday afternoon repeated his now-familiar refrain that China trade talks were going “very well” as he met with NATO Secretary-General Jens Stoltenberg at the White House.

Absent significant process this week on the “tricky” issues of tariffs and enforcement, the goal to complete a deal this month may be missed, Brilliant said.

The Trump administration and American companies want structural IP and market economy issues addressed, with a way to ensure China follows through on its promises, Brilliant said.

U.S. officials favour tariffs as a way to maintain leverage on China and ensure those obligations are met. But it is unlikely that China would agree to an enforcement mechanism that included re-imposition of unilateral U.S. tariffs without the current tariffs being removed, Brilliant said.

The continued threat of tariffs hanging over commerce would mean a deal would not end the risk of investing in businesses or assets that have been affected by the trade war.

Reporting by David Lawder and Chris Prentice; editing by James Dalgleish

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