Analyst: Enforcement will be hard for U.S.-China talks

But U.S.-China Business Council Senior Vice President Erin Ennis indicated she sees a path forward in negotiations during the National Association of Foreign-Trade Zones Legislative Summit.    Enforcement will probably be one of the most difficult aspects associated with any deal reached between the U.S. and China, as Chinese officials have indicated they won’t agree to a unilateral enforcement mechanism and the U.S. is likely to seek to have tariffs as part of any end result, U.S.-China Business Council (USCBC) Senior Vice President Erin Ennis said Tuesday.
   The U.S. and China have agreed that any deal reached between the two countries must be enforceable, according to the White House.
   The U.S. is seeking commitments by China to make several economic reforms, including stoppage of intellectual property theft and forced technology transfer, mitigation of excess manufacturing capacity and reduction of tariff and non-tariff barriers.
   “Whatever it takes to have an enforcement mechanism in this is probably going to be one of the more challenging aspects to negotiate,” Ennis said during the National Association of Foreign-Trade Zones (NAFTZ) Legislative Summit in Washington, D.C. “China has made clear it will not, nor has it ever agreed to a unilateral U.S. assessment of whether it has implemented commitments that it has made. The U.S. is not going to accept China’s word on what it has done.”
   But there are alternatives, she said.
   Some include investor-state dispute settlement, which is included in several U.S. free trade agreements, some form of state-to-state dispute settlement, as well as tariffs, Ennis said.
   Enforcement “does not have to be tariffs, although I think … given the Trump administration’s strong belief that tariffs are a powerful way to get our trading partners to do what we need them to do, and to punish them when they don’t, we should assume that the U.S. will be seeking to have tariffs as some part of what the mechanism is,” Ennis said. “Whether that looks like just a unilateral tariff or not, I don’t know yet. But certainly, those are some of the aspects they are working on.”
   But the prevailing industry view is that tariffs should decrease as China implements any commitments, Ennis said.
   USCBC believes that the U.S. and China are still negotiating based on China’s August response to a four-page document tabled by the U.S. in May that was attached to a longer appendix with 142 items that the U.S. called Beijing to address, she said.
   China’s response indicated that Beijing could be willing to address as much as 80 percent of the items on the list, as Beijing has indicated that 20 percent of the items are non-negotiable, Ennis said.
   “As much as the business community has disagreed with the administration’s tactics, as much as we can argue about why they are at the table, the bottom line is the Trump administration has focused China’s attention that something needs to be done and that it’s going to have to be more than what they have done in the past,” she said.
   Enforcement is difficult in many trade agreement contexts, including the World Trade Organization (WTO), National Foreign Trade Council President Rufus Yerxa said during the NAFTZ summit, noting “there is no WTO jail.”
   “Agreements are agreements, and you can do them all kinds of different ways,” Yerxa said. “The real question is what’s the mechanism you have for enforcement?”