NEC head: Ball in Xi’s court to settle trade issues

USTR also now taking input on $200 billion in additional planned tariffs, after China announced retaliatory tariffs against $50 billion in implemented and planned U.S.duties.    Chinese President Xi Jinping has not indicated that he has “any intention” to follow through on discussions with the United States to resolve U.S. trade complaints and eliminate imposed and planned Section 301 tariffs, National Economic Council (NEC) Director Larry Kudlow said during CNBC’s Alpha Conference on Wednesday.
   President Donald Trump is so dissatisfied with China’s lack of engagement with the U.S. on trade that he is keeping pressure on China, “and I support that,” Kudlow said.
   “They haven’t responded at all — not one basis point — to our requests to do something about the theft of intellectual property and the forced divestiture of our technology,” he said.
   Kudlow added that “the ball is in his court,” referring to Xi, and said China can end tit-for-tat tariffs “this afternoon” by providing a “more satisfactory approach” that reduces tariffs and non-tariff barriers, prevents IP theft and allows foreign investors full ownership of their companies operating in China.
   The Office of the U.S. Trade Representative (USTR) on Tuesday officially opened the comment period for planned 10 percent additional tariffs on $200 billion worth of goods from China in 2017 import value, pursuant to that agency’s investigation concluded in March under Section 301 of the Trade Act of 1974, which found that China engages in unfair commercial practices including forced technology transfer.
   As of Tuesday evening, the comment docket on Regulations.gov showed that USTR hadn’t received any comments.
   The interagency Section 301 Committee will hold a public hearing on the proposed tariffs at the International Trade Commission in Washington, D.C., Aug. 20-23.
   July 27 is the due date for filing requests to appear and a summary of expected testimony at the public hearing, and for all prehearing submissions, while Aug. 17 is the due date for submission of written comments, and Aug. 30 is the due date for submission of post-hearing rebuttal comments.
   The Trump administration is currently collecting 25 percent tariffs on goods from China across $34 billion worth of goods in 2017 import value and plans to collect 25 percent tariffs across another $16 billion worth of Chinese goods in 2017 import value.
   The public comment process for that second tranche of planned tariffs is ongoing.
   The planned third tranche — the $200 billion — covers 6,031 tariff subheadings and was announced in response to Chinese retaliation against the United States’ first round of Section 301 tariffs.
   China hasn’t changed the practices that led the U.S. to impose the tariffs, USTR said.
   “In light of China’s response to the $50 billion action announced in the investigation and its refusal to change its acts, policies, and practices, it has become apparent that U.S. action at this level is not sufficient to obtain the elimination of China’s acts, policies and practices covered in the investigation,” USTR said. “Accordingly, the Trade Representative is proposing to modify the action in this investigation by maintaining the original $34 billion action and the proposed $16 billion action, and by taking a further, supplemental action.”
   USTR requested that comments specifically address whether subheadings listed on the planned tariff list should be retained or removed; whether subheadings not currently on the list should be added; the level of increase, if any, in the rate of duty; and the appropriate aggregate level of trade to be covered by additional duties.
   Among other things, the proposed tariffs list covers fish, vegetables, fruits, nuts, condiments, juice, chemicals, raw materials, fragrances, toiletries, buttons, furniture, boats, vehicles, electrical products, TVs, vehicle parts, machines, hand tools, glass, ceramics, textiles, fashion accessories, carpets, paper products, wood products, travel goods, paints and dyes.  
   Trump appears to be the sole decision-maker in talks with China, but up to this point, talks have signaled a lack of clarity regarding his end goals, said Claire Reade, senior counsel for Arnold & Porter, during an event Thursday at the Information Technology and Innovation Foundation (ITIF) in Washington.
   Reade, who works on China issues, said China likely wants to emerge from trade talks with the U.S. in a way that merely will maintain its control and stability and continue its trajectories in economic and technological development, but she said she’s less sure whether the U.S. has fully determined everything that it wants.
   But the Trump administration and Congress likely, “across the board,” want China to remove its trade-distorting practices, she said.
   “But the next question is, are we interested in helping China create a more efficient and market-oriented economy that will actually assist its development and make it, at the end of the day, a stronger competitor with Western countries by virtue of its getting rid of inefficient state-owned enterprises, of letting the markets dictate when companies go bankrupt, having the financial system work better, reducing the perverse incentives on local governments, etcetera?” Reade said.
   Another issue complicating bilateral discussions is that China is trying to identify the main U.S. interlocutor in these talks who most strongly represents Trump’s positions, as a recent U.S. delegation trip to China to engage on trade indicated that Trump is the only person in his administration ultimately making decisions, Reade said.
   “I found it pretty striking after one of the big delegations went over, when we had Treasury, Commerce, USTR, White House senior staff, all…in China,” she said. In past administrations, “they really would’ve been empowered to make statements and talk about what was going on, and the only statement they made at the end of their visit was, ‘We are now going back to Washington to report to Trump, and we will talk to you later.’”
   Reade worked as assistant U.S. trade representative for China affairs from 2010 to 2014, and chief counsel for China trade enforcement from 2006 to 2010.
   Derek Scissors, resident scholar at the American Enterprise Institute, at the ITIF event said Trump’s main concern in these talks is reducing the bilateral U.S. trade deficit.
   “There is this question of how we are going to set up something that will actually hold within the American political process,” Scissors said. “So they’re not at the level of talking about offers and what to do; they’re at the level of how to do this. Those talks have started, I know.”
   But China cannot currently be trusted to hold to any agreement it may reach with the U.S., and in order to generate changes in China’s fundamental approach to trade, the U.S. must “make them suffer for awhile, and then we can have a negotiation,” Scissors said. “And, ‘for awhile,’ is not two months.”
   Scissors predicted that the U.S. and China will strike an agreement in August primarily focused on reducing the trade deficit. The U.S. started levying Section 301 tariffs July 6.
   U.S. and Chinese officials originally struck a deal in May to enhance China’s IP protections and reduce the U.S. trade deficit through increasing U.S. exports of agriculture and energy to China, before Trump just over a week later announced the U.S. would instead follow through with 25 percent tariffs initially covering $50 billion worth of Chinese goods in 2017 import value.