US, China Trade Delegations Could Meet As Early As Tuesday

Update: The SCMP has published the latest update on the pre-Osaka talks between the US trade delegation (led by Mnuchin and Lighthizer) and the Chinese delegation (led by Liu He).

According to this latest report, Lighthizer and Mnuchin will travel to Osaka early next week for preliminary meetings with Liu and his team. Lighthizer also reportedly said earlier that he and Liu would connect by phone in the next day or two, and meet in person as early as Tuesday.

US and Chinese trade negotiators are scrambling to put a plan together, as they look to ease trade tensions ahead of President Xi Jinping and his US counterpart Donald Trump’s meeting in Osaka next week.

Negotiating teams – led by United States trade representative Robert Lighthizer and Treasury Secretary Steven Mnuchin on the US side and Vice-Premier Liu He on the Chinese side – are expected to meet in Osaka as early as Tuesday, three days before the start the G20 leaders’ summit, to prepare for the high-stakes Xi-Trump meeting, according to a source who was briefed on the situation, but who declined to be named.

Chinese Commerce Ministry spokesman Gao Feng said earlier at a press conference that the lead negotiators on both sides would also meet to follow up on decisions made by Xi and Trump, but he did not provide further details.

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Almost as abruptly as they collapsed, talks between Washington and Beijing will take place for the first time since the dialogue collapsed last month, with Robert Lighthizer saying he's planning on calling his counterpart, Vice Premier Liu He, the leader of China's trade delegation, to restart talks, Reuters reports.

Trade

China confirmed that senior trade officials will speak before the end of the week.

US Trade Representative Robert Lighthizer said on Wednesday he would speak by telephone to Liu He, China’s vice premier and chief negotiator in the trade talks, “in the next day and a half."

"The heads of the two trade teams will communicate, according to instructions passed down from the two presidents," Chinese commerce ministry spokesman Gao Feng told reporters, without elaborating.

"We hope (the United States) will create the necessary conditions and atmosphere for solving problems through dialogue as equals."

Talks first fell apart when Washington accused Beijing of 'reneging' on its commitments. But China has vowed not to give in on matters of principle. News of the talks follows a breakthrough phone call between Trump and Xi on Wednesday where the two leaders purportedly agreed to meet in Osaka.

Trump has threatened to impose tariffs on another $325 billion worth of Chinese imports, covering nearly all remaining Chinese goods entering the country, including consumer products like cellphones, computers and clothing.

Though the prospect of a deal to end the trade war has helped cheer financial markets, Beijing has warned that it won't cave on its main demands.

For one, Beijing has demanded the removal of all additional trade-war tariffs. Meanwhile, both sides have disagreed over trade purchases and a "balanced" text for any trade deal. Those three "matters of principle" cannot be compromised.

Gao Feng asked if China’s demands for a trade deal were still tied to the three issues being met: "China’s principles and basic stance on Sino-U.S. economic and trade consultations have always been clear and consistent, and China’s core concerns must be properly resolved."

"We hope (the United States) will create the necessary conditions and atmosphere for solving problems through dialogue as equals."

In what appeared to be a key paragraph from the report (at least when it comes to calibrating expectations), Reuters said that although the upcoming trade talks between Xi and Trump are unlikely to immediately resolve major disagreements between the two sides, they could start a new phase in negotiations, Chinese state media said on Thursday.

Gao expressed optimism that even issues like structural reforms, IP protections and other major sticking points could be resolved - eventually. And the China Daily said in an editorial that both parties were "in the mood for serious dialogue" as a full-blown trade war was “lose-lose." However, they were unlikely to wrap everything up in one meeting. The two sides are still "too divergent" to allow that, the CD said.

"More likely than not, the one-on-one meeting will end up being the start of a new phase in the negotiations with the two leaders personally setting out their country’s respective bottom lines."

To be sure, China is still prepared to take the "necessary [retaliatory] measures" if the US follows through with plans to slap tariffs on another $300+ billion in imports.

Premier Li Keqiang said Thursday during a meeting with 19 multinational CEOs in Beijing that China would follow through with its promise to open up its market.

"China will maintain our long-standing commitment to reform and opening in order to continue to expand and open. We welcome more and more foreign investment to come to China," Li said, in comments in front of reporters.

"We will also relax (restrictions on) access to even more fields to create a market-oriented, law-based internationalized business environment."

At this point, the earliest new tariffs could be handed down would be early next month, and that would likely only happen if things go sour in Osaka between Trump and Xi. It looks like this tenuous return to the trade-war truce is going to last, for now at least.