US willing to face ‘repercussions’ from China on trade — Mnuchin
Mnuchin suggests Washington will meet Beijing’s demand for ‘two-way’ enforcement deal
The US is willing to face “repercussions” from China if it fails to comply with the terms of a likely deal to end the trade war between the world’s two largest economies, Steven Mnuchin, the US treasury secretary said, suggesting the US will meet Beijing’s demand for a “two-way” system to enforce the agreement.
Speaking on Saturday in Washington, Mr Mnuchin said that both the US and China would be making “certain commitments” in the deal that would have to be respected and enforced on both sides of the Pacific Ocean.
“I would expect that the enforcement mechanism works in both directions, that we expect to honour our commitments, and if we don’t, there should be certain repercussions, and the same way in the other direction,” Mr Mnuchin said.
Beijing and Washington are now in the final stretch of talks to resolve their trade dispute, with US president Donald Trump saying that he expected to know if an agreement was possible by next month.
Until now, the discussion over enforcing and implementing a deal has mostly been focused on US demands for a system to ensure that China complies with its pledges in the deal, including promises to purchase more American goods and move towards a more market-based economy. The US has demanded that it be allowed to impose penalties on China unilaterally, and without retaliation, if it finds that Beijing has flouted the deal.
But Mr Mnuchin’s comments, reported by Bloomberg News, suggest that China also has serious concerns about the US sticking to the agreement. The main US commitment in the deal is expected to be the lifting of existing tariffs on Chinese imports, probably over time and according to a certain schedule — and Beijing may well wonder if Mr Trump will follow through given his unpredictability. Last month, Wang Shouwen, China’s vice-minister of commerce, said that any enforcement mechanism had to be “two-way, fair and equal”.
In recent days, Mr Mnuchin had already said that “enforcement offices” would be set up both in the US and China to monitor the deal, another indication that some reciprocity would be included on the enforcement side of the agreement.
However, while allowing China to impose punitive measures on the US for failure to comply further narrows the gap between the two sides on the way to a deal, the US administration’s acceptance of this could raise eyebrows in corporate America, since they would likely be on the receiving end of those countermeasures.
“If such an arrangement were agreed and reciprocal, it would expose US companies to adverse actions by China, which the US would have committed not to challenge in the WTO,” Daniel Price, managing director of Rock Creek Global Advisors, a Washington-based consultancy, and a former senior economic official in the George W Bush administration. “The right unilaterally to retaliate for non-compliance looks a lot different if it’s reciprocal. I can’t imagine the US business community would be enthusiastic about that,” he added.
Although Mr Mnuchin is a key player in the negotiations, the talks are being led by Robert Lighthizer, the US trade representative who is known to hold more hardline views on China. Mr Lighthizer’s office did not immediately respond to a request for comment on whether the US had accepted that the enforcement mechanism would be reciprocal.
Mr Mnuchin said that he expected more conversations over the phone with top Chinese officials in the coming week, to establish whether a new round of face-to-face talks was necessary. The US and China have been negotiating a deal to end their trade war since December, when Mr Trump and Xi Jinping, the Chinese president, struck a truce in the aftermath of the G20 summit in Buenos Aires, Argentina.
Despite multiple rounds of talks, and claims of significant progress by the negotiators, several deadlines to finalise a deal in March and April have slipped, making May or even June the most likely date for an agreement.