(Bloomberg) -- Donald Trump’s top trade negotiator is dialing back expectations for a sweeping trade deal with China just days after the president suggested he was already planning to sign an accord with Chinese leader Xi Jinping.
Trump this week raised the prospect that he could meet Xi for a “signing summit,” possibly at the Mar-a-Lago resort in Florida as early as next month. Trump has extended the deadline for talks beyond March 1, buoying hopes among investors that an end to the trade war could be in sight.
But U.S. Trade Representative Robert Lighthizer took a more cautious tone on Wednesday, telling lawmakers that much work needs to be done before the administration reaches a trade pact with Beijing, and after that, the tough task of implementing it will get underway.
Lighthizer, speaking before the House Ways and Means Committee, said he wants a deal that’s enforceable and has commitments by China to make deep reforms to its state-driven economy, especially in the areas of intellectual-property rights and technology transfers.
But the crux of any agreement will be a mechanism to ensure China is complying with the rules, said Lighthizer, revealing plans for regular meetings to review the trading relationship between lower- and mid-ranking officials and semi-annual meetings at the ministerial level. Violations by China would prompt the U.S. to react with a “proportional” and “unilateral” response, Lighthizer said, likely referring to tariff actions and other measures.
Soybean Solution
The U.S. won’t accept a deal that merely commits the Chinese to buy more American goods, a scenario Lighthizer dismissed as the "soybean solution," in reference to promises to buy more American soybeans.
“This administration is pressing for significant structural changes that would allow for a more level playing field,” Lighthizer said. “We need new rules.”
With a presidential election looming next year, Trump is keen to keep the world’s biggest economy humming and avoid another steep drop in U.S. stocks, like the late-2018 sell-off. But the hearing also demonstrated the political pressure he could face if he’s seen as caving to China, with lawmakers urging the administration not to accept a stopgap deal.
“I am concerned that we have some sort of agreement that results just in purchasing soybeans and airplanes. That’s not sustainable,” said Earl Blumenauer, a Democratic Congressman from Oregon.
Big ’If’
The U.S. is “very aware of the history of our trading relationship with China, and the disappointments that have resulted from promises that were not kept,” Lighthizer said.
“If we can complete this effort -- and again I say ‘if’ -- and can reach a satisfactory solution to the all-important outstanding issue of enforceability as well as some other concerns, we might be able to have an agreement that turns the corner in our economic relationship with China,” he said. “Much still needs to be done, both before an agreement is reached, and more importantly, after it is reached.”
Trump’s hint at a deal-clinching summit with Xi underscores the sense that the two nations are approaching an agreement, more than seven months since the U.S. first imposed tariffs on Chinese imports, setting off a tit-for-tat conflict that has cast a cloud over the global economy. Treasury Secretary Steven Mnuchin said this week that a leaders’ meeting for late March at Trump’s Mar-a-Lago resort in Florida is being tentatively planned.
But with Trump holding another summit with North Korean leader Kim Jong-Un this week in Vietnam -- a diplomatic effort in which China will play a critical role -- the risk of a setback remains significant.
Mar-a-Lago Summit
“President Trump has already started promoting a ‘signing summit’ at Mar-a-Lago before an agreement has even been inked,” Democratic Minority Leader Chuck Schumer said Wednesday. “I say to President Trump, it would be a momentous failure if you relent now and don’t receive meaningful, enforceable and verifiable commitments on structural reforms to China’s unfair trade policy.”
On another key issue in the talks, Mnuchin on Friday said the U.S. and China had reached an agreement over currency, describing it as the “strongest ever,” though he offered no details. However, Bloomberg reported that the sides are still trying to figure out how to monitor the pact to ensure Beijing lives up to its pledge not to depreciate the yuan.
Asked about the currency deal at the hearing on Wednesday, Lighthizer said “there’s no agreement on anything until there’s agreement on everything. But the reality is we have spent a lot of time on currency and it will be enforceable.”
