By Chao Deng and Lingling Wei, Wall Street Journal–
China is sending its top trade envoy to Washington to resume negotiations and confront U.S. demands that Beijing detail the laws it would change as a part of a trade deal, despite a threat by President Trump to raise tariffs on Chinese goods.
After two days of uncertainty in which President Trump called for the higher tariffs and Chinese officials considered pulling out of the talks, Beijing announced Tuesday that Vice Premier Liu He will travel to Washington for negotiations starting Thursday, a day later than planned.
At the top of the agenda is a U.S. demand that a trade agreement lay out an inventory of laws and regulations that Beijing must revise for compliance, according to people briefed on the negotiations. China has objected to including the list, the people said. The U.S., though, sees it as essential to ensuring China delivers on promises of structural change.
The disagreement over the text of the trade agreement adds to a pile of still-to-resolve issues that include China’s subsidies to domestic companies and opening key Chinese markets, such as cloud computing. It also drove President Trump to Twitter on Sunday to threaten higher tariffs, the people said. U.S. Trade Representative Robert Lighthizer has said the punitive levies on $200 billion of Chinese goods will be raised to 25%, from 10%, on Friday.
In pushing ahead with Mr. Liu’s trip to Washington, China’s leadership decided a full breakdown in the talks may be difficult to repair and would exact costs on the Chinese economy, according to Chinese officials. In doing so, Chinese leaders broke from a public position that Beijing wouldn’t negotiate under threat.
“There is definitely a sense of urgency that we should get this resolved sooner rather than later,” said one of the officials, who is involved in policy-making. “An all-out trade war is in no one’s interest.”
As part of Beijing’s deliberations, a group of vice ministerial-level officials involved in the trade negotiations huddled Tuesday to discuss whether it would still be productive to visit Washington, according to a person familiar with the matter. The officials dissected information obtained from the news conference held Monday by Mr. Lighthizer and Treasury Secretary Steven Mnuchin, the person said. The officials’ conclusion: Yes.
Two of those senior officials, Vice Commerce Minister Wang Shouwen and Vice Finance Minister Liao Min, will lead an advance team to Washington on Wednesday, according to another person with knowledge of the matter. Vice Premier Liu plans to follow. He and his team will stay in a hotel across the street from the White House.
China’s Commerce Ministry, which announced Mr. Liu’s participation, didn’t respond to requests for comment on the government’s deliberations and the delay in Mr. Liu’s itinerary.
Asked about China’s decision, Chinese Foreign Ministry spokesman Geng Shuang objected to the U.S.’s raising tariffs but said talks were the best way forward. “It’s only natural for the two sides to have differences,” he said at a Tuesday briefing. “We are sincere about continuing the consultation.”
U.S. officials have complained for years that Chinese industrial policies—from subsidies to coercive technology transfer—create an unfair advantage for domestic companies, and they have made changing that a central effort of the talks.
In previous rounds, Beijing has offered up broad language that it will pursue structural changes. But it has rejected U.S. demands for more details about implementation, including identifiable timelines, according to people close to the negotiations.
The specificity the U.S. demanded caused the latest impasse, particularly over the listing of particular laws and regulations to be changed, according to the people briefed on the negotiations. Beijing believes that the U.S. demand impinges on its sovereignty, limiting its discretion on implementation, and that changing laws would take time, according to one of the people.
By putting such an explicit pledge within a trade agreement, “not just government agencies, but the whole of society will have a negative response,” says Wang Yong, director of the Peking University Center for International Political Economy Research. “It would weaken the political standing of Chinese leaders.”
Some economists and China specialists say to introduce meaningful change, Beijing would need to revise a slew of laws, including ones that pertain to patents, copyright and criminal punishment.
Jingzhou Tao, lawyer at Dechert LLP in Beijing, said China could change its laws quickly if it musters the political will. While its legislature meets only once a year to review laws, a standing committee of lawmakers has the power to amend laws every other month.
China’s cabinet has the authority to revise regulations, Mr. Tao said. “This fast-track process has often been used in the past,” he added.
The legislature in March fast-tracked a foreign investment law, which goes into effect in 2020, in part to answer U.S. concerns about unfair treatment for foreign companies, and the government has promised necessary revisions to a raft of regulations.
Left unaddressed by the foreign investment law, however, are subsidies and many other industrial policies that the U.S. says favor domestic companies. In general, said a person familiar with Beijing’s thinking, Beijing and the U.S. are still far apart on the issue of how China will reform. “The U.S. wants changes that are too quick, too specific,” he said.
—Lin Zhu and Shan Li contributed to this article.
Write to Chao Deng at Chao.Deng@wsj.com and Lingling Wei at lingling.wei@wsj.com
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