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Tough negotiations as US-China trade talks kick off, but there's scope for compromise

  • The U.S. and China will embark on a second round of trade talks in Washington.
  • Although some U.S. requests were not realistic, there remained ways to resolve the issue, said Wei Jianguo, a former vice minister of commerce in China.
  • "It would be short-sighted to start a trade war by imposing tariffs just because of the trade deficit," Wei said.

A second round of U.S.-China trade negotiations kicks off in Washington on Thursday and although the bilateral talks are expected to be tough, there might still be scope to resolve some issues.

Ahead of the talks, both U.S. and Chinese officials have said the differences that remain are significant, with U.S. Ambassador to China Terry Branstad describing the two sides as "very far apart" earlier this week.

"The U.S. side said they want us to reduce a certain amount of the deficit within a limited time. This is not something a government can do through administrative interference, so I think it's not realistic and not logical," Wei Jianguo, executive deputy director of the China Center for International Economic Exchanges, told CNBC's Eunice Yoon.

The U.S. has requested that its trade deficit with China be reduced by $200 billion by 2020, media reports said. In 2017, China had a $275 billion trade surplus with the U.S.

Still, that did not mean the two sides would be unable to work out some compromise to resolve the problem, said Wei, a former vice minister of commerce in China.

Baking a 'bigger economic cake' 

One area where progress could be made in the bilateral talks was direction from the U.S. regarding the types of goods it could sell to China, Wei said.

"The U.S. should help us learn what other products they could export to China, say, energy resources, like petrol, natural gas and coal. Second, the U.S. has high tech products that can be exported to China," he said.

That suggestion was in line with what U.S. Commerce Secretary Wilbur Ross has said on the U.S. approach to reducing the trade deficit. Increasing China's purchase of U.S. goods, as opposed to requiring China to sell less, had "more bang for the buck" for the U.S. economy, Ross said.

Wei added that it was important to China and the U.S. to "work together to bake a bigger economic cake" that allowed both to benefit.

As for Brandstad's comment that the U.S. wanted to see China further open its markets for autos and food exports, Wei acknowledged that China's large middle class meant that there was growing demand for high quality agricultural products but cautioned that tariffs were not a wise move.

"It would be short-sighted to start a trade war by imposing tariffs just because of the trade deficit. I worry that the U.S. government could make a wrong step and lose its opportunity in the huge Chinese market. That would make Ambassador Branstad very disappointed," he said.

While the Trump administration has made slashing the U.S. trade deficit with China a priority, the U.S. business community is also hoping for developments in more longstanding issues.

"We would like to see progress on some of the systemic challenges, some of the market access issues, some of the behind-the-border issues, like data flows," Jeremie Waterman, vice president for Greater China at the U.S. Chamber of Commerce, told CNBC.

"We recognize that for this administration, deficit reduction is also a priority and it would foolhardy to think that that piece would not also be part of the package. But the benefits of that kind of deficit reduction is likely to be short-lived, and it's very likely that we would be back in six or nine months again [with] the trade deficit at the same level if there isn't systemic reform," Waterman said.

— CNBC's Eunice Yoon and Kayla Tausche contributed reporting.

Correction: This story has been updated to reflect that Wei Jianguo is the executive deputy director of the China Center for International Economic Exchanges.

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