World Economy

US Chamber of Commerce: China trade deal 'fails' if Washington doesn't win enforcement measures

Key Points
  • Any trade deal between the U.S. and China will need enforcement mechanisms, an American business association official said.
  • This week, Chinese Vice Premier Liu He will visit Washington on Thursday and Friday to continue trade negotiations with the U.S., the Commerce Ministry in Beijing said.
Chinese Vice Premier and lead trade negotiator Liu He, right, reaches to shake hands with U.S. Trade Representative Robert Lighthizer before the opening session of trade negotiations at the Diaoyutai State Guesthouse in Beijing, Thursday, Feb. 14, 2019.
Mark Schiefelbein | Pool | Reuters

Pledges from Beijing to buy more American goods and fix some economic structural issues are meaningless victories for the U.S. if Donald Trump's administration doesn't also create ways to enforce a trade agreement with China, according to a top official from the U.S. Chamber of Commerce.

That comes as Chinese negotiators ready for the next round of trade talks, set to begin Tuesday in Washington. So far, reports indicate, the two countries have found common ground on China decreasing its trade surplus with the U.S. through more purchases, but sticking points remain on issues such as intellectual property theft and the subsidies Beijing gives to its domestic firms.

Still, even if Trump's team can realize its goals on those fronts, it will all come down to whether both countries actually live up to their commitments, according to Myron Brilliant, executive vice president and head of international affairs at the U.S. Chamber of Commerce.

"Without enforcement, this deal fails," he told CNBC's Eunice Yoon in Beijing. "Implementation and enforcement are going to be two key elements — so you need to have implementation, you need to have follow-through, but you need to have enforcement mechanisms that will ensure that both sides have trust that this deal is sustaining and verifiable."

Enforcement mechanisms could include a "snapback" in tariffs if China doesn't live up to the terms of the deal, he said. Another option, according to Brilliant, would be for the U.S. to "delay the reduction of tariffs being reduced from 10 percent down to zero" contingent on Beijing's adherence to the agreement.

Such measures are unlikely to be well received by the Chinese negotiators, and multiple media reports indicate that remains one of the biggest sticking points in the ongoing discussion. Still, Brilliant emphasized that the business community is hoping some sort of agreement will come together.

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"Enforcement is going to be a critical component of this deal, but we need a deal. The markets are nervous; the markets will not respond if there isn't a good deal," he said.

Officials from Washington and Beijing met last week in the Chinese capital for trade negotiations.

This week, Chinese Vice Premier Liu He will visit Washington on Thursday and Friday to continue the talks, China's Commerce Ministry said.

Liu will meet U.S. Treasury Secretary Steven Mnuchin and U.S. Trade Representative Robert Lighthizer, the ministry said in a short statement on Tuesday. What happens this week will be "critical," Brilliant said.

"The talks are heating up. I think we're at a point where both sides know what the issues are. There's been progress made around some of the purchasing issues, some offers by the Chinese on market access liberalization, for example in the financial services area, reducing tariffs on autos — that's all good — and some progress, in fact, on intellectual property enforcement, particularly focused around patent and copyright issues," he said, confirming what leaks and Chinese media reports had indicated about the state of discussions.

Still, he added, there are still gaps on "important structural issues." Those include, he said, China allegedly forcing foreign companies to transfer technology expertise to Chinese entities in exchange for market access, Beijing offering market-distorting subsidies to its domestic companies, and "a general category of industrial policies that China has adopted that hurt U.S. companies', and frankly foreign companies', access to the Chinese market."

While the ongoing U.S.-China trade war has roiled markets and heaped uncertainty upon major U.S. companies — notably including Apple — the American private sector is counting on those structural issues getting resolved, according to the Chamber of Commerce official.

"The business community and American workers want a deal that is sustainable, that changes the trajectory of our bilateral relationship," Brilliant said.