U.S., China trade chiefs hold talks over "phase one" deal

© Kyodo News

U.S. Trade Representative Katherine Tai held talks with her Chinese counterpart Liu He on Friday over a bilateral trade deal signed last year, with Tai expressing concerns over the Asian country's unfair trade practices.

The virtual meeting took place as the U.S. administration of President Joe Biden seeks to realign its trade engagement with China after four years under his predecessor Donald Trump led to a tit-for-tat tariff war and the "phase one" trade deal that failed to fully tackle what the U.S. views as harmful industrial policies.

During their "candid" exchange, Tai and Chinese Vice Premier Liu acknowledged the "importance of the bilateral trade relationship and the impact that it has not only on the United States and China but also the global economy," the USTR office said in a statement following the meeting.

Tai noted that she looks forward to following up with Liu in the near future, it also said.

A senior official at the USTR office said that Washington is viewing the talks as "an opportunity for the United States and China to commit to forging a trade relationship that is managed responsibly."

Following a months-long review of China trade policy, Tai outlined on Monday what the USTR office calls a "new approach" to trade relations between the world's two largest economies, which included starting engaging with her Chinese counterpart to hold Beijing accountable to the phase one deal.

She has also said the United States will raise concerns over China's state-centered and nonmarket trade practices that distort competition, which were not addressed in the phase one deal.

Under the trade agreement that took effect in February last year, China has agreed to increase its purchases of U.S. goods and services over two years by at least $200 billion, in a move that is expected to help reduce the chronic U.S. trade deficit.

China has also agreed to strengthen intellectual property protection and pursue financial services liberalization, while committing to address allegations of forced technology transfer and currency manipulation to boost exports.

But China was on course to be more than 30 percent shy of its 2021 purchase commitments as of August, after falling short by more than 40 percent last year, according to an estimate by Chad Bown, senior fellow at the Peterson Institute for International Economics in Washington.

The phase one agreement led to an immediate rollback of some of the U.S. tariffs imposed on China amid an escalation of their trade war. But remaining punitive tariffs continue to affect hundreds of billions of dollars' worth of Chinese products with a rate of up to 25 percent.

Tai said Monday in her speech at the Center for Strategic and International Studies, a Washington think tank, that Beijing is falling short of some of its commitments included in the deal, but did not elaborate.

She also said the United States will use its "full range of tools" to defend American economic interests from harmful policies and practices, without ruling out the use of imposing new tariffs.

The talks on Friday were the second engagement between Tai and Liu under the Biden presidency. Their first talks took place over the phone in May.