US companies uneasy about Trump threat but hope for progress

U.S. President Donald Trump’s earlier threats of tariff hikes resulted in very intense negotiations with Beijing “in a way that we haven’t seen for so many years,” said William Zarit, chairman of the American Chamber of Commerce in China. (Photo by Gage Skidmore/Flickr, CC BY-SA 2.0)

BEIJING — American companies in China are uneasy about Washington’s threat of export and investment controls in a trade dispute with Beijing but see them as a possible way to achieve fairer operating conditions, the country’s biggest U.S. business group said Wednesday.

U.S. President Donald Trump’s earlier threats of tariff hikes resulted in very intense negotiations with Beijing “in a way that we haven’t seen for so many years,” said William Zarit, chairman of the American Chamber of Commerce in China.

Ahead of Commerce Secretary Wilbur Ross’s arrival Saturday for talks, Zarit said companies hope Beijing can be persuaded to “level the playing field” by easing curbs on foreign investment and business activity in its state-dominated economy.

The Trump administration on Tuesday renewed its threat of additional 25 per cent tariffs on $50 billion of Chinese goods in response to complaints Beijing steals or pressures foreign companies to hand over technology. The White House said it also would impose restrictions on Chinese investment and purchases of high-tech exports.

“I wouldn’t say we are in favour of, specifically, export controls, investment restrictions,” said Zarit. But he said American companies want equal treatment, “and this seems to be one of the ways to do that.”

American companies “would only be in favour of them to the extent that we can level the playing field,” he said at a news conference.

China’s Commerce Ministry criticized Tuesday’s announcement as “contrary to the consensus we reached” in talks in mid-May, when American officials postponed a tariff hike after Beijing promised to buy more U.S. goods. But the ministry gave no indication whether Beijing would go ahead with threats to retaliate by raising duties on a $50 billion list of U.S. goods.

“The Chinese side remains consistent: we don’t want to fight, but we are not afraid of it,” said the official Xinhua News Agency. “The Chinese side will determinedly protect the interests of our country and people at all costs.”

Trump has focused on pressing Beijing to narrow its multibillion-dollar trade surplus with the United States, but Zarit said American companies see other issues such as easing restrictions on their operations in the Chinese market as higher priorities.

The United States, Europe and other trading partners are pressing for reciprocal access as Chinese companies expand abroad while Beijing blocks or limits access to industries including banking, insurance, telecoms and health care.

“China’s success means that it can no longer credibly defend protectionist policies on the grounds that it is still a ‘developing country’,” the American chamber said in a report Wednesday.

The tariff threat is a “very powerful” negotiating tactic ahead of the weekend talks, said Lester Ross, a lawyer who is chairman of the American chamber’s policy committee. However, he said tariffs are a tax on American consumers and a blunt tool to address “very complex problems that hamper trade and investment relationships.”

Analysts in the United States suggested the newly confrontational stance also might be aimed at appeasing congressional critics of a deal the Trump administration made Friday that allowed Chinese telecom giant ZTE Corp. to stay in business.

Under that agreement, ZTE will remove its management team, hire American compliance officers and pay a fine. That would be on top of a $1 billion penalty ZTE paid for selling high-tech equipment to North Korea and Iran in violation of U.S. sanctions.

In return, the Commerce Department lifted a seven-year ban on ZTE’s purchase of U.S. components that it imposed earlier in May. Trump said last month the ban threatened too many Chinese jobs and he wanted to get the company back in business.

Chinese leaders have promised piecemeal trade-related changes including allowing full foreign ownership in their auto industry by 2022.

However, American companies have “major concerns” about unfair conditions, and the recent moves haven’t done enough to alleviate those concerns, said the American chamber’s Ross.

European companies also complain they are blocked from acquiring most assets in China while Chinese companies are on a global buying spree.

In a May 24 meeting with President Xi Jinping, German Chancellor Angela Merkel said market access and reciprocity will play a big role in trade relations.

Chinese authorities have announced tariff cuts and promised to end ownership limits in insurance and some other fields apart from auto manufacturing. Business groups say they need to see details to know whether such moves will create commercial opportunities.