U.S. trade chief talks to Chinese counterpart in test of bilateral engagement

U.S. Trade Representative Katherine Tai on Friday held a call with her Chinese counterpart, Vice Premier Liu He, to test whether bilateral engagement with Beijing can address U.S. complaints about China's trade and subsidy practices, a USTR official said.

The call marks the second time that Tai and Liu have spoken and it follows Tai's speech on Monday announcing that she would seek "frank" talks with Beijing and hold China to its commitments under a 'Phase 1' trade deal negotiated by former President Donald Trump.

"Ambassador Tai and Vice Premier Liu reviewed implementation of the U.S.-China Economic and Trade Agreement and agreed that the two sides would consult on certain outstanding issues," USTR said in a statement.

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In a briefing ahead of the call, which occurred on Friday evening Washington time, a senior USTR official said Tai would give Liu an assessment of China's performance in implementing the 'Phase 1' deal, including promised purchases of U.S. goods that are falling short of targets. She also would raise concerns about China's "non-market" economic practices.

"We recognize that Beijing is increasingly explicit that it is doubling down on its authoritarian state-centric approach and is resistant to addressing our structural concerns," the official said. "Therefore our primary focus will continue to be on building resilience and competitiveness, diversifying markets, and limiting the impact of Beijing's harmful practices."

The official said Tai would base future engagement with China on "how China responds to tonight's call" and declined to discuss possible next steps, but added that Tai will not seek 'Phase 2' trade negotiations with Beijing over state subsidies and other structural issues.

The 'Phase 1' deal in January eased a long running tariff war between the world's two largest economies. It focused largely on China's promise to boost purchases of U.S. farm and manufactured goods, energy and services by $200 billion over two years, along with increased protections for copyright, trademarks and other forms of intellectual property.

The Trump administration envisioned a 'Phase 2' negotiation to follow to tackle more difficult issues such as subsidies to state enterprises and China's strategic industrial policies.

Asked whether the United States would resort to another 'Section 301' investigation that could lead to more tariffs on Chinese goods if the engagement with Beijing fails, the official said the United States will use "the full range of tools we have to protect American workers, farmers and businesses from unfair trade practices."

Tai, a fluent Mandarin speaker and the daughter of immigrants from Taiwan, considers the call a "a test of whether or not this type of engagement will help to secure the outcomes that we're looking for, and we're going in with the hopes that China will respond positively," the USTR official said.