Abu Dhabi, UAEWednesday 24 April 2019

China protests over US warship sighting as trade talks start

The postponement of tariff increases may not be longer enough to settle the US-Chinese dispute

China says the US destroyer the USS McCampbell, shown in this file photo, had violated Chinese sovereignty by sailing near disputed islands in the South China Sea, on 7 January 2018. US Navy
China says the US destroyer the USS McCampbell, shown in this file photo, had violated Chinese sovereignty by sailing near disputed islands in the South China Sea, on 7 January 2018. US Navy

Chinese and American officials began talks Monday aimed at ending a bruising tariffs battle between the world's two biggest economies, as Beijing complained over the sighting of a US warship in what it said were Chinese waters.

It was unclear if the ruckus over the warship might disrupt the working level talks being held at the Chinese Commerce Ministry. The two sides have provided scant information about the discussions.

Both sides have expressed optimism over the potential for progress in settling their tariff fight over Beijing's technology ambitions. Yet neither has indicated its stance has changed since a December 1 agreement by Presidents Donald Trump and Xi Jinping to postpone further increases.

Ministry spokesman Lu Kang said Monday during a routine briefing that Chinese military aircraft and naval vessels were dispatched to identify the US vessel and warn it to leave the area near disputed islands in the South China Sea.

"We have made stern complaints with the US," Mr Lu said. He said the warship, which he said was the destroyer the USS McCampbell, had violated Chinese and international law, infringed on Chinese sovereignty and undermined peace and stability.

"As for whether this move has any impact to the ongoing China-US trade consultations... to properly resolve existing issues of all kinds between China and the US is good for the two countries and the world," Mr Lu said

But he added: "The two sides both have responsibility to create necessary and good atmosphere to this end."

There was no immediate comment from the US side about the Chinese complaint.

The American side in the trade talks is being led by a deputy US trade representative, Jeffrey Gerrish, according to the US government. The delegation includes agriculture, energy, commerce, treasury and State Department officials.

The talks went ahead despite tensions over the arrest of a Chinese tech executive in Canada on US charges related to possible violations of trade sanctions against Iran.

Mr Trump imposed tariff increases of up to 25 per cent on $250 billion (Dh918 billion) of Chinese imports over complaints Beijing steals or pressures companies to hand over technology. Beijing responded by imposing penalties on $110 billion of American goods, slowing customs clearance for US companies and suspending issuing licenses in finance and other businesses.

Economists say the 90-day postponement of tariff increases that had been meant to take effect January 1 may be too short to settle the disputes bedeviling US-Chinese relations.

But cooling economic growth in both countries is raising pressure to reach a settlement.

Chinese growth fell to a post-global crisis low of 6.5 per cent in the quarter ending in September. Auto sales tumbled 16 per cent in November over a year earlier. Weak real estate sales are forcing developers to cut prices.

The US economy grew at an annual rate of 3.4 per cent in the third quarter, and unemployment is at a five-decade low. But surveys show consumer confidence is weakening because of concern that growth will slow this year.

Washington, Europe and other trading partners complain Beijing's tactics violate its market-opening obligations.

The standoff also reflects American anxiety about China's rise as a potential competitor in telecommunications and other technology. Mr Trump wants Beijing to roll back initiatives intended to create homegrown Chinese leaders in robotics and artificial intelligence.

China's leaders see such strategies as a path to greater prosperity and global influence and have tried to defuse complaints by emphasising the country's potential as a huge consumer market.

They've also promised to allow more foreign access to its auto, finance and other industries.

Beijing has tried in vain to recruit France, Germany, South Korea and other governments as allies against Mr Trump, but they have echoed US complaints about Chinese industrial policy and market barriers.

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The European Union filed its own challenge in the World Trade Organisation in June against Chinese rules that the 28-nation trade bloc said hamper the ability of foreign companies to protect and profit from their own technology.

For their part, Chinese officials are unhappy with US curbs on exports of "dual use" technology with possible military applications. They complain China's companies are treated unfairly in national security reviews of proposed corporate acquisitions, though almost all deals are approved unchanged.

Some manufacturers that serve the United States have shifted production to other countries to avoid Mr Trump's tariffs.

Updated: January 7, 2019 07:02 PM

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