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China to ask U.S. to remove tariffs in exchange for ag buys in talks Friday:…

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By David Lawder and Andrea Shalal

WASHINGTON (Reuters) – Top US and Chinese trade officials will discuss plans on Friday for China to buy more US agricultural products, but in return, Beijing will ask to cancel some planned and existing US tariffs on Chinese imports. informed informed people about the negotiations. Reuters

Robert Lighthizer, US Trade Representative, US Treasury Secretary Steven Mnuchin, and Chinese Deputy Prime Minister Liu He will speak by telephone on Friday, their latest attempt to calm a nearly-close trade war. 16 months that is shaking the financial markets, disrupting supply chains and slowing global economic growth.

Both sides are working to try to agree on a text for a "Phase 1" trade deal announced by US President Donald Trump on October 11, in time to sign it with Chinese President Xi Jinping, next month at a summit in Chile. .

So far, Trump has only agreed to cancel an October 15, $ 250 billion tariff increase on Chinese products as part of the understanding reached in agricultural purchases, increased access to China's financial services markets, better intellectual property rights protections. and a monetary pact.

But to seal the deal, Beijing must ask Washington to abandon its plan to impose tariffs of $ 156 billion on Chinese products, including cell phones, laptops and toys, on December 15, two US sources told Reuters.

Beijing should also try to remove the 15% tariffs imposed on Sept. 1 to about $ 125 billion on Chinese products, one source said. Trump imposed tariffs in August after a failed round of negotiations, effectively setting punitive taxes on nearly all $ 550 billion in US imports from China.

"The Chinese want to return to tariffs with only the original $ 250 billion worth of goods," the source said.

Derek Scissors, a China-based resident scholar and expert at the American Enterprise Institute in Washington, said the original purpose of the negotiations in early October was to finalize a text on intellectual property, agriculture and market access to pave the way for December postponement. . 15 rates.

"It's strange that the president was so optimistic about Liu He and we still don't have the December 15 tariffs off the table," said Scissors.

The story goes on

US Treasury Secretary Steven Mnuchin said last week that no decisions were made on December 15 tariffs, but added, "We'll settle this as we continue to have talks."

MINOR SHOPPING?

If a text could be sealed, Beijing would in turn exempt some US agricultural products from tariffs, including soybeans, wheat and corn, a China-based source told Reuters. Buyers would be exempt from extra charges for future purchases and would receive returns for fees they have already paid on previous purchases of the list products.

But the final values ​​of China's purchases are uncertain. Trump reported purchases of $ 40-50 billion annually – far above China's $ 19.5 billion purchases in 2017, as measured by the American Farm Bureau.

One source informed in the talks said China's supply would start at around $ 20 billion in annual purchases, largely restoring the status quo before the trade war, but that could increase over time. Purchases would also depend on market conditions and prices.

Lighthizer emphasized China's agreement to remove some restrictions on US genetically modified crops and other food security barriers, which, according to sources, is significant because it could pave the way for much higher US agricultural exports to China.

The high-level call comes a day after US Vice President Mike Pence criticized China's trade practices and the construction of a "watchful state" in a key political speech. But Pence left the door open for a trade deal with China, saying Trump wanted a "constructive" relationship with China.

While US tariffs on Chinese products have led China to the negotiating table to address US complaints about its business practices and intellectual property practices, so far they have failed to lead to a significant change in China's state-led economic model.

The "Phase 1" deal will ease tensions and provide some market stability, but it is expected to do little to address major US complaints about Chinese theft and forced transfer of US intellectual property and technology. The deal's intellectual property chapter deals largely with copyright and trademark issues and promises to reduce technology transfers that Beijing has already put into a new investment law, people familiar with the discussions said.

More difficult issues including data constraints, China's cyber security regulations and industrial subsidies will be left to the later stages of the talks, but some Chinese trade observers said concluding a Phase 1 deal could leave little incentive for China. negotiate more, especially in a US Election Year by 2020.

"Negotiations between the US and China change very quickly from hot to cold, but the longer it takes to set Phase 1 easier, the harder it is to imagine a breakthrough in Phase 2," Scissors said.

Two sources said Mnuchin and Lighthizer would likely travel to Beijing in the week of November 3 for more personal talks to try to finalize a text. But a Treasury spokesman said no meetings were planned.

(Additional reporting by Jonathan Landay in Washington and Hallie Gu in Beijing, edited by Heather Timmons and Simon Cameron-Moore)

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