As the United States and China edge closer to a trade agreement, the ability to reach a final deal is coming down to a central question: Will Beijing live up to its promises?
Treasury Secretary Steven Mnuchin, in a CNBC interview on Wednesday, said that the countries had “pretty much agreed” on an enforcement mechanism for a trade deal, adding that both sides would establish “enforcement offices” to deal with continuing trade matters.
But it remains unclear which provisions of the trade deal will be subject to enforcement and how much power the United States will have to punish Beijing if it reneges on the agreement. The ability to secure a firm commitment from China to hold up its end of the pact or face repercussions will be a key determinant in whether President Trump’s trade deal is seen as a true win or a capitulation.
The emerging pact tries to resolve longstanding concerns about Beijing’s economic practices, including forcing American companies to turn over valuable technology as a condition of doing business in China and restricting American firms from participating in certain industries. But business leaders are closely watching to see exactly how American negotiators will ensure that China holds to its commitments.
The United States is pushing for a broad commitment that would allow American tariffs on Chinese goods to snap back if China violates key promises — without permitting China to retaliate in response. So far, Chinese leaders have been reluctant to agree to an enforcement mechanism that would leave their economic future at the mercy of American politicians.
In a hearing in March, Robert Lighthizer, Mr. Trump’s top negotiator leading the China talks, said the United States had to maintain the right to be able to raise tariffs “in situations where there’s violations of the agreement.”
“That’s the core,” he added. “If we don’t do that, then none of it makes any difference.”
Mr. Lighthizer and other White House officials have criticized past administrations for extracting promises from the Chinese, only to see those pledges go unfulfilled as the two sides engaged in extended dialogues. But some China experts and business leaders say that the Trump administration’s approach, as described publicly, does not appear to differ much.
When asked about the enforcement mechanism at a hearing in February, Mr. Lighthizer said that the two countries would hold a series of regular meetings at various levels of the government to resolve complaints brought by companies. If the issues could not be resolved through negotiation, the United States would impose tariffs.
China experts say enforcement is necessary given that the United States wants Beijing to make significant structural changes that will take time.
“The proof of structural change will only emerge over the next year or more,” said Elizabeth Economy, director for Asia studies at the Council on Foreign Relations. “Then we will see, for example, whether new market access actually yields new opportunities for foreign companies or whether death by a thousand cuts prevents foreign firms from actually realizing any benefits.”
But pressing China for firm commitments has not been easy. The Chinese are not expected to accept a tough enforcement mechanism — or agree to a final deal — without confirmation from the United States to remove some portion of Mr. Trump’s tariffs on the $250 billion worth of Chinese goods he imposed last year. The more hawkish members of Mr. Trump’s administration, including Mr. Lighthizer, have cautioned that no provisions are final until the entire deal is done.
Craig Allen, the president of the U.S.-China Business Council, suggested that Mr. Mnuchin might have been getting ahead of himself on the enforcement agreement if such a deal includes China agreeing not to retaliate against future tariffs.
“I remain very cautious on this,” Mr. Allen said. “Will the Chinese really renounce the ability to retaliate at what they feel is an unfair trade action? I think it defies Chinese tradition.”
Mr. Trump, who met with a Chinese delegation in the Oval Office last week, said negotiators might require four more weeks to finish ironing out the deal.
Mr. Mnuchin on Thursday declined to specify whether the countries were on track for that timeline, saying Mr. Trump is “more focused on the right deal.”
Mr. Mnuchin added that some chapters of the agreement were close to finished, while others still had “technical issues.” He declined to comment on whether the United States and China had agreed to remove all or part of the tariffs the two countries had leveled on each other, and when.
Myron Brilliant, the executive vice president and head of international affairs at the U.S. Chamber of Commerce, said the two sides were closer but cautioned that the Chinese would not agree to a final deal without something in return.
“I remain confident in the prospects of a deal, but I think we need to be cleareyed and understand that China could walk away from expected commitments in purchases, market access, intellectual property and other areas if they don’t get something out of this deal, and that’s tariff relief,” he said.
Political reception of the deal in the United States will largely come down to how tough the United States appears to have been on China.
“I think you have hawks on both sides that are now down to the heart of the matter,” Stephen K. Bannon, Mr. Trump’s former strategist, said on Tuesday. “What do you do on these structural issues? What are the triggers? What’s the enforcement?”
“No one to date has gotten to the right of Trump on China,” he added. But once details of the deal emerge, outspoken China critics like Senator Marco Rubio, Republican of Florida; Senator Chuck Schumer, Democrat of New York; and Richard Trumka, the president of the A.F.L.-C.I.O., “may say, hey, this is not tough enough,” Mr. Bannon said.
American and Chinese negotiators have continued to carry out talks this week through video conferencing, after a Chinese delegation visited Washington last week. Negotiators have already worked out the bulk of a 150-page agreement on issues including intellectual property protections, purchases, subsidies and currency. Yet the two sides have recently grappled with sticking points over issues including intellectual property and approvals for genetically modified crops, as well as major differences on lifting Mr. Trump’s tariffs and the enforcement mechanism.
The negotiations have been highly secretive, and it was not clear on Thursday how many of these remaining issues had yet to be resolved. A spokeswoman for the United States trade representative, which is leading the negotiations, declined to comment.
People familiar with the negotiations speculated that Mr. Mnuchin’s optimistic remarks, coming as foreign officials gather in Washington for the spring meetings of the World Bank and the International Monetary Fund, might spring from a desire to reassure financial markets and foreign officials.
On Thursday, Vice President Mike Pence said that the Trump administration’s approach differed from previous administrations “literally going back decades since we admitted China into the World Trade Organization.”
“We kind of made a bet that if we opened up access to China to world markets and we engaged in broader trade that we would see China embrace the kind of policies that would respect private property rights and open up their markets to the West,” Mr. Pence said. “And candidly, that hasn’t happened.”
Both investors and allies have worried that Mr. Trump’s aggressive and unilateral approach to trade is causing uncertainty and acting as a drag on global economic growth.
On Tuesday, the International Monetary Fund announced that it had cut its 2019 economic estimates for global growth to just 3.3 percent, down from previous estimates of 3.5 percent in January and 3.7 percent in October. It cited “trade tensions and tariff hikes between the United States and China,” as well as tighter financial conditions, declining business confidence and Britain’s potential exit from the European Union.