China Pushes Back on U.S. Accusations on Trade, Urges Cooperation--Update

By Eva Dou Features Dow Jones Newswires

China urged the Trump administration to back off plans for tough trade actions, calling on the U.S. to remain cooperative and warning that conflict would hurt both sides.

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Beijing hopes to avoid a trade war with the U.S., but is preparing to target American businesses if Washington moves forward with trade sanctions, Chinese government advisers and industry experts said.

China's Commerce Ministry said Thursday that all members of the World Trade Organization should abide by its rules, and reminded the U.S. that the two economies are intertwined. "We both win through cooperation. We both are hurt in a fight," spokesman Gao Feng said in remarks posted on the ministry's website.

The Trump administration is considering invoking a little-used provision of U.S. trade law to penalize China for perceived unfair trade practices, The Wall Street Journal reported Tuesday. Doing so would mark a break from the two countries' reliance on the WTO to adjudicate their disputes and would likely aggravate tensions over North Korea and the South China Sea.

The Trump administration has shown increasing disappointment with Beijing for not reining in North Korea's missile development or offering concessions to rein in a trade imbalance heavily in China's favor. A U.S. and China high-level economic dialogue ended without agreement last month.

Targeted in the planned U.S. measures are Chinese theft of intellectual property and policies that require foreign companies to share advanced technology to gain access to the Chinese market. A first step would be invoking a little-used provision of U.S. trade law to investigate whether China's intellectual-property policies constitute "unfair trade practices," according to people familiar with the matter.

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William Zarit, chairman of the trade group American Chamber of Commerce in China, said the former and current Chinese officials he meets with have said Beijing is likely to retaliate, if reluctantly, for trade sanctions, though they didn't specify what the measures would be.

"Usually China will not respond in the same industry sector," said Mr. Zarit, a consultant and former Commerce Department official. "They may target industries and products that will cause equal pain."

Beijing may consider reversing recently concluded agricultural agreements, such as American beef exports to China, said Li-gang Liu, chief China economist at Citigroup. China might also target aircraft or other sectors where the U.S. enjoys a large trade surplus, he said.

China's Commerce Ministry spokesman on Thursday defended the country's protection of intellectual property. "China's government has consistently stressed intellectual property protection, and the results are there for all to see," Mr. Gao said.

China's critics point to the imbalance in trade in goods as a sign the country isn't playing fair. China's surplus with the U.S. reached $117.5 billion over the first half of the year, or more than 63% of the total surplus it ran with all of its trading partners, according to China's customs bureau.

Chinese officials have said that figure is overblown since it is partially offset by China's services-trade deficit with the U.S. Beijing has urged the U.S. to narrow the gap by easing export restrictions to China on certain categories such as high-tech goods.

President Donald Trump early on said that his administration would consider compromising on trade in return for China's help in dealing with North Korea. Last week, he tweeted his disappointment, saying that the U.S. had been "foolish" to let China make money from trade, while "they do NOTHING for us with North Korea, just talk."

China fired back, warning the U.S. not to link the North Korea issue to trade. One researcher who advises the Chinese government on trade policies said, however, that Beijing may consider diplomatic measures, for example not cooperating on regional issues, as well as economic retaliation. "China doesn't want a trade war but if the U.S. really takes action, China will fight back," he said.

--Liyan Qi contributed to this article.

Write to Eva Dou at eva.dou@wsj.com

(END) Dow Jones Newswires

August 03, 2017 09:13 ET (13:13 GMT)