April 17, 2019 / 5:40 AM / a month ago

U.S. firms no longer 'positive anchor' for Beijing ties: AmCham in China

BEIJING (Reuters) - Frustrated U.S. businesses can no longer be counted on as a “positive anchor” in U.S.-China relations, a top U.S. business lobby said on Wednesday, arguing any deal to end trade tensions must address structural problems in China’s economic system.

FILE PHOTO: Chinese staffers adjust U.S. and Chinese flags before the opening session of trade negotiations between U.S. and Chinese trade representatives at the Diaoyutai State Guesthouse in Beijing, Thursday, Feb. 14, 2019. Mark Schiefelbein/Pool via REUTERS

Long considered the ballast in a relationship fraught with geopolitical frictions, the U.S. business community in China in recent years has advocated a harder line on Beijing’s trade policies.

“Crucially, the mood has shifted,” the American Chamber of Commerce in China said in a statement accompanying its annual report on China’s business climate.

“The U.S. business community in China, so long an advocate of good bilateral relations, can no longer be relied upon to be a positive anchor. U.S. companies continue to face an uncertain operating environment in China amid decreasing optimism about their investment outlook,” it said.

The world’s two biggest economies are nine months into a trade war that has cost billions of dollars, roiled financial markets and upended supply chains.

U.S. President Donald Trump has slapped tariffs on $250 billion of goods imported from China to press demands for an end to policies - including industrial subsidies, forced technology transfers, and market access barriers - that Washington says hurt U.S. companies.

China has responded with its own tit-for-tat tariffs on U.S. goods.

The chamber said tariffs had negatively impacted many of its members who “are not necessarily supportive” of their use, but earlier attempts at dialogue had failed to balance economic relations.

“We understand that any true resolution of the current dispute requires addressing the structural issues ... that have long hindered importation of U.S. goods and services and operations of U.S. businesses in China,” the chamber’s chairman, Timothy Stratford, said in the report.

‘DOWNWARD SPIRAL’

A chamber survey in February showed a majority of members favored the United States retaining tariffs on Chinese goods while Washington and Beijing try to hammer out a deal to end the trade war.

It noted then that 19 percent of its companies were adjusting supply chains or seeking to source components and organize assembly outside of China as a result of tariffs.

China has pledged to open up, but U.S. companies in many industries in the country are still not receiving the same treatment that Chinese companies experience in the United States, the chamber said.

For example, foreign companies in China are subject to equity caps and joint venture restrictions that often include hidden costs, such as technology transfer, in the automotive, banking, healthcare services, information and communications technologies, and insurance industries. China bars foreign law firms from hiring lawyers who can practice law in the country.

Chinese companies operate freely in the United States in all of those industries, the chamber said.

Trump and U.S. negotiators have repeatedly said the trade talks with China were going well.

U.S. Treasury Secretary Steven Mnuchin said on Saturday he hoped the two sides were close to a final round of negotiations, and that a deal - if reached - would go “way beyond” previous efforts to open China’s markets to U.S. companies.

But many in the U.S. business community have expressed concern that Trump could settle for a deal that increases commodity sales to China, while doing little to change China’s underlying trade practices and industrial policies.

U.S. negotiators have tempered demands that China curb industrial subsidies as a condition for a deal after strong resistance from Beijing, Reuters reported on Monday.

Stratford urged negotiators should get the agreement right and not rush talks to meet an arbitrary deadline. The collapse of an eventual deal might risk a “downward spiral” in relations, he told reporters at a briefing on the chamber’s report.

“If that agreement doesn’t work, what’s going to give us confidence that we should just go back and negotiate?” Stratford said, adding that the two governments might show less restraint.

“I think the downside of having an agreement that doesn’t work is considerable,” he said.

Reporting by Michael Martina; Editing by Neil Fullick

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