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US-China dialogue opens with tough talk on trade

Washington grows impatient with Beijing's reluctance to curb Pyongyang

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From left, U.S. Treasury Secretary Steven Mnuchin, Chinese Vice Premier Wang Yang and U.S. Commerce Secretary Wilbur Ross gather for economic talks in Washington on July 19.   © Reuters

WASHINGTON -- The U.S.-China relationship, relatively friendly in recent months, could take a contentious turn in talks here Wednesday as American officials take aim at the countries' growing trade imbalance and press Beijing for tougher action on North Korea.

U.S. Commerce Secretary Wilbur Ross, Treasury Secretary Steven Mnuchin and Chinese Vice Premier Wang Yang met in Washington for round one of the U.S.-China Comprehensive Economic Dialogue. "It's time to rebalance in our trade and investment relationship in a more fair, equitable and reciprocal manner," Ross said in his opening statement, setting the tone for the meeting to come. America's trade deficit with China expanded to around $120 billion in the January-June half, according to Chinese figures, even as the Asian powerhouse's overall trade surplus with the rest of the world shrank.

Mnuchin also pushed for more openness on China's end, suggesting that more "foreign participation in China's financial sector will help improve the allocation of resources to the most productive sectors of the Chinese economy." Wang took a more conciliatory tone: "Dialogue cannot immediately address all differences, but confrontation will immediately damage the interests of both" parties, he said.

The vice premier announced in a speech Tuesday that China had begun importing such American goods as beef and liquefied natural gas as part of the so-called 100-day plan to address the trade imbalance that Presidents Xi Jinping and Donald Trump agreed to in April. The first part of that plan was made public in May, and Wednesday's talks are intended to firm up other aspects.

But a number of stumbling blocks could hinder such progress. Overproduction of steel in China remains a thorny issue, particularly after the country logged record crude steel output in June. While China's steel exports to the U.S. appear, at first glance, to be falling, Washington charges the products are simply being rerouted through third countries like South Korea. Beijing, meanwhile, charges that limits America is considering on steel imports are protectionist, raising real concerns of a stalemate.

Getting tough

The shadow of North Korea's nuclear and missile development will also darken the proceedings. The Trump administration in the past has indicated a willingness to overlook certain economic issues if Beijing were to help it rein in Pyongyang. But the deadline for progress on that front is thought to be mid-July -- that is, when the 100-day economic plan is to have run its course -- and China remains leery of imposing sanctions on its neighbor that are as harsh as Washington would like.

And so the U.S. is taking a harder line. The Treasury Department at the end of June barred China's Bank of Dandong from doing business with American financial institutions, saying the bank helped North Korea launder money. Washington is now weighing further sanctions on Chinese companies doing business with the North.

The Bank of Dandong sanctions are intended more to make an example of the institution than to have a real impact, according to a diplomatic source in Shenyang, China. Given that Dandong is right across the border from North Korea, it is easier to simply carry in cash than risk leaving a paper trail by going through banks. But the message of the crackdown is clear: If Beijing's cooperation is not forthcoming, further punitive measures will be.

After the American and Chinese officials made their opening statements Wednesday, it was announced that neither side would hold news conferences planned for that evening. While Washington and Beijing have made quite a show of partnership since April, it is clear the honeymoon is over. 

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