Fiscal cliff looms large over Sino-US trade talks

First high-level meeting between China and US since November

The first high-level talks between Chinese and US officials since both countries underwent leadership transitions in November will be held in Washington. Trade disputes and the US fiscal cliff are expected to top the agenda.

Experts are looking for a tone that indicates growing cooperation between the world's two largest economies even if detailed policies are not hammered out.

Vice-Premier Wang Qishan left Beijing on Tuesday afternoon for the 23rd China-US Joint Commission on Commerce and Trade scheduled for Dec 18 and 19 in Washington.

He will co-chair the annual talks with US Deputy Secretary of Commerce Rebecca Blank and trade representative Ron Kirk.

Kirk and his colleagues have said they are pushing China to drop restrictions on US livestock and farm products and beef up anti-piracy efforts, among other issues.

Wang in turn is expected to talk about Beijing's views on whether the US economy can avoid going over the fiscal cliff.

A deal must be reached in the US by Jan 1 or else $600 billion in spending cuts and tax hikes will automatically kick in. This is widely known as the fiscal cliff.

Given that China is the largest creditor of the US, it has

an interest in Washington's budget management. Economists warn that going over the cliff could send the US back into recession.

Other topics China may touch upon range from US anti-dumping measures on Chinese goods to obstacles in the way of Chinese investment entering the US, and restrictions on US high-tech products exported to China.

Shen Danyang, a spokesman for the Ministry of Commerce, said at a news briefing on Tuesday that despite the fast growth of Chinese investments in the US, some investors faced obstacles such as national security investigations.

"We constantly oppose the so-called 'national security' moves to block Chinese investments because it's obvious discrimination," Shen said.

"We hope that the US will judge Chinese investments fairly, avoid politicizing the issue and ensure transparency. The two-way investment pact should also be advanced to boost the confidence of Chinese investors," he said.

The first 11 months saw Chinese non-financial investment in the US total $1.1 billion, up 13 percent from a year earlier, according to the ministry.

China's non-financial outbound investment in the US registered $1.81 billion in 2011, up 38.5 percent year-on-year.

"In addition to Chinese investments in the US, China will also expect the US to take effective measures in export controls, trade cases against China and intellectual property protection," Shen said.

He Weiwen, co-director of the China-US-EU Study Center at the China Association of International Trade, said that the talks will help the US better understand China's signals on continuing reforms and opening-up, as well as welcoming US investment.

During a trip to southern Guangdong last week, Party chief Xi Jinping echoed calls made by late leader Deng Xiaoping on market reforms and strengthening the rule of law.

Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said that this year's talks will play a key role in ties. "Easing obstacles to Chinese investment in the US will be an important issue in this year's talks,'' Huo said.

"It will enhance trust and create a positive atmosphere for cooperation," Huo said.

"The key for Sino-US economic ties is long-term strategic trust."

Derek Scissors, a senior research fellow at the Heritage Foundation in Washington, told Reuters that "we're either going to get nothing, meaning just details, or we might get a change".

"I don't think we should be expecting sweeping changes, but I do think we will see tangible progress on some specific issues," said John Frisbie, president of the US-China Business Council.

"China is definitely prioritizing its US relations and they are also discussing economic reforms back at home that could impact some of the issues that matter to US companies."

The meeting has become a central forum for the management of the US-China economic relationship. Along with the Strategic and Economic Dialogue, it is a valuable platform to discuss disputes, said Edward Alden, a senior fellow at the Council on Foreign Relations.

"The Obama administration has been working on a significant overhaul of its export restrictions on high-technology goods, and there are genuine prospects for progress in the second term," he said.

Alden believes the lack of protection for intellectual property rights in China continues to be a major irritant in relations. "The big problem is that the tools for enforcement are inadequate," he said.

He said he will be particularly interested to see if there is any progress in discussion over a bilateral investment treaty between the US and China.

Karl Sauvant, a resident senior fellow at the Vale Columbia Center on Sustainable International Investment at Columbia University, echoed Alden's views.

He said the meeting is an excellent opportunity to reconfirm on both sides that the negotiation for a trade treaty between China and the US is in the interests of both sides.

"Naturally, the negotiations will present a number of challenges that need to be met, and some issues may even require decisions on the political level, but I think it is certainly worthwhile to press ahead with them," said Sauvant, editor of the book Is the US Ready for FDI from China?