WASHINGTON: The United States and China have started to outline commitments in principle on the stickiest issues in their trade dispute, marking the most significant progress yet toward ending a seven-month trade war, according to sources familiar with the negotiations.

The world’s two largest economies have slapped tit-for-tat tariffs on hundreds of billions of dollars of goods, slowing global economic growth, skewing supply chains and disrupting manufacturing.

As officials hold high-level talks on Thursday and Friday in Washington, they remain far apart on demands made by US President Donald Trump’s administration for structural changes to China’s economy.

But the broad outline of what could make up a deal is beginning to emerge from the talks, the sources said, as the two sides push for an agreement by March 1. That marks the end of a 90-day truce that Trump and Chinese President Xi Jinping agreed to when they met in Argentina late last year.

Negotiators are drawing up six memorandums of understanding (MoUs) on structural issues: forced technology transfer and cyber theft, intellectual property rights, services, currency, agriculture, and non-tariff barriers to trade, according to two sources familiar with the progress of the talks.

At meetings between US and Chinese officials last week in Beijing the two sides traded texts and worked on outlining obligations on paper, according to one of the sources.

The process has become a real trade negotiation, the source said, so much so that at the end of the week the participants considered staying in Beijing to keep working. Instead they agreed to take a few days off and reconvene in Washington.

The sources requested anonymity to speak candidly about the talks.

Chinese Commerce Ministry spokesman Gao Feng on Thursday declined to comment on the MoUs.

US equity index futures initially rallied on the news of progress in the talks, with the S&P 500s e-mini futures contract gaining about 0.4 percent over the following hour during Asian trading. The dollar strengthened and US Treasury security yields rose.

US stocks later retreated in Thursdays Wall Street session following a batch of weaker-than-expected economic data, though the dollar and bond yields remained modestly higher.

The MoUs cover the most complex issues affecting the trading relationship between the two countries and are meant, from the US perspective, to end the practices that led Trump to start levying duties on Chinese imports in the first place.

One source cautioned that the talks could still end in failure. But the work on the MoUs was a significant step in getting China to sign up both to broad principles and to specific commitments on key issues, he said.

Published in Dawn, February 22nd, 2019