WASHINGTON - The United States has stepped
up pressure on China to adopt broad economic
changes in a bid to slow Beijing's huge trade
surplus with the US. The move is the latest in a
series of actions by the Bush administration to
preempt a threat by US lawmakers to confront China
over trade. The administration argues that
protectionism against China could equally harm US
companies that depend in many respects on open
economies abroad, and do an increasing amount of
business with China.
Commerce Secretary
Carlos Gutierrez said October 24 that China needs
to make major economic and financial changes to be
a more attractive place for US businesses and to
curb the growing US trade deficit. "When measured
by size, by unmet needs or the
complementary
nature of our economies, China offers great
promise for American business, but [that promise
should be met] under the appropriate terms of
trade," Gutierrez said.
Gutierrez, like
many other US officials who have recently tried to
pressure Beijing, says these terms of trade
actually mean free market changes, including
opening up the country further to foreign firms.
"We ask that China become a responsible
stakeholder in the international economic system
by aligning its economy with market-based
principles," Gutierrez said in a speech to the
18th annual Update Conference on Export Controls
and Policy, a business group.
More
specifically, the United States is lobbying China
to implement a number of reforms, including
improved intellectual property rights (IPR)
protection, currency revaluation and re-export
restrictions on high-tech products. Washington
says that two-thirds of all the counterfeit goods
seized by US Customs officials come from China,
and that some 90% of the software sold within
China is pirated.
US Treasury Secretary
John Snow and Federal Reserve Chairman Alan
Greenspan were both in China last week prodding
the country to make currency reforms, which
Washington describes as a key element in balancing
trade relations. US critics say that Chinese
restrictions on the yuan mean it is undervalued by
40%, making Chinese exports artificially cheap and
contributing to China's US$162 billion trade
deficit with the US.
Under American
pressure, China revalued its currency by 2.1% in
July, but Washington still wants to see more
flexibility. Chinese officials say they cannot
risk busting the country's exports boom because
there are millions of poor Chinese who depend on
these sales. On the list of US demands is a
request that China guarantee sensitive high-tech
exports will not be diverted to end uses that
threaten US national security or fall into the
hands of nations deemed hostile by Washington.
The United States, the world's largest
economy, also wants to see a more transparent
China, and has repeatedly urged Chinese regulators
to promote fair competition between domestic and
foreign participants, especially in the finance,
banking and insurance sectors. Washington charges
that China gives subsidies to its firms and has
urged Beijing to reconsider its subsidies
practices. China has promised to provide a
detailed accounting of its subsidies to the World
Trade Organisation by the end of 2005.
"So
from the standpoint of the United States, the
economic relationship with China needs improvement
- to say the least," said Gutierrez. "Without
improvement, there is risk of restrictions on
commerce between our countries."
China
increasingly vital for US firms The Chinese
economy has been steadily growing in importance
for US businesses. China is now the sixth largest
market for US exports and its third largest trade
partner overall. Last year, US companies exported
$42 billion worth of merchandise and services to
China, making it among the fastest-growing major
markets for US manufactured goods. US exports of
computers, electrical equipment and other
electronic products to China increased by 20%
between 2002 and 2003, topping $7 billion.
Chemical exports grew 24%, to $3.7 billion, over
the same period. US investments in China now stand
at $50 billion.
This explains why the Bush
administration, keen to promote free trade and
open more foreign markets for US corporations, is
resisting calls from Congress for greater
protectionism against China even as US
manufacturers complain of the influx of Chinese
goods and products. US legislators said earlier
this month that they will consider punishing China
by slapping new import tariffs on its products if
Beijing does not act on most of Washington's
demands. New York Senator Charles E Schumer said
that he would introduce a bill imposing tariffs of
as much as 27.5% on Chinese imports by November 24
if China does not take the requested measures.
But Gutierrez says such threats are
outdated and do not fit the current global trade
architecture, since Chinese growth is creating
jobs in the United States. He says that workers
and companies at home are benefiting from the
increased purchasing power of China's 1.3 billion
consumers. "Just think about the stock market
appreciation of companies doing business with
China," he said. "We need to reject very
aggressively the ... medieval medicine offered by
economic isolationists," Gutierrez said.
"Protectionism has failed us in the past, and
these policies will fail us again if new trade
walls rise up on the old, antiquated protectionist
foundations."
