U.S. Walks China Trade Tightrope

[chlamor]

US walks China trade tightrope
By Russell L Smith and Caroline G Cooper

A policy battle is now raging in Washington over China. The Bush Administration and a bipartisan group of legislators are at odds over how best to address long-standing concerns about the US trade deficit with China, alleged currency manipulation by the Chinese government, and China's failure to attack intellectual property rights (IPR) violations aggressively. Since the beginning of 2005, members of Congress have introduced a range of initiatives on these issues that, if approved and signed into law, could make sweeping changes to US trade law, return the United States to an era of Smoot-Hawley trade policy and affect trade with far more countries than China. The administration has so far opposed new, stricter legislation on China, but at the same time, issued increasingly harsh rhetoric about China's unfair trade practices. For example, both President Bush and Treasury Secretary Snow recently made public statements saying the Chinese government must hasten its adoption of a market-based exchange rate.

If the reaction from Senators at the recent confirmation hearing of US Trade Representative (USTR) designate Robert Portman is any indication of what may lie ahead for the administration on China policy, then the fight is only just beginning. Representative Portman (Republican - Ohio) won some praise from Senators by vowing to "get tough" on China and empathizing with their concerns about the Chinese government's unfair trade practices based on experiences his own constituents have had in trying to compete with Chinese imports. Although the committee unanimously endorsed Portman for the position of USTR, this collegial relationship will not last when he becomes a member of the Bush administration unless he goes beyond rhetoric and produces concrete results. Finding the right balance between President Bush's policy goals with respect to China and protectionist pressures from Congress on the issue will be Portman's biggest challenge.

As a result of these developments, an effort is afoot in both the House and Senate to craft an omnibus China bill with two purposes in mind: 1) to address legislators' concerns with respect to China while at the same time not applying stringent duties on Chinese imports; and 2) to link China to votes on the US-Central America/Dominican Republic Free Trade Agreement (CAFTA-DR).
There have been numerous reports that any comprehensive China legislation will contain provisions regarding currency manipulation. Perhaps more alarming is the possibility that language from HR1498 introduced recently by Representatives Tim Ryan (Democrat - Ohio) and Duncan Hunter (Republican - California) to clarify that exchange-rate manipulation by China is actionable under several provisions of US trade laws could be included in such a bill. What is not readily recognized is that HR1498 contains a provision that would create a new remedy for currency intervention under the US CVD laws. This remedy would not be China-specific and could therefore be used against any country. US industry groups have included both Korea and Japan in the discussion of alleged currency manipulation.

http://www.atimes.com/atimes/China/GD29Ad02.html