U.S. may reassess economic ties to China

By DONNA BORAK, UPI Business Correspondent

WASHINGTON, March 14 (UPI) -- The Bush administration signaled on Tuesday that it may be forced to "reassess" its economic relationship with China, if Beijing does not take corrective action to reduce unfair barriers to trade and further open its market to U.S. companies.

Trade relations between the two trading partners have become progressively more irritated due to the mounting bilateral trade deficit, which reached an all-time high of $201.6 billion last year, failure by the government to crack down on piracy and counterfeiting issues and access by U.S. companies to the Chinese market.


"The reality of trade with China continues to fall short of the potential," said Carlos Gutierrez, U.S. Secretary of Commerce in an address before the Asia Society. "If our economic relationship is to stay afloat, China needs to lighten the load by carrying out reforms and delivering results."


According to the administration, the United States has pursued an "open commercial exchange" with its Chinese counterparts, but with a poor record of trade enforcement, denying U.S. companies "rightful access" to China's market and a high level of criminal activity when it comes to piracy, the administration argues that Beijing has exposed itself to legislative action by the U.S. Congress.

"When China fails to act, it only strengthens those who want to build protectionist barriers around the U.S. market and that's the last thing we need," said Gutierrez.

The administration has been working to crack down on piracy and counterfeiting in China. U.S. trade officials headed last week to Beijing for a technical review under World Trade Organization rules that requires China to provide information on how much progress it has made on intellectual property enforcement efforts.

"The U.S. government is continuing its effort to get China -- as a responsible and mature player in the rules-based global trading system -- to play by the rules," said Christin Baker, spokeswoman for the U.S. Trade Representative office.

Since the beginning of the year the administration has toughened its stance against the Chinese government threatening to place "trade measures" if Beijing does not take appropriate steps to adequately open its market to U.S. companies.


"Our relationship has matured beyond the stage when our focus should be measured by the sheer potential. Now, our trading relationship needs to be measured by results," said Gutierrez.

The Chinese government has vigorously warned that trade sanctions by the United States would cause damage to both counties. However, Washington contends that Beijing has benefited enormously from gaining access to U.S. markets and should be held accountable to its World Trade Organization obligations. China acceded to the WTO in 2001. At the end of this year, it is expected to conclude its transition period and will be required to comply with world trade rules.

The administration has until now been extremely cautious in handling China's unfair trading practices, attempting to stray away from use of retaliatory measures. But now that China is about the exit is WTO transition period, the United States has set the stage of taking possible retaliatory action against Beijing.

Last month, U.S. Trade Representative Rob Portman described economic relations between the two trading partners as "out-of-balance" saying the administration would seek a new strategy with its Chinese counterparts which could include retaliatory action.

"As a mature trading partner, China should be held accountable for its actions and required to live up to its responsibilities, including enforcing intellectual property rights, allowing market forces to drive economic development and opening its markets," said Portman. "We will use all options available to meet this challenge."


Congressional members have launched into a heated debate over the issue of China's economic policies. U.S. lawmakers have threatened to impose a 27.5 percent import tariff on all products entering the United States, if Beijing continues to show inflexibility in revaluing its currency, the yuan.

Chairman of the Senate Finance Committee, Sen. Charles Grassley, R-Iowa suggested late last month that he would be seeking to introduce legislation to address the current problems in U.S.-Sino trade relations.

China's foreign currency policies and trade are expected to be high on the agenda when Chinese President Hu Jintao visits Washington in late April. The U.S. Treasury has been putting pressure on Beijing to revalue its currency ahead of Hu's visit, and is expected to label China as a currency manipulator in its next report.

Gutierrez said Tuesday he would head to Beijing next week to set the agenda for the upcoming U.S.-China Joint Commission on Commerce and Trade meeting in China next month. The JCCT, is one of three meetings that is held at a high-level consultative process, which is used to resolve trade and economic concerns between trading partners.

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