WASHINGTON — The Bush administration, facing a record deficit with China and complaints of unfair trade practices from U.S. producers and lawmakers, is pushing China toward a bigger role in the international trading framework.
“China’s apprentice period must now come to a close and China must act as a fully accountable participant and beneficiary in the international trading system,” Deputy U.S. Trade Representative Karan Bhatia told the U.S.-China Business Council on Wednesday. “China has not played a role in strengthening the international trading system commensurate with its commercial heft and with the benefit it has obtained from that system.”
China joined the World Trade Organization in 2001 and benefited significantly from the elimination of apparel and textile quotas last year. However, Bhatia described China’s track record as a member of the global body as mixed, with some of its obligations left unfulfilled.
Thanks partly to China’s WTO membership, two-way trade with the U.S. mushroomed to about $286 billion last year, contributing to a projected trade deficit for the U.S. of $200 billion.
“An imbalance of this magnitude is not sustainable, either economically or politically, over the long term,” Bhatia said.
As China continues to develop as a trading partner, Bhatia said it must work to rein in “rampant intellectual property rights violations” and address nontariff barriers that make it difficult for U.S. companies to do business in China.
“We will continue to press China to address policies that make it difficult and often impossible for our competitive domestic companies to compete against unfairly subsidized Chinese exports,” he said.
U.S. textile companies often complain the industry cannot compete with goods made in Chinese factories that are supported by the government. They also argue that China’s currency policies keep the yuan undervalued, making the country’s goods even less expensive in the U.S. market.
“The United States will not hesitate, when appropriate, to use all tools at its disposal to ensure that China lives up to its commitments, including dispute settlement at the WTO or the use of trade remedies within our own legal system,” Bhatia said.
Despite the tough talk, Bhatia acknowledged a significant upside to trade with China and described the relationship between the two countries as “enormously important.”
This story first appeared in the January 31, 2006 issue of WWD. Subscribe Today.
“U.S. consumers have clearly benefited from the trade relationship, having access to a wider variety of less-costly goods,” he said. “On a macro-economic level, these low-cost consumer and industrial goods have assisted the United States in holding the line on inflation for a long time. This, in turn, has helped the Federal Reserve to maintain historically low short-term interest rates for sustained periods, thus spurring U.S. economic growth.”
In this vein, the U.S.-China Business Council, which was holding its Forecast 2006 Conference at the St. Regis Hotel here, also released “The China Effect: Assessing the Impact on the U.S. Economy of Trade and Investment with China,” a report stressing the positive results of the trading relationship.
Produced by Oxford Economics and The Signal Group, the report said the U.S. gross domestic product will be 0.7 percent higher and U.S. prices will be 0.8 percent lower by 2010 as a result of increased trade and investment with China since 2001. These two factors will equal about $1,000 in real disposable income per U.S. household per year, it said. The relationship will also shift 500,000 jobs from the manufacturing to the service sector.