WASHINGTON — A volley of trade disputes between China and the U.S. is complicating efforts by both countries to keep tensions to a low simmer in order to achieve goals on a range of issues, from climate change and foreign policy to addressing the fallout from the global financial crisis.

This story first appeared in the December 1, 2009 issue of WWD. Subscribe Today.

The relationship between Washington and Beijing has historically been dogged by ambivalence over trade policies, currency manipulation and the large amount of U.S. debt China holds. As the Obama administration nears its one-year anniversary, it walks a fine line between holding China’s feet to the fire on trade obligations and trying to refrain from pushing the Asian nation too far.

U.S.-China trade relations in recent months have been overshadowed by President Obama’s decision in September to impose punitive tariffs on Chinese tires. The move prompted a swift response from Beijing, which launched trade remedy investigations of U.S. poultry exports.

Trade spats between the countries also include World Trade Organization disputes over Chinese subsidization of raw materials and barriers against intellectual property imports, in addition to countless antidumping and subsidy cases filed by both countries over everything from steel pipes to chemicals used to make nylon. The U.S. also informally complained at the WTO in early November about local and provincial subsidies to textile and apparel companies in China.

Both governments appear to be trying to keep trade disputes from escalating too far, observers said, but with widespread speculation in the trade community the textile and apparel industry could file a trade remedy case in the coming months, that could get more challenging.

“Both sides, President Hu Jintao and President Obama, will let these trade fires burn and hope they burn out and let steam off,” said Gary Hufbauer, senior fellow at the Peter G. Peterson Institute for International Economics.

However, Hufbauer said, “I would be surprised if we got to 2010 without a major case on textiles and apparel.”

Sources in the industry have indicated they are exploring their options. According to the most recent data available from the Commerce Department’s Office of Textiles and Apparel, Chinese imports of textiles and apparel to the U.S. year-to-date topped $23.37 billion.

The broad array of issues at play for the U.S. and China will make it difficult for the Obama administration to push too hard on any one area, experts said.

“We are locked in this embrace with each other,” said Erik Autor, vice president and international trade counsel for the National Retail Federation. “Both China and the U.S. need each other and I don’t think either country wants to push things too far in the inevitable disputes that arise.”

The administration is balancing small actions like the tire case with larger concessions such as its reluctance to prod China on currency manipulation, Autor noted.

It’s difficult to talk about any one issue without touching on trade because of the enormous commercial relationship between the U.S and China. The nature of the relationship is partly driven by “the fact that the Obama administration has had an ambivalent position on trade,” said Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association.

The administration has instead focused its energies on other high priority issues.

“Clearly, like almost every other issue, U.S.-China relations, and U.S.-China trade relations in particular, have taken a back seat to the President’s agenda dealing with the stimulus package early in the year, and now health care,” said Auggie Tantillo, executive director of the American Manufacturing Trade Action Coalition.

Obama acknowledged in an interview with the Chinese press at the close of his trip to Asia in mid-November that despite statements from the two governments that they would work together to strengthen economic, trade and foreign policy ties, the relationship is susceptible to disputes.

“The only thing that could prevent such a positive outcome is if there are misunderstandings and miscalculations between the two sides,” said Obama, according to White House transcripts. “The more trust that’s been established between the two countries, the less likely such misunderstandings occur.”

Experts and observers said in large part the nature of how the U.S.-China relationship moves forward will depend on the global economic recovery. Trade imbalances, fiscal policies and foreign policy issues were all impacted in some way by the grinding halt of economies worldwide. Now that signs of recovery are appearing in some countries, the path forward is likely to hinge on how, and when, a full recovery takes hold.


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