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Cause of the disputes
The Bush administration accused China of a host of trade violations, including intellectual property theft and trade barriers.
Manufacturers complained about rampant piracy of intellectual property, forced transfer of technology from firms launching joint ventures in China, trade barriers and capital markets that are largely insulated from free-market pressures, Evans said.
Evans also announced the creation of a new Unfair Trade Practices Team inside the Commerce Department to address trade barriers that are costing American jobs, as well as two new posts - an assistant secretary for trade promotion and an assistant secretary for manufacturing.
The announcements made in September, 15th in Detroit followed a series of 0 round-table discussions his agency has held around the country examining problems in manufacturing, Since July 000, manufacturing companies have lost .7 million jobs.
During those meetings, no country raised more attention as a source of concern than China, Evans said.
He gave as one example the experience of the manufacturer of Wrigley chewing gum, which has a 70 percent share of the Chinese market. Evans said that a Wrigley official told him that the Chinese were violating the companys copyrights by selling pirated gum in the city of Guangzhou and had even gone so far as to copy the designs of the Wrigley distribution trucks and were now driving the same routes.
Thats not a pretty picture, said Evans, who accused the Chinese of failing to live up to commitments it made in December 001 when it joined the World Trade Organization. China said at the time that it would open up its distribution systems to foreign suppliers and allow foreign non-bank companies to offer auto loans to consumers in China.
Evans pledged that the Bush administration would aggressively target unfair trade practices wherever they occur. American manufacturers can compete against any countrys white collars and blue collars but we will not submit to competing against another countrys choke collars.
American manufacturers have complained that China is artificially keeping the Chinese currency undervalued by as much as 40 percent to make American products more expensive in China and other markets where U.S. goods compete against Chinese products.
Evans said the new Unfair Trade Practices Team would work within the departments International Trade Administration while a new assistant secretary for trade promotion would also serve as the director general of the agencys Foreign Commercial Service, which supplies U.S. embassies with Commerce officials whose job is to help American companies operate in various foreign countries.
Senator Joe Lieberman, a Democrat representing Connecticut, said the Bush administration was late in addressing the issue.?The Bush administrations attention to Chinas trade abuses is .5 million jobs late. Weve been hemorrhaging manufacturing jobs for the last 1/ years, he said.
Senator Charles Schumer, a Democrat representing New York, said the Bush administration should be supporting his legislation to impose across-the-board tariffs of 7.5 percent on Chinese imports to penalize the country for undervaluing its currency to gain competitive advantage against U.S. exports.
China has been a member of the World Trade Organization (WTO) for almost two years, but is still dragging its heels on fulfilling its WTO commitments. If it were a smaller economy, some of Chinas transgressions could be tolerated, but when the worlds fourth largest trading nation ignores its obligations, Chinas trading partners ought to act.
Till now, one thing is clear Bush administrations action is based on the belief that China will not change its behavior unless it faces credible prospects of retaliation. Therefore, persuading China to comply with its WTO obligations will take a combination of economic leverage and diplomatic pressure.
US Trade Barriers against China Textile Export
Therefore, the Bush administration is promising to further the cause of free trade by putting up barriers to trade. The U.S. Department of Commerce announced on November 18th that, at the request of American textile manufacturers, it will limit imports of Chinese-made brassieres, sleepwear and knit fabrics. (Based on the Section 01-- the 174 Trade Act)
Trade advocates immediately decried the decision, but the administration argues that the quotas will only restrict the growth of imports. And Republicans from textile states have said that they would not support future trade agreements unless the administration agreed to protect the industry.
When the time comes to vote on trade measures, though, its hardly clear that lawmakers from textile states will be forthcoming with their support. And if the president gets in the habit of protecting the nations least competitive industries, his credibility in trade talks will suffer.
Thats a major problem at a time when the United States is negotiating with other Western Hemisphere nations over the terms of a proposed Free Trade Area of the Americas. Pushing other nations to knock down barriers while putting new ones up in the United States amounts to telling the world, Do as I say, not as I do.
But even if President Bushs newest anti-trade measure doesnt provoke a trade war with China, its still a discouraging step.
Trade barriers are bad news for New Orleans and other port cities, which benefit from a free flow of goods around the world. Imported steel is one of the most important products that move through the Port of New Orleans, and the effect of tariffs has been dreadful. Steel, which normally represents about 40 percent of the cargo passing through the port, now accounts for only 5 percent.
Because no Chinese textiles pass through the Port of New Orleans, the quotas wont be nearly as damaging to the metro area as the steel tariffs have been.
Even so -- and even if textile quotas do temporarily improve the health of the domestic industry -- the consequences outweigh any benefits. One researcher calculates that government restrictions on the textile trade cost the average family of three, $400 to $500 a year. Those higher prices explain why retailers are up in arms about the new textile quotas.
Textile quotas may play well in textile states like North Carolina, just as the steel tariffs have shored up support for the president in Pennsylvania, Ohio and Kentucky. But these trade restrictions hurt the cause of free trade and the nation as a whole.
China's Reponses
China has strongly protested plans by the United States to slap quotas on Chinese textile imports of dressing gowns and bras, accusing Washington of violating WTO principles of free trade.
The Chinese government expresses deep regret over this decision, the Ministry of Commerce said in a statement.
The American government ignored the strong opposition from the Chinese side, made such a recommendation, violating the World Trade Organizations principles of free trade, transparency and non-discrimination.
China threatened to take the issue to the rules-based global trade body.
The Chinese side retains the right to appeal to relevant agencies of WTO to protect the rights and interests of Chinese industries, the ministry said.
A ministry spokesman told AFP Chinese officials had cancelled a trip scheduled Wednesday to the US to meet soybean sellers.
The spat adds to a rising number of disputes between the two trading giants, as the US seeks to balance a 10 billion dollar trade deficit with China blamed on Beijing boosting its competitiveness by deliberately undervaluing its currency.
The new row erupted Tuesday as Washington announced quotas on Chinese textiles after finding a flood of subsidized imports has hurt US textile makers.
A US trade panel examining a complaint from the US textile industry called for safeguard relief against Chinese-made knit fabrics, dressing gowns and bras, the US Commerce Department said.
The move, which could limit the growth of Chinese imports to 7.5 percent annually, came under the provisions of Chinas accession agreement to the WTO.
But the ministry said the US measures did not fit the provision that allows the United States and other WTO members to impose temporary quotas in the event those imports are found to cause market disruption.
China did not explicitly threaten retaliatory measures, but said overall trade relations could be damaged.
China hopes the US will realize the negative impact the decision is bound to have on bilateral trade relations, the ministry said.
A group representing Chinese textiles manufacturers lambasted the US decision as completely wrong and arbitrary.
The China Chamber of Commerce for Import and Export of Textiles said the US textile sector had only itself to blame for slumping production.
It insisted Chinese manufacturers had nothing to do with the sharp increase in exports, saying the growth only underscored the changing nature of the industry.
The accusations of US domestic producers to Chinese textile exporters are fabricated, there is no factual foundation, it said.
One US industry group estimated that since 001 exports of dressing gowns from China have increased by 05 percent, bras by 8 percent and knit fabrics by 8,000 percent.
But the chamber argued China has become one of the USs bright spots in its textile exportation market and benefits much more from maintaining the fast growth of the market.
It further reminded Washington that Chinas textile imports from the US have grown sharply, surging 148 percent to 787 million in the first nine months of this year compared with the same period last year.
Given that the restrictions would be calculated in dollar values rather than volume, they would affect a fraction of the total textile trade between the two countries, which suggested the move was politically motivated.
The products affected have an annual export value of less than one billion dollars, so its unlikely there will be any substantial impact on Chinese textile exporters, said Li Zhixian, a textile analyst at Guotai Junan Securities.
The US government seems to be doing this more for political reasons than economic reasons.
In response, the dollar sunk to record lows against the euro in Tokyo, with the euro hitting 1.178 dollars.
Analysts attributed the slide to worries that the US move could open the door to other protectionist barriers.
So far, China has not threatened to retaliate. And while the Chinese government said it would reserve the right to seek relief from the World Trade Organization, the statement came from a Commerce Ministry spokesman rather than a policymaker. Beijing-watchers take this as a sign that, for now, Chinas leaders dont see the issue as a major one.
That reaction is far more muted than the outcry in Europe over the steel tariffs that President Bush imposed last year. After the WTO ruled last week -- as expected -- that the tariffs violate international trade rules, the European Union prepared $. billion worth of retaliatory tariffs on American products.
Conclusion
The trade barrier battle between China and US is hard to predict and if it can not be calmed down, it is not a good thing to both sides.
First of all, China has to admit that it gives the protection to certain departments and products violate the WTO accession agreement.
Secondly, the too aggressive action taken by US against China is not appropriate.
China's trade surpluses with American and European countries first reflect China's police of welcome to the foreign direct investment. It shows that China is not pushing trade protectionism. In addition, China's opening degree is also manifested in its relatively low import tariff after joining WTO. Admittedly, it still can not qualify the standards of a WTO membership.
At last, I do agree that China need to cope with the fair trade competition. And speed up its reform of every social and economy aspect. A more open and free trade market between China and US is not only good for the American economy but also good for China. So, I believe the American's push to China to speed up its opening process is necessary but it is also not wise to push too much and hurry. I think China and USA need more talk and cooperation at this point and achieve a win-win solution based on their common goal-boosting their own economies, is not impossible.
US Trade Barriers against China's Export
Prepared by Jing Wang
Appendix
SUMMARY OF U.S.-CHINA BILATERAL WTO AGREEMENT
AGRICULTURE
The Agreement would eliminate barriers and increase access for U.S. exports across a broad range of commodities. Commitments include
?Significant cuts in tariffs that will be completed by January 004. Overall average for agricultural products will be 17.5 percent and for U.S. priority products 14 percent (down from 1 percent).
?Establishment of a tariff-rate quota system for imports of bulk commodities, e.g., wheat, corn, cotton, barley, and rice, that provides a share of the TRQ for private traders. Specific rules on how the TRQ will operate and increased transparency in the process will help ensure that imports occur. Significant and growing quota quantities subject to tariffs that average between 1- percent.
?Immediate elimination of the tariff-rate quota system for barley, peanut oil, sunflower-seed oil, cottonseed oil, and a phase-out for soybean oil.
?The right to import and distribute products without going through a state-trading enterprise or middleman.
?Elimination of export subsidies on agricultural products.
China has also agreed to the elimination of SPS barriers that are not based on scientific evidence.
INDUSTRIAL PRODUCTS
China would lower tariffs and eliminate broad systemic barriers to U.S. exports, such as limits on who can import goods and distribute them in China, as well as barriers such as quotas and licenses on U.S. products.
TARIFFS
?Tariffs cut from an average of 4.6 percent to an average of .4 percent overall and 7.1 percent on U.S. priority products.
?China will participate in the Information Technology Agreement (ITA) and eliminate all tariffs on products such as computers, telecommunications equipment, semiconductors, computer equipment, and other high-technology products.
?In the auto sector, China will cut tariffs from the current 80-100% level to 5% by mid-006, with the largest cuts in the first years after accession.
?Auto parts tariffs will be cut to an average of 10% by mid-006.
?In the wood and paper sectors, tariffs will drop from present levels of 1-18% on wood and 15-5% on paper down to levels generally between 5% and 7.5%.
?China will also be implementing the vast majority of the chemical harmonization initiative. Under that initiative, tariffs will be at 0, 5.5 and 6.5 percent for products in each category.
RIGHT TO IMPORT AND DISTRIBUTE
Trading rights and distribution are among the top concerns for U.S. manufacturers and agricultural exporters. At present, China severely restricts trading rights (the right to import and export) and the ability to own and operate distribution networks. Under the Agreement, trading rights and distribution services will be progressively phased in over three years. China will also open up sectors related to distribution services, such as repair and maintenance, warehousing, trucking and air courier services.
SERVICES
China has made commitments to phase out most restrictions in a broad range of services sectors, including distribution, banking, insurance, telecommunications, professional services such as accountancy and legal consulting, business and computer related services, motion pictures and video and sound recording services. China will also participate in the Basic Telecommunications and Financial Services Agreements.
ANTIDUMPING AND SUBSIDIES METHODOLOGY
The agreed protocol provisions ensure that American firms and workers will have strong protection against unfair trade practices including dumping and subsidies. The U.S. and China have agreed that we will be able to maintain our current antidumping methodology (treating China as a non-market economy) in future anti-dumping cases. This provision will remain in force for 15 years after Chinas accession to the WTO. Moreover, when we apply our countervailing duty law to China we will be able to take the special characteristics of Chinas economy into account when we identify and measure any subsidy benefit that may exist.
PRODUCT-SPECIFIC SAFEGUARD
The agreed provisions for the protocol package also ensure that American domestic firms and workers will have strong protection against rapid increases of imports.
?To do this, the Product-Specific Safeguard provision sets up a special mechanism to address increased imports that cause or threaten to cause market disruption to a U.S. industry. This mechanism, which is in addition to other WTO Safeguards provisions, differs from traditional safeguard measures. It permits United States to address imports solely from China, rather than from the whole world, that are a significant cause of material injury through measures such as import restrictions. Moreover, the United States will be able to apply restraints unilaterally based on legal standards that differ from those in the WTO Safeguards Agreement. This could permit action in more cases. The Product-Specific Safeguard will remain in force for 1 years after China accedes to the WTO.
TEXTILES
Chinas protocol package will include a provision drawn from our 17 bilateral textiles agreement, which permits U.S. companies and workers to respond to increased imports of textile and apparel products. This textile safeguard will remain in the effect until December 1, 008, which is four years after the WTO agreement on Textile and Clothing expires.
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