Emad Mekay

WASHINGTON, Oct 24 2005 (IPS) — The United States stepped up pressure on China Monday to adopt broad economic changes in a bid to slow Beijing’s huge trade surplus.

The move is the latest in a series of actions by the George W. Bush administration to preempt a threat by U.S. lawmakers to confront China over trade.

The administration argues that protectionism against China could equally harm U.S. companies that depend in many respects on open economies abroad, and do an increasing amount of business with China.

Commerce Secretary Carlos Gutierrez said Monday that China needs to make major economic and financial changes to be a more attractive place for U.S. businesses and to curb the growing U.S. trade deficit.

“When measured by size, by unmet needs or the complementary nature of our economies, China offers great promise for American business, but under the appropriate terms of trade,” Gutierrez said.

Gutierrez, like many other U.S. officials who have recently tried to pressure Beijing, says these terms of trade actually mean free market changes, including opening up the country further for foreign firms.

“We ask that China become a responsible stakeholder in the international economic system by aligning its economy with market-based principles,” Gutierrez said in a speech to the 18th annual Update Conference on Export Controls and Policy, a business group.

More specifically, the United States is lobbying China to implement a number of reforms, including intellectual property protection, currency revaluation and re-export restrictions on high-tech products.

Washington says that two-thirds of all the counterfeit goods seized by U.S. Customs officials come from China, and that some 90 percent of the software sold within China is pirated.

U.S. Treasury Secretary John Snow and Federal Reserve Chairman Alan Greenspan were both in China last week prodding the country to make currency reforms, which Washington describes as a key element in balancing trade relations.

U.S. critics say that Chinese restrictions on the yuan mean it is undervalued by 40 percent, making Chinese exports artificially cheap and contributing to the 162-billion-dollar trade deficit with the United States.

Under U.S. pressure, China revalued its currency by 2.1 percent in July, but Washington still wants to see more flexibility. Chinese officials say they cannot risk busting the country’s exports boom because there are millions of poor Chinese who depend on these sales.

On the list of U.S. demands is a request that China guarantee that sensitive high-tech exports will not be diverted to end uses that threaten U.S. national security or fall into the hands of nations deemed hostile by Washington.

The United States, the world’s largest economy, also wants to see a more transparent China, and has repeatedly urged Chinese regulators to promote fair competition between domestic and foreign, participants especially in the finance, banking and insurance sectors.

Washington charges that China gives subsidies to its firms and has urged Beijing to reconsider its subsidies practices. China promised to provide a detailed accounting of its subsidies to the World Trade Organisation by the end of 2005.

“So from the standpoint of the United States, the economic relationship with China needs improvement – to say the least,” said Gutierrez. “Without improvement, there is risk of restrictions on commerce between our countries.”

The Chinese economy has been steadily growing in importance for the U.S. businesses. China is now the sixth largest market for U.S. exports and its third largest partner overall.

Last year, U.S. companies exported 42 billion dollars worth of merchandise and services to China, making it among the fastest-growing major markets for U.S. manufactured goods.

U.S. exports of computers, electrical equipment and other electronic products to China increased by 20 percent between 2002 and 2003, topping seven billion. Chemical exports grew 24 percent, to 3.7 billion dollars over the same period.

U.S. investments in China now stand at 50 billion dollars.

This explains why the Bush administration, keen to promote free trade and open more foreign markets for U.S. corporations, is resisting calls from Congress for greater protectionism against China as U.S. manufacturers complain of the influx of Chinese goods and products.

U.S. legislators said earlier this month that they will consider punishing China by slapping new import tariffs on its products if Beijing does not act on most of Washington’s demands.

New York Senator Charles E. Schumer said that he would introduce a bill imposing tariffs of as much as 27.5 percent on Chinese imports by Nov. 24 if China does not take the requested measures.

But Gutierrez says such threats are outdated and do not fit the current global trade architecture, since Chinese growth is creating jobs in the United States.

He says that workers and companies at home are benefiting from the increased purchasing power of China’s 1.3 billion consumers. “Just think about the stock market appreciation of companies doing business with China,” he said.

“We need to reject very aggressively the… medieval medicine offered by economic isolationists,” Gutierrez said. “Protectionism has failed us in the past, and these policies will fail us again if new trade walls rise up on the old, antiquate protectionist foundations.”