Emad Mekay

WASHINGTON, Nov 10 2005 (IPS) — China’s growing political, military and economic strength poses a serious threat to U.S. national security and its economic and technological leadership, an influential Congressional group argues in a new report.

The U.S.-China Economic and Security Review Commission (USCC), an advisory group to the U.S. Congress on relations with China, urged the United States to rein in China’s growing influence and “establish and implement policies that provide course corrections” towards the Asian nation.

“The impact of China on our nation’s economy – through such venues as trade, U.S. investments in China, China’s acquisitions in the U.S., and currency valuation – inescapably affects our national security,” said Roger W. Robinson, Jr., vice chairman of the commission.

Established in October 2000, the USCC has 12 members whose duties include submitting an annual report on the national security implications of the U.S. economic relationship with China.

The commission’s 2005 report, which took a year to compile, faults China on a number of bilateral issues, including alleged manipulation of its currency, violations of intellectual property rights and subsidies to Chinese industries, as well as technology transfers.

“The Commission’s greatest concern is that the United States has not developed a fundamental assessment of how American national interests are affected by our relationship with China,” said C. Richard D’Amato, president of the bipartisan commission.

The group, which gained prominence when it stirred Congressional opposition to a bid by a Chinese oil company to buy a U.S. firm earlier this summer, said it detected a number of worrying trends in the current relationship between the two countries.

On the trade front, it said that U.S. imports from China outpaced U.S. exports to China by more than five to one, which the USCC saw as a threat to U.S. workers and producers. This has lead to bilateral goods trade deficit that reached 162 billion dollars in 2004, a 31 percent increase over the previous year.

The trade deficit between the two nations is expected to exceed at least 200 billion dollars this year.

The warnings came as the U.S. Department of Commerce said Thursday that the total U.S. deficit had soared to a new record of 66.1 billion dollars in September, 6.8 billion dollars more than the figure for August.

The trade deficit with China also rose to a record 20.1 billion dollars from 18.5 billion dollars last month. This compares to a deficit of 12 billion dollars with Europe, 7.4 billion with Canada and only 6.4 billion with Japan.

China also posted a record trade surplus last month with the world on Thursday. The Chinese October trade surplus reached 12 billion dollars, up from 7.6 billion dollars in September.

The USCC blamed China’s exchange rate system for the deficit. It said that currency reform measures announced in July, including a modest revaluation of the renminbi (RMB) against the U.S. dollar and the linking of the RMB’s value to a basket of international currencies, was in fact “an extremely limited step, amounting to a 2.1 percent change in value”.

The commission also said that U.S. firms continue to face market access barriers in China and unfair trade practices in third-country markets.

The group, whose recommendations in the past have won the support of several senators, urged Congress to take punitive action and some protectionist measures, including filing a complaint with the World Trade Organisation about China’s exchange rate.

It also said that Congress should consider imposing an immediate, across-the-board tariff on Chinese imports, a most worrying step for China.

A statement posted on China’s Commerce Ministry website Thursday said that such calls for protectionism in the United States, which accounts for nearly one quarter of China’s trade surplus with the world, could cause enormous uncertainties for China’s exports in the future.

President George W. Bush will visit China next week, and has said that he will raise the currency issue with Chinese officials.

The commission has been critical of China since its creation in 2000. It said that China was increasing its global reach in part to obtain access to energy resources and raw materials.

Research by independent groups has shown that China’s demand for oil resources, needed to fuel its economic growth, is rapidly increasing. Currently, roughly 40 percent of all new world oil demand is said to stem from China’s rising energy needs.

This has triggered fears in Washington that China is on course to compete with the United States and other oil-importing nations for global supplies.

The report also faults China for forging alliances with countries deemed hostile to the United States, like Iran, Sudan, North Korea and Zimbabwe. It concludes that China is methodically accelerating its military modernisation, which could undercut U.S. security interests in the Pacific.

The Commission goes so far as to call on Congress to encourage the administration to freeze the assets of Chinese firms involved in weapons of mass destruction or missile-related proliferation, and Chinese companies or institutions that may be assisting or financing such efforts.