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"Despite three consecutive years of growing U.S. exports to China, our bilateral trade relationship with China today lacks equity, durability and balance in the opportunities it provides," said Ambassador Portman. "The time has come to readjust our trade policy with respect to China." "As a mature trading partner, China should be held accountable for its actions and required to live up to its responsibilities, including opening markets and enforcing intellectual property rights," Portman said. "We will use all options available to meet this challenge." China's Foreign Ministry spokesman Liu Jianchao reaffirmed China's determination to continue with reform of the yuan -- code for eventually letting it float more freely -- but said Beijing would dictate the pace of change. "China will push forward the reform according to the development of the situation and the principle that is most favorable to the international economy and China's economy," he told a regular news briefing. Wu Xiaoling, a vice governor of the People's Bank of China, said China was in fact already letting market forces drive the yuan. The currency rose 0.14 percent last week, the biggest gain in any week since it was unshackled from the dollar. China reported its surplus with the United States last year at $114.2 billion. Washington put its deficit with China at $201.6 billion.
The discrepancy is largely because the United States counts exports shipped through Hong Kong as originating in China. The United States also counts the cost of shipping and insuring exports in its figures. Cheng Siwei, an influential law-maker and economist, urged Washington to acknowledge the benefits it reaps from trade with China. He quoted a study by U.S. investment bank Morgan Stanley estimating that U.S. consumers had saved $600 billion in the past decade from buying goods made in China. China had also put a lot of the earnings from its trade surplus into U.S. bonds, helping to lower interest rates for U.S. home buyers, Cheng said. Background The Top-to-Bottom review assesses the benefits and challenges in U.S-China trade following China’s first four years of membership in the World Trade Organization, as China nears the end of its transition period as a new member. The review reflects the input of Congress, China experts, industry, public testimony and other U.S. government agencies. The report announces the following actions that will be implemented in consultation with Congress and other stakeholders to ensure meaningful progress in achieving the key objectives outlined in the report: • Expanding USTR trade enforcement capacity to better ensure China’s compliance with trade obligations, including through establishment of a China Enforcement Task Force at USTR, to be headed by a Chief Counsel for China Trade Enforcement; • Expanding USTR capability to obtain and apply comprehensive, forward-looking information regarding China’s trade regime and practices to U.S. trade policy formulation and implementation, by: (1) adding personnel to USTR’s China office to coordinate collection and integration of information on current and potential China trade issues from other U.S. government agencies and other sources; and (2) establishing an Advisory Committee for Trade Policy and Negotiation (ACTPN) China Task Force to provide strategic advice and recommendations related to U.S.-China trade policy; • Expanding U.S. trade policy and negotiating capacity in Beijing and other resources in China to more effectively pursue top priority issues, especially the protection of intellectual property rights; • Increasing coordination with other trading partners on China trade issues of common interest, such as enforcement of intellectual property rights;
• Deepening and strengthening trade relations with other Asian economies, and within the Asia-Pacific Economic Cooperation (APEC) forum, to maintain and enhance U.S. commercial relationships in the region; • Increasing the focus on regulatory reform in China, including through initiating a high-level dialogue on steel with China under the U.S.-China Joint Commission on Commerce and Trade (JCCT), deepening and expanding the State Department’s high-level dialogue with China’s economic planners regarding structural reform, launching an initiative to evaluate, assess and engage on China’s subsidies issues, expanding initiatives led by the U.S. Department of Agriculture (USDA) to improve China’s transparency and compliance with its sanitary and phytosanitary (SPS) obligations under the WTO, and focusing intensive interagency efforts to address China’s development of standards and of an anti-monopoly law; • Increasing effectiveness of high-level meetings with China’s leaders, including through holding annual, elevated meetings of the JCCT prior to presidential-level meetings where possible and conducting mid-year reviews of goals and progress under the JCCT at the Vice Minister/Deputy level; • Strengthening and expanding US-China dialogue on numerous other specific issues of significance to the global trading system and on bilateral trade issues that pose potential problems for the relationship, including, e.g., China’s participation in global institutions; market access and standards issues related to telecommunications, financial services, healthcare and direct sales; subsidies and structural issues, especially in the steel industry; standards; labor; environmental protection; and transparency and the rule of law; • Strengthening U.S. government interagency coordination, including through monthly review, by the Trade Policy Review Group and Trade Policy Staff Committee, of strategies and progress made in achieving the key objectives identified in this report; and • Strengthening the Executive-Congressional partnership on China trade, through initiation by USTR of a program of regular briefings for Congressional members and staff, to update them on progress in pursuing the objectives outlined in this report and to ensure that the Administration’s China trade policy is informed by Congressional priorities. Over half of China's total exports are attributable to foreign-owned affiliate operations Joseph Quinlan, chief market strategist of Bank of America, says that almost every day there seems to be another report about another American company decamping the U.S. for low-cost China. The more capital U.S. firms plough into China, according to conventional wisdom, the greater the competitive threat to corporate America and American workers. By increasing their presence in the Chinese economy, U.S. firms, in effect, are exporting American jobs to Shanghai, Tianjin, Wuhan and other burgeoning areas in China. That's the consensus view among many constituents in the U.S., although, not for the first time, Quinlan says that the consensus is wide off the mark. He says that, as a percent of total U.S. FDI (Foreign Direct Investment) outflows, China accounted for just 1.4% of the global total in the first half of this decade (2000-04) -- a pittance, in other words, relative to total U.S. FDI overseas. Quinlan says that data from the Bureau of Economic Analysis shows that, after hitting a record high of $4.2 billion in 2004, one measure of U.S. foreign investment to China dropped sharply last year, to roughly $1.8 billion by Bank of America's estimate. Declining profit margins among U.S. affiliates in China, coupled with excess capacity in various Chinese industries, were among the chief reasons behind the slowdown in U.S. investment to China last year. Second, as it relates to China's FDI inflows, Corporate America accounts for only a small slice of the pie. Since 2000, U.S. firms have accounted for just 10% of total FDI inflows to China, a much smaller percentage than commonly recognized. Japan's share was slightly larger, at 11.1%. Germany's relative presence in China (accounting for just 2.6% of total inflows this decade) has been rather limited, as was the presence of the British, the Dutch and the French. In general, European firms have stepped rather cautiously into China. At the other end of the spectrum are companies from Hong Kong, South Korea, Taiwan and Singapore, who have been at the forefront of investing in China, collectively accounting for over 60% of China's FDI inflows this decade. Joseph Quinlan says that, it's not the developed nations that are driving China's investment-led growth and industrialization. Rather, the rise of China has a significant "Made in Asia" quality to it; the Middle Kingdom, along with Hong Kong, South Korea, Taiwan and Singapore have never before been joined at the hip as they are now. Accordingly, in terms of production shifting to China, the burden of adjustment has fallen disproportionately on workers in Taiwan, South Korea, Singapore and Hong Kong as opposed to Germany, Japan or the U.S. That's a fact lost on many policy makers and legislators here in the U.S. Quinlan says that also lost on many folks in the U.S. is this: While U.S. imports from China have soared over the past decade, much of what the U.S. now imports from China used to come from Hong Kong, Taiwan and other Asian nations. Over half of China's total exports are attributable to foreign-owned affiliate operations, thereby obscuring the true meaning of "Made in China." © Copyright 2007 by Finfacts.com |
