CHINA / National

China output not a threat, US official says
(New York Times)
Updated: 2006-04-04 08:55

The United States has nothing to fear from the rise of China as a low-cost manufacturing power and should concentrate on further growth in high-value industries, Commerce Secretary Carlos Gutierrez said Friday.

At a time of mounting friction over a $202 billion trade deficit with China, Mr. Gutierrez said United States unemployment was declining and wealth increasing even as imports from China rise.

"Our economy is growing, and the average take-home pay per American is increasing," he told a business forum in Tokyo.

On Wednesday, Mr. Gutierrez issued a blunt warning during his visit to Beijing that rising protectionism in Washington could hurt China if the country failed to open its markets further to American products.

The two messages highlighted the fact that Washington is more concerned with what it perceives as Beijing's unfair trade practices than with the growing might of China's manufacturing industry.

The Bush administration and American manufacturers have long complained that China keeps its currency, the yuan, undervalued to give its exporters a competitive advantage.

They also argue that a broad range of regulatory barriers, subsidies and rampant theft of intellectual property restrict United States exports to China, contributing to the ballooning deficit.

The European Union joined Washington on Thursday in confronting China at the World Trade Organization over tariffs that Beijing places on auto part imports.

This trade gap is now one of the major irritations in what senior United States officials describe as the most important global economic relationship of the 21st century. It seems certain to be a source of contention when President Hu Jintao of China visits Washington in April.

Some trade specialists maintain that United States and European Union manufacturers have little choice but to surrender low-cost manufacturing to China.

"For the time being, the strategy for developed countries is to go further into new-generation technology and value-added products," said Yan Lan, a Beijing-based specialist on international trade with the French law firm of Gide Loyrette Nouel.

Senior United States trade officials acknowledge that trade between China and the United States is complex with benefits to each side.

"The United States draws significant benefits from our commerce with China," Mr. Gutierrez said Wednesday in a speech in Beijing after he held talks with senior Chinese leaders. "Our consumers gain additional choices and many American companies are operating profitably in China."

Senior Chinese officials argue that some critics of the United States trade deficit fail to recognize that a significant proportion of Chinese exports of manufactured goods are shipped by subsidiaries of American companies or subcontractors.

And they note that the value to China of these exports was often limited to inexpensive labor, materials and packaging ¡ª while the high-value returns from design, marketing and retail sales were earned in the United States.

Despite continued American frustration over the deficit, there are signs that some of this tension could ease.

Two of Beijing's most strident critics in the Senate, Charles E. Schumer, Democrat of New York, and Lindsey Graham, Republican of South Carolina, this week delayed plans for a bill that would have required heavy tariffs on Chinese imports if Beijing failed to let its currency rise in value against the dollar.

After a weeklong visit to China last month, both lawmakers said Chinese officials had expressed willingness to allow the yuan to appreciate and tackle other barriers to United States exports.

The yuan did rise this week, albeit incrementally, and it finished the week at its highest level since July, when it was partly released from a peg to the dollar. The dollar eased to 8.0175 yuan on Friday from 8.027 yuan on Thursday, adding to a gain for the yuan of about 0.5 percent since early February.

Some trade specialists suggest that trade tensions can also be expected to ease if both sides recognize that they have a lot to gain from cooperation rather than conflict.

Mr. Gutierrez said Friday in Tokyo that China and the United States were at different stages of development and not competing head-on.

"China has built its economy on the basis of manufacturing of commodity-type products," he said. "What we have seen in the U.S. is that our new jobs that are being created are in the area of higher-value manufacturing, differentiation of products, higher technology and in many cases new services."

To remain competitive, he said the United States would need to improve education and encourage research and development.

He suggested that China would eventually need to follow the same path.

 
 

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