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China-US trade relations face challenges
By Wang Li, Fan Xingdan (Business Weekly)
Updated: 2004-07-04 14:09

In the coming months, the US presidential election and inauguration of the new president are expected to push the United States to take harsher trade stances against China, but the situation will not last long, as there is an internal mechanism adjusting the bilateral trade relationship.

In the next six months to one year, there will be rising criticism from the United States on China's foreign currency control, labour conditions and intellectual property rights protection.

The current Bush administration will do so to appease voters. It is for the incoming president to show differences from the current trade policies.

But whatever the purpose, the harsh trade policies against China are unlikely to extend more than half a year, as no US president can risk the longer decay of Sino-US economic and trade ties.

In fact, boosted by the permanent most-favoured nation status the United States extended to China in 2002 and China's efforts to mediate the relationship between the United States and the Democratic People's Republic of Korea in nuclear issues, the Sino-US relationship is stabilizing.

Between 1979 - when the two countries established official diplomatic relations - and 2003, Sino-US trade volume grew 50 times to US$126 billion, according to China Customs statistics.

In 2003, China's exports to the United States reached US$74.92 billion, rising 32.7 per cent year-on-year. The nation's imports from the United States rose 25.7 per cent to US$27.56 billion.

According to US statistics, from 2001 to 2003, foreign trade volume of the United States decreased 3 per cent, but its trade volume with China rose 43 per cent.

US investment in China grew rapidly. In 2003, US investors poured an actual investment of US$4.27 billion in 2,553 projects in China.

By the end of 2003, US investors had invested US$30 billion in China, in machinery, oil, electronics, telecommunications, chemicals, auto and pharmaceuticals.

However, with the increasing jobless rate of the United States, softening US dollars and slow economic revival, China's rapidly growing exports to the United States become a major target of disputes.

US politicians, labour unions and manufacturers accuse Chinese goods of taking away jobs in the United States.

As the US presidential election approaches, the trade topic is likely to be further politicized.

The US International Trade Commission ruled on May 14 that Chinese TV producers dumped US$276 million worth of Chinese colour TVs in the United States. In the final ruling, Chinese TV manufacturers were charged anti-dumping tariffs from 5.22 per cent to as high as 26.37 per cent.

On June 18, Washington slapped preliminary anti-dumping duties of up to 198 per cent on US$1.2 billion of Chinese wooden bedroom furniture in what Chinese firms labelled the latest protectionist move by the United States.

Despite the rising US protectionism moves, Democratic president candidate John Kerry was highly critical of the Bush administration for not having imposed severe trade policies on China.

Bush rejected requests by US labour unions and business groups earlier this year to impose tariffs of up to 77 per cent on all Chinese goods.

They said China was violating workers' rights by preventing collective bargaining and was manipulating its currency to gain unfair advantages in competition with US goods.

Yet facing strong pressure from the Democratic side, the Bush administration may increase its voice to require China to let more US goods into its market.

A survey by the American Broadcasting Co in April showed that about 45 per cent of US citizens opposed free trade with China.

But within US business circles, there is a strong force to maintain Sino-US trade, as many of the country's leading firms benefit from the bilateral trade and economic relationship.

China also took a positive attitude to solve the trade disputes between the two nations.

Last November, China sent a big business group to buy more than US$6 billion worth of goods in the United States. Last December, during his visit to the United States, Chinese Premier Wen Jiabao said China will positively seek to solve trade disputes between China and the United States based on fair principles.

In April, Vice-Premier Wu Yi visited the United States and signed eight memorandums of understanding with her US counterparts, covering wireless Internet standards, agricultural trade and service trades.

It is expected that in the coming months, China will seek other measures, such as increasing imports from the United States, to balance Sino-US trades.

Yet that is not the end of story. Between June and November, in the run up to the election, the Bush administration may launch more anti-dumping investigations against Chinese goods in individual cases.

On the other hand, Kerry said last week that if he were elected president, he would fight for US workers and would not "sit idly by when China or any other country pursues policies that hurt our economy."

Democrats stand closer to US trade unions.

But Kerry, or anyone else in the US Oval Office, would not maintain long-term harsh trade policies on China, because the administration would benefit far more from advancing Sino-US economic and trade ties than what it could lose from rising Chinese exports to the United States.

The authors are researchers with the Chinese Academy of International Trade and Economic Co-operation, which is a think-tank for the Ministry of Commerce.

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