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Thursday, October 23, 2003

Turning the Heat Up on Trade

Meantime on the trade front we may be in for another turn of the screw. Given then intransigence of Beijing on the currency issue, turning the heat up at the WTO may be a more politically viable strategy for the US. The bang per decibell rate could be higher, at least at the ballotbox. Of course, on another time-honoured theory, a good way to head-off problems is to position yourself at the head off the race and then lead the pack well away from main street by turning down the nearest convenient cul-de-sac.

The US is ratcheting up pressure on China to abide by its commitments in the World Trade Organisation in an effort to defuse domestic political demands to begin penalising Chinese exports to the US.

Robert Zoellick, the US trade representative, on Wednesday warned that Chinese access to the US market depended on "fair" two-way trade.

"I believe in open markets [and] I think the United States' market should remain open, but the only way that we can maintain open markets is if American exporters have an opportunity to export here," he said in Beijing.

That followed similar statements in Washington late on Tuesday by Grant Aldonas, undersecretary of Commerce, who arrives in China on Friday with Commerce secretary Don Evans to continue pressing the trade issue.

"We expect action from the Chinese," he told a hearing of members of Congress who were demanding stronger action. "The time has come to measure up," he said, stressing that the US had been patient in waiting for China to meet its WTO commitments. "There's a point at which the bill comes due and that point is now."

The language is the toughest yet from the top two trade officials in the US. Ratcheting up the pressure over WTO compliance would be the easiest way for the administration to show immediate progress with China, given Beijing's reluctance to revalue the renminbi. Several bills currently circulating in Congress would slap tariffs on Chinese imports unless China moves quickly to revalue. Mr Zoellick repeatedly linked US willingness to keep its market open to Beijing's willingness to resolve problems over such issues as intellectual property violations and controls on agricultural imports. "We need to make progress on [these issues] and we need to make progress soon," said Mr Zoellick.

The US has yet to bring any dispute cases against China since it joined the WTO in 2001, which has angered Congress, as the bilateral trade deficit ballooned to $103bn (€87bn) last year and $65bn in the first seven months of this year.

Mr Aldonas said that China could respond by eliminating its rebate of value-added taxes for exports, which Beijing announced last week would be reduced by an average of three percentage points. He also said the Chinese government should use only legally-purchased software as a way of combating piracy. In spite of all the strong words, the administration has been trying to discourage a congressional backlash against trade with China.
Source: Financial Times

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