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Last updated at: (Beijing Time) Tuesday, October 07, 2003

US export controls on China unwise: Int'l Finance News

The United States' decision to tighten controls on exports to China will not solve its trade deficit, but only aggravate its trade disadvantage, said an article in International Finance News.


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The United States' decision to tighten controls on exports to China will not solve its trade deficit, but only aggravate its trade disadvantage, said an article in International Finance News.

On September 16, the United States and China signed a declaration on transfers of nuclear technology between the two countries. A day later, they held a symposium in Shanghai on export controls.

Against a backdrop of intensified China-US trade disputes, the events strengthened communication and understanding between the two countries, offering hope of resolving trade disputes in a reasonable manner.

However, Washington's unilateral controls on technological exports makes the settlement of the two countries' trade imbalance more difficult.

During the Cold War, the United States adopted a regulation on export controls in 1949 to prevent products and technologies with military potential from being exported to what it deemed "communist countries." Washington categorized the world's countries into seven groups - namely, Z, S, Y, W, Q, T, V - based upon their relations with the United States and their national strength. Washington's export policies towards a country depended on the category it fell into.

China was classified into the Z group, which was subject to a full trade embargo following the outbreak of the Korean War (1950-53).

In 1979, the Carter administration began to relax its restrictions on technological exports to China due to the normalization of China-US diplomatic relations and the Soviet Union's invasion of Afghanistan.

In 1983, the Reagan administration reclassified China into the V group. It became subject to the most relaxed controls on technological exports. The event signified that the United States regarded China as a friendly nation for the first time.

The United States, however, tightened its export controls on China after June 1989 when Sino-US relations once again plunged to a low point. In the 1990s, due to pressure from Congress, the Clinton administration made no headway on the issue of US technological transfers to China. Since George W. Bush came to power, the United States has imposed even stricter controls on technological exports to China.

The International Finance News article argued that Washington's technology export policies towards China have been based on short-sighted national interests.

Although the United States gradually relaxed its controls on exports to China during the Cold War, it did so only to strengthen Sino-US co-operation and increase its strategic advantage over the former Soviet Union, its major Cold War foe.

With the need for Sino-US strategic co-operation disappearing, the United States' export control measures have inevitably become more stringent.

The economic and technological blockade of the Soviet Union and China imposed by the United States and other Western countries during the Cold War had considerable impacts, the article said.

Statistics show the United States had the edge on the Soviet Union in most military technologies.

However, as China's economic and national strength grows, the United States is finding itself in a dilemma with its export control policy, said the article.

On the one hand, China is an ideal place for foreign trade and investment, especially in technological fields. The United States would suffer if its high-tech manufacturers were not allowed to enter the huge Chinese market like other Western counterparts.

On the other hand, Washington still sees China as a potential threat. It believes technological exports to China could damage US security.

However, unlike the United States, other Western countries have not imposed strict export controls upon China. Washington would have to strengthen the current system of multilateral export controls and push them to mirror its interests to widen international restrictions. Yet Washington would not be able to do this easily.

The dilemma facing the United States reveals, to some extent, the failure of Washington's export control policy towards China, said the article.

The export control policy is a double-edged sword. While it prevents high technology from flowing into China, it also causes enormous economic losses to US manufacturers.

In 2002, the United States was the fourth biggest exporter of high technology to the Chinese mainland, behind Japan, the Association of Southeast Asian Nations (ASEAN) and China's Taiwan. It only accounted for about 13.5 per cent of Chinese imports of high-tech products.

The United States has an obvious advantage in global high-tech industries. These industries are also expected to drive the US economy in the 21st century. China is now a huge high-tech importer, with its booming telecommunications, computer, and semiconductor markets offering enormous opportunities to US companies.

However, these commercial benefits cannot be realized due to Washington's rigid export control policy towards China.

US business circles, dissatisfied with this policy, have increasingly called for the government to relax and suspend its export control measures, said the article.

Besides damaging to its own commercial interests, the US export controls have also become a serious obstacle to the expansion of Sino-US economic co-operation.

Currently, China is the world's largest mobile telecommunications market. It is expected to become the world's second largest semiconductor market by 2010. The Chinese market provides many avenues for Sino-US co-operation in high-tech products.

The US policy, however, not only retards the progress of its own enterprises, but also impedes China's industrialization.

Worse, the Sino-US trade deficit will increase further due to the controls, said the article.

The United States is accusing China of controlling the exchange rate of its renminbi currency to gain trade advantages. But it is still strengthening its export controls, casting doubt on its willingness to settle its trade imbalance with China.

The article concluded the United States must relax or even suspend its current export control policy as soon as possible, to increase its companies' competitiveness in China, deepen Sino-US economic co-operation, and redress their trade imbalance.


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