Comment: Improve Sino-US trade relations

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Last updated at: (Beijing Time) Monday, October 13, 2003

Comment: Improve Sino-US trade relations

As the debate intensifies in the United States on its trade with China, it is necessary to take a look at the direction of Sino-US trade relations to better understand the issue.

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As the debate intensifies in the United States on its trade with China, it is necessary to take a look at the direction of Sino-US trade relations to better understand the issue.

Negotiations and co-operation between China and the United States have recently gone ahead steadily in many important areas, such as foreign affairs, military and anti-terrorism. Frequent exchanges of high-level official visits also help improve bilateral relations.

US Secretary of State Colin Powell said on September 5 that Sino-US relations are at their best since former US President Richard Nixon's historic visit to China in 1972.

This view was soon echoed by Wang Yunxiang, China's Consul-General in San Francisco on September 17.

However, trade relations between China and the United States are not as sweet as these enhanced political ties.

Since the second half of 2002, signs have surfaced of intensified trade conflicts.

After a series of disputes over dumping accusations against China-made colour TV sets, over agricultural produce and over the US call for a re-evaluation of the renminbi, Sino-US trade relations now stand at a crossroads after a number of US officials recently expressed their dissatisfaction with China's trade policies.

Several factors are behind the current tumble in Sino-US trade relations.

One is the high expectation from the United States following China's accession into the World Trade Organization (WTO). Exports of agricultural produce to China were once anticipated to double or even triple in the United States.

However, US farmers and exporters have not seen the expected rocketing revenues after China opened its market one year ago in line with WTO agreements.

Meanwhile, the trade deficit of the United States to China increased to US$103 billion in 2002.

This remarkable gap between the reality and expectations offers more weapons for those who had objected to China's entry into the WTO.

Actually, the high hopes from the US part have been overblown.

Before China became a WTO member, its de facto tariff rate stood less than 5 per cent with its tax-deduction policy considered, roughly at the same level with that of Brazil and Mexico.

The country promised to lower the average tariff of industrial products to 10 per cent by 2005 when it applied to enter the global trade body.

So US producers may not see significantly more opportunities into the Chinese market except a limited number of commodities that are subject to dramatic tariff cuts and therefore see their exports rise rapidly.

It is therefore only natural that US exports to China will not rise remarkably in the near future.

Ever since President George W. Bush took office, the US economy has been haunted by the threat of depression. And the September 11 terrorist attacks in 2001 dealt a heavy blow to its economic growth.

The unemployment rate in the United States rose to a historical high along with these economic setbacks, standing at 6.1 per cent this September.

Though the US economy is showing signs of recovery, it needs time to gather momentum. And the manufacturing industries, where recovery is especially weak, are heavily affected by unemployment.

Accordingly, opinion polls showed that the support rate of Bush dropped to 49 per cent, an unprecedented low during his term.

As the election draws close, Bush has limited room for manoeuvre in trade relations with China, coming under pressure from agricultural, manufacturing and labour union interests.

Judging from recent speeches of Bush administration officials and Washington's policy changes, one cannot be optimistic about the Sino-US trade relationship.

There is an opinion that these moves are only kite-flying instead of real turn in US policy on China.

But they can easily become substantial moves if Bush's support does not stop declining.

If these trade conflicts escalate, they will have a definite negative impact on political ties.

Joint efforts are needed from the governments of both countries to avoid such a situation.

For the Chinese Government, the first step is to encourage domestic exporters to diversify their market. Trying to compete in the same marketplace will only compromise their own interests.

Second, China could purchase more products made by the United States in the form of government procurement, such as aircraft and automobiles. In this way, China's trade surplus can be diminished, also easing US concerns over the trade imbalance.

Third, China could take more active measures, such as issuing an annul white paper, to show the remarkable progress it has made in fulfilling its promises upon WTO entry and its determination to further open its market. If the US people could see their economy is really benefiting from, rather than jeopardized by, China's progress, trade relations may hopefully progress more smoothly.

Fourth, the Chinese authorities should accelerate their reform of the financial system and get ready to solve the issue regarding the renminbi exchange rate in a win-win manner.

As to the United States, it should first of all analyze its unemployment situation with a rational attitude.

Unemployment in the US manufacturing sector is caused by its own economic structure. To boost employment, it should accelerate its industrial restructuring, rather than point fingers at other countries.

The exchange rate of the renminbi should not be linked with the trade imbalance. After all, a complex of factors has caused the trade imbalance. Simply blaming China's foreign exchange system cannot solve the problem.

The US part should understand that a sound Sino-US trade relation benefits both countries. Low-priced Chinese commodities help improve the life of US people. And the US$126 billion US treasury bonds held by China lend a hand to the easing of its capital shortage resulting from its huge trade deficit.

US President Bush and Chinese President Hu Jintao will meet at the APEC summit to be held late this month. Premier Wen Jiabao is also going to visit the United States before the end of the year.

These meetings will surely offer good opportunities for the two sides to solve trade conflicts, helping give a new impetus to the development of Sino-US trade relations.

Miao Yingchun, a researcher with the School of Politics and Public Management at Wuhan University in Central China's Hubei Province.

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