Commentary: US trading policies must be equitable

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Last updated at: (Beijing Time) Saturday, November 15, 2003

Commentary: US trading policies must be equitable

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The latest multi-billion-dollar contracts China has signed with US companies are undoubtedly meant to lubricate Sino-US trade relations.

Yet, to render them into real win-win deals for bilateral economic ties, the United States needs to refashion its trade approach with China.

A Chinese trade mission to Washington DC included the signing of a series of contracts on Wednesday for several billion dollars worth of US-made planes, aircraft engines, cars and auto parts.

It is the latest effort the Chinese side has made to boost US imports so as to narrow the trade disparity between the two countries.

The tension over trade relations between China and the United States has ratcheted up this year as the latter's trade deficit with China hit a new record.

Growing domestic unemployment has led many US politicians to simplistically put all the blame on China even though Chinese exports to the United States account for only about 1 per cent of the US gross domestic product.

China's export have grown considerably lately, with the latest statistics indicating exports rose 32.8 per cent to US$348.6 billion in the first 10 months this year.

Such a surge largely resulted from the country's adherence to its comparative advantage as a populous developing country as well as massive inflow of foreign investment after China's entry into the World Trade Organization (WTO) in 2001.

However, one fact those critics of China's trade policy in the United States have so far overlooked, if not ignored, is that more than half of China's exports come from foreign-funded firms today.

Besides, those critics also failed to obtain a firm grasp of the broad picture of China's trade situation.

China's big trade surpluses with the United States have largely been offset by its deficit with countries like Japan.

Thanks to China's efforts to expand domestic demand in recent years and its strengthening economic growth, the country has displayed an amazing appetite for others' output.

Between January and October, the country's imports soared by 40.4 per cent over the same period last year.

It is predicted that the country's trade surplus will shrink to around US$10 billion this year and reverse into a small deficit in 2004.

In fact, China has repeatedly voiced its desire to achieve a trade balance this year and worked hard to this end.

For instance, in spite of the dent on its exporters' competitiveness, the country announced last month it would cut the export tax rebate rate by an average 3 percentage points starting next year.

The country fully understands that if its economy is to further integrate with the large world market, it has to undergo painful industrial restructuring to make most use of its competitive edges.

Nevertheless, as a major beneficiary of the worldwide free trade, the United States now appears more and more reluctant to bear its due responsibilities.

A brief look at the mix of trade between China and the United State will highlight the complementary nature of the two economies. As one of the fastest-growing developing economies, China manufactures a large number of cheap labour-intensive goods. Meanwhile, as the world's largest economy, the United States yields numerous high-tech products.

But the United States refused to relax its export controls as a result of an outdated Cold War mentality.

And more worrisome is the rising protectionism in the United States.

Instead of accelerating its industrial upgrades, the US Government has tried to protect some domestic industries in disregard of WTO rules.

The final ruling the WTO issued early this week that the US Government violated trade laws when it imposed extra tariffs on an array of steel imports last year serves as a timely warning to the US protectionists.

The United States should not turn a tin ear to world opinion on its trade policies. Protectionism would be harmful to both foreign exporters and its own economy.

Unfortunately, the United States is now considering emergency import quotas on Chinese textiles though its people as well as others are getting used to enjoying these made-in-China products.

China's new purchases in the United States not only point to the tremendous opportunities of Chinese market for US companies, but manifest the Chinese Government's sincerity to reduce trade surpluses to further boost bilateral trade relations.

The ball is now in the court of the US side, not as a leader but merely a responsible member of the WTO. It is time for the United States to drop its discriminative trade policies toward China.

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