US needs to be fair with China: News analysis

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Last updated at: (Beijing Time) Tuesday, November 25, 2003

US needs to be fair with China: News analysis

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Don Evans, US Secretary of Commerce, published an article entitled "America Plays Fair. Does China?" in the Wall Street Journal November 5. It pointed out that "the current absence of parity is the primary source of the friction in the US-China trading relationship."

That article quoted data from the Business Software Alliance, which stated that software piracy rates in China exceeded 90 per cent. So Evans assumed that the vast majority of Chinese government offices are operating with pirated software.

In addition, Evans also had the aid of two proposals from US Congress a few days ago, one measure which would repeal Permanent Normal Trade Relations with China while another would impose a 27.5 per cent tariff on all Chinese exports to the United States.

He emphasized that China must open its markets quickly to America's goods. Otherwise, the United States would lose patience with China's opening of its markets.

Published just a week after the secretary finished his trip to China, the article has a number of implications.

First, although Evans believes that "the reports of upcoming Chinese purchases of US capital goods are a step in the right direction... our goal is structural change in China's economy to produce a genuinely level playing field."

Second, the United States will strengthen the monitoring of fulfilling World Trade Organization (WTO) commitments and continue to create an atmosphere of public opinion to prepare for a trade war with China according to WTO agreements. Therefore, "the United States will settle for nothing less than a level playing field."

During the previous week, US trade representative Robert Zoellick had stated that US markets are open, but the United States would not continue to open its markets in the future if American companies could not get more chances of exporting their goods to China.

In light of this, the US Government's criticism is expanding from the dumping of products, RMB exchange rate and genetically modified soybeans to the Chinese foreign trade system. The US Government also believes that China has violated WTO agreements.

Such opinions will increase the difficulties in solving Sino-US trade disputes. This might be why Premier Wen Jiabao recently said he would have a great responsibility while visiting the United States next month.

Despite rising criticism from the US side, the current problems are not China's fault. On the contrary, China is taking greater steps to improve Sino-US trade relations. For example, China signed a series of contracts this month with US companies for US$6 billion worth of planes, aircraft engines, cars and auto parts to help boost imports from the United States.

In fact, China's high degree of openness is reflected in several measures. First, its global imports have been growing at a prodigious rate in recent years. China's imports grew from US$53.4 billion in 1990 to US$295 billion last year, a growth rate of more than 15 per cent annually. This year, China's imports in the first nine months increased by 40 per cent, more than double that in the first nine months of 2002. China's imports are likely to hit US$400 billion this year, for the first time exceeding Japan to become the world's third largest importing nation behind the United States and Germany.

A second measure of China's economic openness is the ratio of its imports to the gross domestic product, sometimes called the import ratio. China's import ratio increased from under 15 per cent in 1990 to almost 25 per cent last year. This year the ratio likely will reach 30 per cent, which is almost four times Japan's import ratio of 8 per cent and twice the likely 14 per cent import ratio for the United States this year.

A third measure of China's openness is the degree of protection provided by its import tariffs. Even prior to the time China became a member of the WTO, it had reduced its average import tariff rate by about three quarters, from a peak of 55 per cent in 1982 to 15 per cent at the beginning of 2001. Today, China's average import tariff is 11.5 per cent, and the average tariff on manufactured goods is only 10.3 per cent. China's average tariff rate on imported manufactured goods is far lower than the rates prevailing in other large emerging markets.

In fact, in terms of the United States itself, the trade barrier is not the main reason causing the US trade deficit. The United States has bilateral trade deficits with Mexico and Canada, two countries that are almost completely open to exports from the United States. Yet the United States runs a trade surplus with Brazil, a country that still maintains significant barriers to US exports.

In addition, the United States carries a much heftier deficit with Japan today than 30 years ago, even though Japan's economy is much more open at present. And US exports to European Union countries, although under a common external tariff, result in huge surpluses with some nations like the Netherlands and deficits with others, like Germany. Clearly, trade barriers or some half-baked measure of competitiveness cannot account for these differences.

The US criticism over the so-called "trade barrier" in China is not reasonable. China will continue to buy more US products in the future. But a question for Don Evans is this: China is open to imports. Is the United States?

The author is a researcher at Wuhan University's College of Political and Public Management.

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