China-US trade faces new variables

UPDATED: 17:41, June 22, 2007

Since the US Department of Commerce has issued a new regulation on controlling exports of high-tech products to China, experts believe that the progress on the trade surplus issue will be made in vain. The Chinese Ministry of Commerce responded, on Tuesday, that the US should be responsible for any negative consequences. China-US trade relations are facing new variables. Analysts believe that the US would rather forfeit in the trade deficit issue for reasons of "security." It has been difficult to avoid the issue during the fourth China-US strategic dialogue which began on Wednesday.

US behavior incredible

The US government issued a review of and explanation on the policies for further control on exports to China, and the new control regulations went into effect on Tuesday, just one day before the beginning of the fourth China-US strategic dialogue.

Analysts believe that this action will aggravate disagreements in China-US trade. China argues that it has made great concessions during the recent China-US economic and trade strategic dialogue held in Washington. Thus, spokesman from the Ministry of Commerce, Yao Shenhong, expressed that the US action of controlling exports to China is harming China's efforts in increasing imports from the US. He said the US should take full responsibility for any negative consequences brought about by US control on high-tech product exports to China.

Liu Qing, deputy director of American studies under the China Institute of International Studies, said China should take a tougher stand on this issue. He said China had made great concessions during the recent dialogue on bilateral trade in Washington.

China has promised to purchase 10 billion US dollars worth of goods from the US and open many other business fields. However, the US did not seem to be impressed by these efforts. Thus, China feels quite angry with the US's measures. Liu Qing said that the US's move was the complete opposite of what China had expected, after China had made such great concessions. "The US's move is difficult to understand".

However, Liu Qing personally thinks that although the Ministry of Commerce has taken a firm stand, it is in fact a kind of disappointment and regret.

Chen Taifeng, a member of the China WTO research institute, said the US regulation applies to domestic laws. China could not do anything about it.

Even under the WTO framework, the domestic laws of member countries have priority over the rules of the WTO. WTO rules will especially not apply to those laws involving military goods. Many US regulations are similar to new export control regulations; for example provision 201 and 301. It appears to oppose WTO principles; but it is also compatible with domestic law priorities. Chen Taifeng said this is, in fact, a kind of hegemony on the part of the US.

The US considerations

Liu Qing holds that this is a strategy used by the Bush administration to both pave the way for the next election for the Republican Party and alleviate pressure from the Democratic Party. However, current actions are in conflict with its purpose. The controls on exports will not help the US increase exports to China.

Liu Qing said the US will not consider the issue from a trade perspective. What they consider to be more important is to weaken China's military and scientific and technological strength, in order to slow down the rise of China's military. Earlier this year, a defense satellite test by China intensified US concern about China's threat. "For the US, security is forever the number 1 issue," said Liu Qing.

Chen Taifeng agrees with Liu Qing. "The US has always paid more attention to security issues. This sense of national crisis is characteristic of the US." Chen said the US began to place controls on export products to China last year. China tried to talk with the US and hoped the US could relax its control on exports to China, but the result was disappointing.

As for the trade deficit with China, Liu Qing holds that the US could make some breakthroughs in its financial, aviation and service trade with China. China has indeed made a lot of concessions in these areas during previous trade dialogues.

Liu explained that many issues emerge from US concern about China's threat. Many purely commercial issues for China are understood by the US to be part of a global strategy or political purpose. He believes that China will assert its position during the fourth China-US strategic dialogue on Wednesday and Thursday.

Although the dialogue should focus on political issues, Liu Qing thinks that they cannot avoid talking about this new export control regulation and China will ask the US to respond.

Chen Taifeng thinks the topic will be on the agenda for the dialogue, even though losses resulting from the regulation can hardly be reconciled.

By People's Daily Online

People's Daily Online ---