IV.US Export Control Against China
-- a Major Obstacle for Bilateral Trade Balance

The United States has adopted discriminatory export control policies towards China for many years. These policies have hindered US exports to China and therefore have become a major obstacle for bilateral trade balance.

It is acknowledged that, since the two countries established diplomatic relations in 1979, the United States has relaxed control on exports to China by categorizing the latter into group ``P'' first and group ``V'' later. But China has not fully enjoyed treatment for ``V'' countries as the United States has retained a number of discriminatory measures in its policy making and implementation. It was after 1983 that member states of the former COMCO, including the United States, began to consider an ease of export control on China. In September of 1985, resolutions were adopted to simplify approval procedures concerning exports to China, which, however, demanded not to change the final use and end users of ``controlled export items.'' The Chinese Government's response was positive. For many years, the Chinese Government has been earnest in carrying out its promise about ``end users'' and ``final use.'' Certain effective measures have been adopted to honour the promise. The results have been obvious. Other Western countries have accepted ``Elaboration on End Users and Final Use'' made by the Chinese Government. However, only the United States have indicated doubts, demanding China to come up with extra undertakings about US ``controlled export items.'' For example, end users should accept pre-licensing inspection and double check after unloading of imported goods; and various unduly strict conditions are attached to granting of licenses, such as around-the-clock spot surveil"ilance and free random check. All these are difficult for China to accept. Upon the disintegration of COMCO -- a product of the Cold War -- in March 1994, the United States could not but adjust its export control policies. Nevertheless, its discriminatory measures towards China remained largely intact.

We have noticed that Sino-US trade relations witnessed certain prog"iress in the 1980s when the United States relaxed export control on China. But, since the beginning of the 1990s, the United States has instituted a series of new sanctions against China, many of which concern export control. This change has led to severe consequences and gradually an unfavourable reverse of trade balance for the United States. It is hard to say that such a change -- indeed a double-edged sword -- is wise.

The US export control policies and lingering sanctions against China have greatly restricted US exports to China as well as US investment in high-tech sectors on the territory of the latter. In short, these measures have bottlenecked Sino-US economic and trade co-operation. The negative effects of these measures on bilateral economic and trade co-operation and on US businesses can be seen in the following examples:

-- In early 1980s, China conducted technical and commercial negotiations with the US Westinghouse and General Electric companies over the purchase of equipment for the Qinshan nuclear power plant (300,000 kilowatts) and the Daya Bay nuclear power plant (900,000 kilowatts). But the talks failed due to US export control. In 1985, China and the United States signed the ``Agreement for Co-operation Between the Government of the People's Republic of China and the Government of the United States of America Concerning the Peaceful Use of Nuclear Energy.'' It was immediately approved by China. But the US Congress insisted on attaching many preconditions thereto. As a result, the protocol has yet to take effect. At present, China's nuclear power industry is expanding, prompting substantial import of technologies and equipment. US nuclear power enterprises, with enormous interests, have lost their chance of export to China because of the US Government control over nuclear energy technology.

-- In mid-1980s, similar restrictions ripped US exporters of potential business opportunities worth several billion US dollars when China planned to import technologies and equipment for integrated circuits and programme-controlled telephone switching boards. In recent years, China still hopes to buy electronic components and related manufacturing and testing equipment from the United States. But again, the US Government's discriminatory control policies have prevented US businesses from selling them to China.

-- China needs to import advanced machine tools, thus providing good trade opportunities for US manufacturers. But the US Government's strict export control has forestalled normal business with China.

The above examples are but a drop in the sea. Under the US Government's discriminatory export control policies towards China, not only a large number of Chinese customers are unable to co-operate with US exporters, but US exporters themselves stand to lose trade opportunities. Some analyses have concluded that the United States has lost an average of several billion dollars of exports each year to China in the recent past due to such discriminatory policies. It makes no sense for the United States to play up trade deficit against China on the one hand, and continue its export control on the other.

While the US Government maintains such discriminatory export control policies towards China, other industrialized countries have, one by one, cancelled their discriminatory policies and have even provided China with governmental financial support for its import of capital goods. This has definitely enhanced the competitiveness of their products on the Chinese market. The European Union member countries are not only free from any trade deficit, but have enjoyed an average annual trade surplus worth several billion US dollars with China. This comparison between EU and the United States speaks aloud on the different effects on bilateral trade balance brought by different export policies towards China.

The Chinese Government hopes the US Government will, proceeding from the long-term interest of bilateral trade and economic co-operation, adopt effective measures to relax or even cancel the current discriminatory export control policies against China so as to usher in a healthy and balanced Sino-US trade relationship. This is a realistic way of resolving the trade balance issue between China and the United States.