As Taiwan discussed the new cross-strait economic and trade policies suggested by President Chen Shui-bian (陳水扁) in his New Year address, the US Congress held similar hearings to discuss economic and trade policies with China in a search for its own version of "active management."
The reason behind the hearing was a report from the US Department of Commerce saying that the US trade deficit has reached US$700 billion, a year-on-year increase of 17 percent. Imports were 60 percent greater than exports and it is estimated that the deficit will reach US$800 billion by the end of this year.
Many US academics ascribe the massive trade deficit to rising energy prices and an imbalance in trade with China. The US trade deficit with China reached US$200 billion last year, a 20 percent increase on the previous year. The money that China has earned in one year of trade with the US is equal to one-quarter of its total US$800 billion foreign exchange reserve.
With Chinese President Hu Jintao (胡錦濤) scheduled to visit the US in April, the debate about the US trade deficit with China is getting increasingly loud. US Trade Representative Rob Portman has pointed out that China still raises obstacles to the import of US products, which shows that Beijing is not living up to promises it made when entering the WTO. Since the election of US President George W. Bush, the deficit with China has more than doubled.
An even louder debate is going on in the US Congress. Last week, Democratic Senator Byron Dorgan and Republican Senator Lindsey Graham submitted a joint bill asking that China be stripped of its Permanent Normal Trade Relations (PNTR) status. They feel that the enormous trade deficit shows that the US' China trade policy is an unbelievable failure.
Five years ago, Congress approved PNTR status for China. The bill submitted by Dorgan and Graham wants to strip China of that status so that it is reviewed annually and can be withdrawn or extended depending on the situation. The two senators believe that since the US is the world's largest market, controls on Chinese products entering the US market can be used as leverage to force China to follow fair trade rules.
During the administration of former president Bill Clinton, the US helped China enter the WTO and gain PNTR status. Clinton believed that expanded trade could force the Chinese government to reform. The changes over the past five years, however, show that not only has China not moved toward democracy, but instead it has moved toward increasing its military strength and that Hu is more despotic than his predecessor. The cross-party bill is an expression of doubt about something that has been wishful thinking all along.
Not long ago, Graham and Democratic Senator Charles Schumer submitted a joint bill requiring the US to levy a 27.5 percent import tax on Chinese products unless the yuan was allowed to appreciate. The vote on the bill was postponed after China's decision to let the yuan appreciate by 2.1 percent. Schumer said in a statement that the trade deficit with China was tantamount to slitting the US' wrists and letting it slowly bleed to death. Unless China takes certain measures, the senators may resubmit the bill.
The US will hold mid-term elections this year to elect one-third of the Senate and all House representatives. To win over voters, both Democratic and Republican senators may take a tougher line on trade issues, and Bush will also pay attention to such issues if he wants to maintain his party's majority in both the Senate and Congress.
It seems Hu will have his hands full during his US visit.
Cao Changqing is a writer based in New York.
Translated by Perry Svensson
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