Wed, Jan 12, 2011 - Page 7 News List

Deficit, dogma to frustrate Hu, Obama on trade


China is slowly delivering on a vow to cut its overall trade surplus, but the structure of global commerce and a raft of pro-export policies ensure that its trade advantage over the US will cloud relations between the two for years to come.

That increasing divergence — the shrinking of China’s overall surplus in contrast with a growing imbalance with the US — sets the stage for frustrating trade talks when Chinese President Hu Jintao (胡錦濤) visits Washington next week.

The US will point to a bilateral trade gap that grew 26 percent last year to US$181 billion, according to Chinese data, as evidence of the problems. In response, China can say its total surplus, at US$183 billion, is down nearly 40 percent from its pre-crisis 2008 peak.

Whether US President Barack Obama pushes for faster yuan appreciation or more market access for US firms, Hu will be able to argue that China is doing its part to resolve the imbalance, and the onus is on the US.

“The US had a trade deficit with 92 countries in 2009. So, the United States doesn’t just have problems with China and it has little to do with the renminbi,” said Zhou Shijian (周世儉), a senior fellow at the Center for US-China Relations at Tsinghua University in Beijing.

“It is an old problem, a structural problem, that has been around for more than 10 years,” he added.

Jeremie Waterman, a senior director for China at the US Chamber of Commerce, agreed that structural factors contribute to the huge trade imbalance, but said Chinese government policies were also to blame.

“They’ve clearly pursued over a number of years very much an export strategy as part of their development,” he said. “If China were truly a market economy, they would not have the kind of export numbers that they do.”

Barriers to China’s services sectors also prevent US financial, telecommunication and express delivery companies from doing more business there, Waterman said.

Last week, Chinese Vice Minister of Commerce Jiang Yaoping (蔣耀平) said the root of the US trade imbalance had less to do with the value of the yuan and more to do with the nature of China’s processing trade, in which multinational firms import intermediate goods and assemble them into products for export.

Jiang said those products are only partially manufactured in China, but recorded as Chinese exports.

“We have adjusted the yuan’s exchange rate since 2005, but we can see that China’s trade surplus with the United States, especially the surplus in the processing trade, basically did not change,” Jiang told a forum.

“That is to say, the yuan’s exchange rate has no big impact on the trade surplus,” he said, adding that 80 percent of the US trade deficit stems from US firms’ operations in China.

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