Thu, Nov 10, 2005 page12

• Panel wants US to get tough on China

  CRITICAL Amid mounting trade friction, the US-China Economic and Security Review Commission endorsed forceful steps to bring about further currency reforms

  • NY TIMES NEWS SERVICE
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  A US bipartisan advisory group planned to deliver a report to Congress yesterday that is sharply critical of China's trade practices and endorses sanctions including a tariff on imports unless Beijing takes forceful steps to allow its currency to move in line with market forces.

  The 222-page report, by the US-China Economic and Security Review Commission, has more than 50 recommendations, including urging closer cooperation with China on coal-related programs intended to help wean both nations from their dependence on imported oil.

  But the overall portrait is of growing friction, especially on trade issues. The report comes at a time when Congress is increasingly ready to take action against China, as that country's rapid economic ascent and its fast-growing trade surplus with the US stir anxiety that US jobs and wealth are being lost, perhaps unfairly.

  The commission's report could strengthen the hand of those in Congress who favor a tough stance on China matters. Congress holds the constitutional power to regulate foreign commerce, but it tends to become most involved when trade becomes a heated political issue. That happened in the 1980s when Japan's trade surplus with the US surged, and it seems to be happening now with China.

  Last summer, for example, the state-controlled China National Offshore Oil Corp (中國海洋石油) backed away from a bidding contest with Chevron to acquire a US oil company, Unocal, after fierce opposition in Congress.

  "There is a real urgency in Congress to get progress on issues with China," said Richard D'Amato, chairman of the US-China commission and formerly a senior staff member for Senator Robert Byrd, a Democrat. "What we'd like to see is legislative actions that get at pieces of this problem."

  The commission report said Congress should consider "an immediate, across-the-board tariff on Chinese imports," unless China moves quickly to allow its currency, the yuan, to rise in value by at least 25 percent against the US dollar or a trade-weighted basket of currencies.

  The recommendation amounts to an endorsement of the approach taken in a bill once sponsored by Senator Charles Schumer, a Democrat, and Senator Lindsey Graham, a Republican. The bill called for a 27.5 percent tariff on Chinese imports unless China let its currency float more freely. The Bush administration, which has been adamantly opposing the legislation, was taken aback last spring when 67 senators voted against a motion to kill the bill.

  Schumer and Graham withdrew the bill after assurances by US Secretary of the Treasury John Snow and Federal Reserve Board Chairman Alan Greenspan that China would soon move to let its currency fluctuate.

  In July, China made a modest step toward adopting a more flexible currency policy. But the change has resulted in an appreciation of the yuan of only about 2 percent against the US dollar.

  Schumer and Graham met again last week with the Treasury secretary and the Fed chairman. Afterward, the senators issued a brief statement saying that the meeting had been "very productive" and that they were "hopeful" progress would be made soon. The senators have held out the option of introducing their bill again.

  The US-China commission, created by Congress in 2000, has 12 members. One of them, William Reinsch, dissented from the report's recommendations.

  "It does a good job of defining the difficult issues we face with China, but its standard solution is to beat Chinese over the head until they comply," said Reinsch, who is president of the National Foreign Trade Council and was an undersecretary of commerce under former president Bill Clinton.

  "That approach runs the risk of undoing our policy of engagement with China, which has been the policy of the last five administrations," he said.
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