US President Barack Obama is facing a fresh trade row with Beijing that could inflame this year’s US election race and complicate his farewell visit to China in September.
Beijing is pressing Obama’s administration to treat China like a “market economy,” a move that would spell lower tariffs on controversial Chinese exports such as steel.
The issue lit up the campaign trail on Monday, when Democratic presidential hopeful Hillary Rodham Clinton appeared to challenge the White House to deny China’s demand.
“I have made this clear, I’m going to say it again and I hope the press writes it so people in the administration see it: I am dead-set against making China a market economy,” Clinton told steel workers in Kentucky.
“They don’t follow the rules and they don’t play by the rules,” Clinton said, echoing longstanding allegations that China hurts US jobs and businesses by dumping goods on the market below cost.
The Chinese government denies such actions and has fought back against waves of US and European retaliatory tariffs.
Now Beijing is opening a new front, challenging the unfavorable and arcane way those tariffs are calculated for non-market economies suspected of dumping goods.
China said its 2001 deal to join the WTO dictates that from Dec. 11, the US must change.
“We anticipate all WTO members to fulfill their treaty obligations on time, not to distort or delay its implementation,” Zhu Haiquan (朱海權), a spokesman for the Chinese embassy in Washington, told reporters.
Few trade partners would argue China is a fully fledged market economy, but even fewer want to pick a fight with the world’s second-largest economy. Smaller nations like New Zealand and Singapore have already granted China market economy status ahead of the December crunch point.
The Obama administration insists that its determination will be quasi-judicial, based on established US Department of Commerce criteria.
“Nothing in China’s protocol of accession requires that WTO members automatically grant China market economy status later this year,” a Commerce Department official told reporters on condition of anonymity.
The official said that instead, China would have to “request a review of status” in the context of a specific dispute.
That stance is unlikely to wash with Beijing.
“If that’s how it comes out, then I expect China to bring a case to the WTO, arguing that it is being denied what it bargained for,” said Gary Clyde Hufbauer of the Peterson Institute for International Economics.
“In China, this is a big issue because it has a lot of atmospherics to it,” Hufbauer said.
That risks making Obama’s September trip to Hangzhou for a G20 meeting — likely his last trip to China and one of his last meetings with Chinese President Xi Jinping (習近平) — an uncomfortable one.
Even if Obama avoids a public spat, he faces the prospect of presiding over a China trade dispute during his final months in office.
“They have a pattern of retaliating, so they will figure out some combination of industries where they can shift shipments from US sources to friendly sources,” Hufbauer said, predicting Chinese sanctions.
Any retaliatory measures would only be a blemish on trade worth trillions, but they could be a significant irritant nonetheless.
It would be a bitter irony for Obama, again undermining a presidency-long effort to improve relations with China and “pivot” US foreign policy away from the Middle East and toward Asia.
For Obama, the issue is made more difficult by an election season that has been a festival of protectionist rhetoric from both sides.
Clinton’s opposition to the Trans-Pacific Partnership trade deal has already called into question the future of a landmark Obama achievement, designed to serve a counterbalance to China’s regional economic clout.
Meanwhile, candidates like Republican frontrunner Donald Trump routinely point to the roughly US$368 billion trade deficit with China as evidence that the US is being taken for a ride.
Trump has ditched his party’s free-trade mantra, saying: “We can’t continue to allow China to rape our country.”
Figures like US-China Business Council senior vice president Erin Ennis say the US must meet its WTO commitments to China, but common ground on anti-dumping measures can still be found.
However, likely rivals Trump and Clinton are likely to keep up the pressure for a tough line as they battle for voters across the US’ hard-hit rust belt in the general election.
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