US-China trade gap raises tensions

Sat, Feb 22, 2003 page12

US-China trade gap raises tensions

WTO COMMITMENTS Washington may start pushing harder for Beijing to live up to the promises on market access it made when it joined the trade organization
- BLOOMBERG
The US' record trade deficit with China last year may increase pressure on Beijing to meet its market-opening pledges and let its currency strengthen, government officials and analysts said.
The US trade gap with China widened by about a quarter last year to US$103 billion, the biggest ever with any country, as companies such as Motorola Inc took advantage of the country's low manufacturing costs to sell more China-made goods to American consumers.

Kenji Hidaka, left, director of Intellectual Property Rights (IPR) Beijing Office of the Japan External Trade Organisation, and his assistant Feng Chao, show reporters the ``2002 Annual Report on IPR Issues in China'' yesterday. The report, due to be released next month, concludes that piracy in China is getting worse since its entry into the WTO. The US is also unhappy with the speed at which China is meeting promises it made to gain WTO membership.

PHOTO: REUTERS

China's exports to the US last year surged 22 percent.

At the same time, some US exporters say China, the country's No. 4 trade partner, hasn't given them the market access it promised when it joined the WTO in December 2001.
This week, US Trade Representative Robert Zoellick delivered that message at several meetings in Beijing.
"China is selling a lot to the United States," Zoellick said, after urging Chinese officials to remove barriers to US farm goods.
"It's good for our consumers, it is good for their growth, but it does mean that we have to have a fair shot at selling products here," he said.
The growing deficit is fueling complaints from the US Congress and business groups that China is dragging its feet in opening its markets, Zoellick said.
China has also drawn charges from Japan, its biggest trade partner, that it's keeping its currency artificially weak to undercut other countries' exports.
The Chinese yuan, pegged at about 8.3 yuan to the US dollar since 1995, has weakened against the yen and other currencies in the past year as the dollar's value fell.
Japanese Finance Minister Masajuro Shiokawa said earlier this week he may argue at today's meeting of the G7 industrialized nations in Paris that China should revalue the yuan.
"The worse the US deficit gets, the more fuel it will provide for people who want China to adjust its exchange rate," said Michael Kurtz, an economist at Bear Stearns Asia Ltd in Hong Kong.
The US, responding to farmers' complaints, is considering taking its case against China to the WTO, Secretary of Agriculture Ann Veneman said last month.
If successful, the move would allow the US to impose sanctions on China.
Farm groups say China is restricting imports of US corn, soybeans and cotton and using subsidies to undercut their exports in markets such as South Korea.
China exported goods worth US$125.2 billion to the US last year and imported US$22.1 billion, a 15 percent increase from a year earlier, the US Commerce Department reported on Thursday.
China accounted for almost a quarter of the US' overall deficit of US$435 billion last year, a record.
Motorola, the world's second-biggest mobile-phone maker, exported US$3.6 billion in mobile phones and other equipment from its Chinese factories last year, up from US$2.1 billion in 2001.
China's trade surplus with the US last year accounted for almost a 10th of its US$1.2 trillion economy, which grew 8 percent last year -- more than three times as fast as the US economy.
About a third of China's US$326 billion in exports went to the US.
According to Chinese government figures, the country posted a US$42.7 billion trade surplus with the US last year, less than half of what the US reported.
China's figures don't count US-bound shipments that pass through Hong Kong, while US ones do.
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