CHINESE VOICES THAT OPPOSE REFORM GROWLOUDER

liuyunzhzd

SUSAN SCHWAB
Monday, December 11, 2006
  
  
One of the most important events in modern economic history occurred five years ago today when China joined the World Trade Organisation. This anniversary provides the opportunity to take stock – through a congressionally mandated report issued today by the office of the US Trade Representative – of China’s integration into the global economy and its compliance with WTO obligations.

The record is profoundly mixed. China has moved with resolve to reform some of its economic and governmental structures over the past five years. It has enacted or revised over 1,000 laws and regulations to help bring its trading system into compliance with WTO rules. It has also reduced tariffs on goods of great importance to US industry from an average of 25 per cent in 1997 to 7 per cent today, with similarly significant reductions for agricultural products.

In addition, it has reduced or eliminated numerous non-tariff barriers, increased market access for international service providers and improved the transparency of its governmental procedures. These steps have expanded economic growth in both countries and contributed to a roughly 190 per cent increase in US goods exports to China over the past five years. Today, China is America’s fourth largest export market – up from 15th a decade ago.

WTO accession has also helped promote the rule of law in China and subjected the country to binding international dispute settlement procedures. Nevertheless, looking back on the past year, we see troubling indications that China’s momentum towards reform has begun to slow. Voices in China opposing further market liberalisation have grown louder and government intervention in the economy, especially at the provincial level, has increased.

While facing fewer blanket prohibitions or prohibitive tariffs, US companies face an array of regulatory obstacles and government policies that make doing business in China uncertain.

Later this week, I will join other administration officials on a trip to China as part of the new strategic economic dialogue led by Treasury secretary Hank Paulson. As part of this dialogue, we will clearly convey our view that a slowdown in reform hinders China’s development and undermines the health of our bilateral ties.

One of the most serious challenges identified by USTR is the rampant infringement of intellectual property rights that persists in China in spite of efforts by central government officials to move against this illegal practice. Counterfeiting, piracy and inadequate enforcement of intellectual property protections rob US businesses of billions of dollars a year in legitimate sales and weaken China’s development of its own knowledge-based industries.

Of equal concern is China’s continued use of industrial policies that limit imports of goods, government subsidies that encourage exports and protect non-competitive industries, and regulatory barriers that impede participation in China’s market by US service providers. There are many other areas, from steel to telecommunications, where China’s incomplete move away from a centrally-planned to a market-based economy is creating massive distortions that could leave the Chinese and global economies at risk. In agriculture, we are pleased by the rise in US exports to China. But our exporters continue to be frustrated with practices that make China one of the world’s least transparent and predictable markets.

The large US trade deficit with China, which this year will exceed the $202bn reached in 2005, is due to factors including differences in patterns of saving, investment and consumption as well as fiscal and monetary policies. Our trade policies can help reduce the imbalance to the extent it arises from closed markets or unfair trade practices. USTR and other US government agencies are aggressively addressing our trade concerns with China through the Joint Commission on Commerce and Trade and other bilateral forums. Multilateral negotiations under the Doha round of trade talks, litigation through the WTO and the applrade remedy laws are other important avenues. Whether through dialogue, negotiation or dispute settlement, China must be held to its commitments to reform.

We want a strong trade relationship with this vast and fast-growing economy. The potential benefits for Americans – in exports, jobs and greater economic competitiveness – are enormous. But that depends on China’s continued reform, and on a commitment to expand free and fair trade based on decisions by the actors in the market – not by bureaucrats.

The writer is US trade representative