____________________
In the Chinese trade narrative, a case in point is China
National Offshore Oil's attempt in 2005 to take over Unocal,
a U.S. oil company. The state-owned oil giant withdrew its
$18.5 billion offer after Congress threatened to block the
deal. The episode came after the Chinese had spent years
listening to U.S. lectures about how modern economies must
be open to foreign investment and had opened their own
economy to a flood of U.S. capital.
In recent months, official rhetoric on U.S.-China trade has
grown increasingly hostile.
When the United States imposed the tariffs on paper, China
said the sanctions violated a pledge to resolve trade
disputes through dialogue. On the intellectual property
issue, Wu response, roughly translated, was "If you want a
fight, let's fight."
____________________
Original source URL:
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/16/AR2007051600601.html
China, U.S. Come to Trade Talks At Odds
Inequity to One Is Bullying to Other
By Ariana Eunjung Cha
Washington Post Foreign Service
Saturday, May 19, 2007; A01
SHANGHAI -- On the eve of high-level economic talks in Washington next week,
Chinese leaders are increasingly bitter about what they see as bullying behavior
by the United States on trade issues, potentially complicating efforts to tackle
disputes on such matters as technology exports and intellectual property.
In the span of three months this year, under the pressure of domestic politics,
the United States moved aggressively against China for trade violations, filing
two lawsuits and imposing steep tariffs on imports. The actions have so incensed
China that Vice Premier Wu Yi, the leader of its delegation to next week's
talks, apparently considered boycotting them.
On the surface, the Chinese are likely to play the role of grateful guests.
Friday, in a slight concession to American arguments, they loosened controls on
the value of their currency, the yuan. The Chinese are expected to bring with
them $4.3 billion in high-technology contracts for American products.
But Treasury Secretary Henry M. Paulson Jr., Federal Reserve Chairman Ben S.
Bernanke and the heads of nine Cabinet-level agencies are sure to encounter a
more combative China when they sit down at the table this time. The Chinese are
so mad there had been talk Wu might stay home to show "dissatisfaction and
anger," said Xu Mingqi, an international economics professor at the Shanghai
Academy of Social Sciences, a government-affiliated think tank.
Wu relented, however, and on Tuesday and Wednesday she will lead a delegation
that includes 14 government ministers.
This will be the second session of the high-level "strategic economic dialogue"
Paulson and the Chinese launched last year. The dialogue was supposed to be a
feel-good forum at which leaders could discuss big issues in the countries'
economic relations, moving beyond an intractable debate about the value of
China's currency.
But in recent months, with antitrade sentiment rising in the United States and
Congress threatening China with sanctions, the talks have taken on a new role,
as perhaps the best forum for averting a trade war.
For years, the United States has opposed China's strict controls on the yuan,
which has been allowed to rise 7 percent since July 2005 but which the United
States says is still kept artificially low to give Chinese exports an advantage
in the world market. U.S. officials have blamed the exchange rate for some of
the ballooning trade deficit with China, which was $233 billion last year and
$46.4 billion in the most recent quarter -- twice as large as the corresponding
period last year -- according to the Department of Commerce, .
Yesterday, China, in a move it said would help control runaway economic growth,
widened the band within which the currency can float, permitting a move of as
much as 0.5 percent a day, up from 0.3 percent. At a news briefing, Alan Holmer,
the Treasury Department's special envoy for China, said this was a "useful step"
but that, in general, reforms were "not fast enough as far as the U.S.
administration is concerned." The U.S. government has long pressed for a large
revaluation of the yuan, perhaps 30 or 40 percent.
In the December session in Beijing, both sides walked away with a list of
symbolic agreements, such as allowing the New York Stock Exchange and the Nasdaq
Stock Market to open offices in China, and promising to work together on more
commercial air travel between the two countries.
There was hope that broader cooperation was on the way, but a lot has changed in
a few months.
On the American side, with Democrats in control of Congress and a presidential
campaign gearing up, there's a growing impatience with the pace of economic
reform in China and a slew of antiChinese trade bills pending.
This week, 42 members of the House filed a petition calling for the U.S. trade
representative to take "strong action" to end China's currency controls,
threatening that if the Bush administration doesn't resolve the situation,
Congress will.
"We have watched China manipulate its currency at the expense of American
workers, farmers and businesses for too long," House Ways and Means Chairman
Charles B. Rangel (D-N.Y.) said in a letter accompanying the petition.
The United States in February filed a World Trade Organization case charging
China with providing illegal incentives to Chinese manufacturers of such items
as steel. In March, the United States slapped tariffs of up to 20 percent on
high-gloss paper made in China, complaining of subsidies. In April, the United
States sued China in the WTO over intellectual property protection.
While these actions may make sense in the United States, where much of the
public sees Washington as doing too little to protect American interests, they
have played poorly in China. Economists here describe themselves as startled by
the degree to which the United States is willing to take action to protect its
companies and domestic industries while criticizing China for doing the same. In
short, they perceive hypocrisy.
In the Chinese trade narrative, a case in point is China National Offshore Oil's
attempt in 2005 to take over Unocal, a U.S. oil company. The state-owned oil
giant withdrew its $18.5 billion offer after Congress threatened to block the
deal. The episode came after the Chinese had spent years listening to U.S.
lectures about how modern economies must be open to foreign investment and had
opened their own economy to a flood of U.S. capital.
"There are lots of disturbances in U.S.-Sino relations," said Zhao Yumin,
director of the Chinese Academy of International Trade and Economic Cooperation,
a research group affiliated with the Commerce Ministry. "From China's point of
view, it just wants stable development. But American enterprises have an
anti-Chinese feeling."
In recent months, official rhetoric on U.S.-China trade has grown increasingly
hostile.
When the United States imposed the tariffs on paper, China said the sanctions
violated a pledge to resolve trade disputes through dialogue. On the
intellectual property issue, Wu response, roughly translated, was "If you want a
fight, let's fight."
In next week's talks, the Chinese side is expected to seek fewer restrictions on
high-technology exports and a recognition that China has become a market
economy. The technology issue in particular is sticky. China says it would buy
more expensive U.S. technology goods if it were allowed to do so; the U.S.
government imposes controls on many high-tech exports that it fears could be
converted to military use.
Beyond deals on such issues, Chinese leaders will be looking for something more
basic: a better understanding of Congress and the role it plays in setting trade
policy. To China's political and economic leaders, accustomed to operating in a
government controlled by the Communist Party, the many-headed American
government -- with its multiple, often-conflicting voices -- is a mystifying
creature.
A senior Finance Ministry official said the Chinese side is puzzled by the way
members of Congress focus on a small local issue, such as a factory closure in
their district, even at the expense of the larger relationship between the
countries. "Sometimes it is a question of only 200 jobs lost," he said.
The official, who requested anonymity in order to speak candidly, acknowledged
that China's senior civil servants such as himself have trouble understanding
such concerns, even though they have been told about the U.S. system with its
checks and balances and competing powers. He said senators think they are the
president and House members see themselves as "at least a vice president."
"This is something we can hardly understand," he added, "and that is why we need
to have the strategic dialogue."
Correspondent Edward Cody in Beijing and researcher Crissie Ding in Shanghai
contributed to this report.
© 2007 The Washington Post Company
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