BRILLIANT: Opportunity knocks - time to capitalize

Steps to dismantle a great wall in China trade

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At a time when so few of us can agree on so little, one fact commands an arguable consensus: There is no more important bilateral partnership in the world than the U.S.-China relationship, and it stands at a critical crossroads.

Economic engagement will be at the core of the agenda this week as Chinese Vice Premier Wang Qishan arrives in Washington for a high-level dialogue to resolve bilateral trade issues and promote positive commercial relations. Followed roughly one month later by the state visit of President Hu Jintao, the talks offer an opportunity to dial down our simmering tensions and steer our commercial relationship onto a more positive path. Both countries have an opportunity to signal that they’re serious about improving our commercial relationship in ways that will benefit the global economy.

This can begin with China eliminating policies that exclude foreign businesses from competing on a level playing field in the country while further liberalizing its inbound investment policy. For the United States to do its part, we must show a willingness to shed the protectionist impulses that are not just counterproductive, but close the U.S. market from trade and investment. Across the board, both sides must agree on common benchmarks to measure near-term progress in China’s intellectual-property regime.

These steps would provide opportunities to the U.S. farmers, manufacturers and service providers whose jobs are tied to China, the fastest-growing market for U.S. exports. Consider that since 2000, U.S. exports to the world have grown by 29 percent. During the same decade, U.S. exports to China grew by 330 percent. Strains have been building steadily over most of 2010.

Earlier this year, the House of Representatives passed legislation taking aim at China’s exchange rate. Should the Senate pass identical legislation, the likely result would be a trade war - a lose-lose scenario for both countries.

At the Group of 20 summit in Seoul, the two sides sank to the occasion, failing to reach consensus on ways to manage continued global imbalances. Beyond economics, the two governments continue to face a difficult road in forging common approaches to geopolitical, climate change and cybersecurity challenges.

Taken together, these are big issues, presenting real challenges to the bilateral relationship. But for all the tensions of late, a win-win relationship is within reach.

To reach this goal, China must eliminate policies such as indigenous innovation and related industrial policies that exclude foreign producers and manufacturers from competing on a level playing field in the Chinese and other markets around the world. China can take a significant step forward by bringing its negotiations to join the World Trade Organization Government Procurement Agreement to a timely and commercially meaningful conclusion in a manner that allows U.S. firms to bid on government contracts at the central, provincial and local levels and covers relevant state-owned enterprises.

It’s also time for the two governments to agree on common benchmarks to measure near-term progress in China’s intellectual-property regime. China’s new intellectual-property protection and enforcement campaign is unquestionably a positive development, but given endemic levels of counterfeiting and piracy, mutually agreed-upon benchmarks that signify concrete and consequential outcomes are essential.

China also must liberalize its inbound investment policy. Ten years after its WTO accession, the time has come for China to improve significantly market access for foreign firms and curtail behind-the-border regulatory barriers that shield China’s so-called national champions from market-based competition.

This week’s dialogue should serve to reinforce the positive direction endorsed by China’s leaders in the outline of the 12th Five-Year Plan. There is tremendous support in the American business community for China’s efforts to move its economy in the direction of increased consumption and a stronger service sector. Moreover, China adopting a market-determined exchange rate is an important component of a range of financial reforms that need to be undertaken in the near term, not because they respond to American demands, but because they are the best way to ensure that China meets its economic objectives and maintains economic stability.

However, for China to change in the ways set out here, the United States must show its own willingness to shed counterproductive economic policies. We must curb protectionist impulses at home and keep the U.S. market open for market-based trade and investment. We must make our own products and business environment more competitive by addressing domestic policies that sap competitiveness, such as excessive legal, regulatory, tax and energy costs. We also must continue to be a global champion for free markets - a leader in the cause of an active, forward-looking trade policy.

A strong, stable and healthy relationship between the world’s two largest economies, China and the U.S., reverberates far beyond its bilateral benefits. Together, our countries can be effective advocates against the pull of protectionism and in favor of commercial engagement and unfettered global trade. This week’s talks won’t resolve all the issues creating the current contentiousness in U.S.-China relations. But confidence-building on the key commercial issues outlined here can be a start in the right direction.

Myron Brilliant is the senior vice president for international affairs at the U.S. Chamber of Commerce.

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