- The Washington Times - Thursday, May 3, 2001

Army soldiers won't be wearing black berets with the "Made in China" label, after all. But the United States still imports $100 billion of Chinese products every year.

That $100 billion caused the United States' annual trade deficit with the communist country to grow to a record $83.8 billion last year, a 22 percent increase from 1999 and surpassing the deficit with Japan.

The Pentagon Tuesday night announced plans to recall whatever Chinese-made berets have already been delivered and distributed.

"The Army Chief of Staff has determined that U.S. troops shall not wear berets made in China or berets made with Chinese content," Deputy Defense Secretary Paul D. Wolfowitz said in a brief statement.

Despite the flap over the berets, China's status as a major trading partner with the United States is expected to grow, as the country is the world's most populous with 1.3 billion people and is set to win admittance to the World Trade Organization and continue its economic reforms.

"All the major companies are selling to China," said Leslie Schweitzer, senior trade adviser for the U.S. Chamber of Commerce. "China's greatest resource is its buying power."

America exported $16.3 billion to China last year. In 1999, imports were $81.8 billion compared with $13.1 billion in exports.

The United States' big-name corporations have a big presence in China, as they look to capitalize on the emerging economy and, more importantly, the cheap price of labor there.

U.S. companies pay $3.86 an hour to the average Chinese worker, half of what an American is paid for the same work, according to the Congressional Research Service. Work conditions are notoriously unsatisfactory and have drawn the ire of human rights organizations.

Nevertheless, Chinese workers in U.S.-owned facilities earn more than 15 times the wage of an average Chinese citizen.

Capitalizing on growth

Large corporations doing business in China include Coca-Cola, Pepsico, Boeing, Microsoft, Motorola, Procter & Gamble and Kmart, with other big names ranging from sneaker to airplane manufacturers.

China is a prominent importer of U.S. technologies, and wireless-communications companies in particular are looking to capitalize on the tremendous growth potential.

"It is a very large market for the telecom industry," said Motorola spokesman Roderick Kelly.

Electrical machinery and telecommunications equipment make up nearly $1.8 billion in exports to China more than the exports of automobiles, plastics and medical equipment combined. That figure has tripled since 1996.

U.S. satellite exports to China are expected to reach $3 billion in the next five years.

Power generators are also big exports, as the Chinese government struggles to provide its massive population with electricity, heat and running water. Arlington-based AES Inc. has seven plants servicing mainland China.

Procter & Gamble, the largest U.S. manufacturer of household goods, posted strong Chinese sales of hair care products including Head & Shoulders and Vidal Sassoon in the last quarter.

Alticore, one of the United States' largest distributors of home products and food supplements, boasted about $220 million in sales to China last year. Skin, body and hair care products are big exports distributed by Alticore's subsidiary Amway, along with household cleaners and the Nutrilite brand of vitamin and mineral supplements.

About 16 percent of Coca-Cola's sales in Asia are in China, accounting for 2.5 percent of its overall sales of soft drink and food products. Only the Japanese consume more Coke products in Asia.

Boeing, the world's largest aircraft manufacturer, boasts more than $19 billion in cumulative airplane sales to China. Boeing provides part, if not all, of the fleets for 17 Chinese airlines and claims a 67 percent market share. As of January 2000, 335 of the 503 jetliners in China were manufactured by Boeing.

"Our projections show China to be the largest market in the world," said Boeing spokesman Rick Fuller. "They don't have roads and railroads, so one of the ways they're going to get around is by airplane."

Infrastructure in China may be lacking, but European car companies have capitalized on the road system that does exist. U.S. auto manufacturers lag behind European car makers in sales. Volkswagen accounts for more than 50 percent of all cars in China, while General Motors boasts just a 9 percent share. Ford manufactures less than 1 percent of all cars driven in China but recently became involved in several joint ventures to manufacture automotive components there.

'Made in China'

While exports to China continue to increase, imports are coming in at an eye-popping rate.

Imports included more than $9.1 billion in footwear a year, particularly sneakers and shoes made of leather and rubber accounting for more than 97 percent of China's overall footwear exports.

Most athletic footwear displays the "Made in China" label, particularly popular brand names Nike, Reebok and Spalding.

Chinese clothing, particularly women's attire made of leather and silk, is a top five U.S. import.

It joined with toys, games, sporting goods, computers and electrical machinery and equipment to account for two-thirds of all U.S. imports from China last year.

More than 70 percent of all U.S. toy imports come from China, according to industry statistics.

Small firms make impact

Small businesses are also making their presence known. According to the U.S. Chamber of Commerce, companies with fewer than 20 employees account for 29 percent of all U.S. exports to China. Often, these are niche companies that have been able to react quickly and take advantage of the 1.2 billion potential consumers.

"One of the most interesting aspects of [trade between the U.S. and China] is the number of small businesses," Miss Schweitzer said. "I think people are quite surprised when they hear that."

Eighty-two percent of all U.S. exports not just to China have fewer than 500 employees, Miss Schweitzer said.

The companies are diverse, ranging from the Hudson Pecan Co., a family owned business based in Ocilla, Ga., to International Innovations, an Austin, Texas, manufacturer of wooden clothes hangers.

Hudson sold more than 50,000 pounds of pecans to China last year. International Innovations says 8 percent of its sales go to China.

"Small business have the ability, if they're entrepreneurial, to have an impact in China," Miss Schweitzer said. "Sometimes, they can react more quickly than big companies."

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