- The Washington Times - Thursday, December 18, 2003

China has failed to live up to many of the obligations it undertook when it joined the World Trade Organization (WTO) two years ago and continues to favor its own companies at the expense of U.S. firms, the U.S. trade representative’s office (USTR) said in a report released yesterday.

The annual report to Congress emphasizes progress in some areas and underscores the importance of U.S.-China economic relations, citing the Asian nation as one of the few growing markets for U.S. exports.

But the Bush administration also threatens to sue China at the WTO or take other action unless problems are resolved.

“In a number of different sectors, including some key sectors of economic importance to the United States, China fell far short of implementing its WTO commitments, offsetting many of the gains made in other areas,” the report said.

China joined the WTO in December 2001, after 15 years of negotiations, and its economy since has churned out record levels of goods.

China also has increased imports markedly, helping drive up prices of commodities from steel to soybeans and offering a rare bright spot for some producers.

“Indeed, over the last three years, while U.S. exports to the rest of the world have decreased by 10 percent, U.S. exports to China have increased by 66 percent,” the report said.

But Chinese exports have gained the most notice. The trade office noted that in 1986, when China began WTO negotiations, total U.S.-China trade was $7.9 billion. It is projected to top $170 billion this year, with the trade deficit hitting $125 billion.

Many U.S. legislators and business groups have accused the country of unfairly dumping cheap goods and displacing American workers, while failing to live up to WTO commitments. A few legislators have tried to raise barriers to all Chinese goods, while others have focused on specific products, such as textiles.

The USTR report codifies many of the complaints, citing specific areas in which it says China is not living up to commitments and in which China’s implementation efforts lost momentum.

Agriculture, services, intellectual-property piracy and transparency — fair and equal application of laws and regulations — were problems last year and, despite some progress, continue to hinder U.S. firms, the report said.

“At the same time, other areas of concern have developed, such as China’s questionable use of certain tax policies to favor domestic production. This year has also seen an increasing use of industrial policies to encourage domestic industries at the expense of imports from abroad or foreign businesses operating in China,” the report said.

Such industrial policies threaten U.S. gains in China’s automotive markets, the report said.

The report also appears to discount some major purchases, of aircraft and other big-ticket items, that China announced earlier this year.

“In many instances, China has sought to deflect attention from its inadequate implementation of required systemic changes by managing trade in such a way as to temporarily increase affected imports from vocal trading partners, such as the United States,” the report said.

Despite some tough language in the 67-page report, the Bush administration has been reluctant to alienate China with trade restrictions, and both sides have played down trade friction.

The president last month capped Chinese imports of three specific textile and apparel products, sparking a threat of retaliation, but Chinese goods in general continue to race into the U.S. market.

The WTO sets up a rules-based system for international trade and also reaches into local rules and regulations. China’s WTO accession agreement includes far-reaching commitments that include legal changes at all levels of government.

Congress requires the annual USTR report on compliance with global trade rules.

An official at China’s trade office in Washington could not be reached for comment.

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