- The Washington Times - Sunday, November 2, 2003

Secretary of Commerce Donald L. Evans recently ratcheted up the pressure on China to correct systemic inequalities in bilateral trade opportunities. Mr. Evans was chided in much of the mainstream, free-trade-at-any price media for calling on China to engage in fairer trade. Several editorials suggested that the United States is afflicted with small-minded China-envy, failing to see the advantages of a burgeoning Chinese economy.

This is not so. U.S. economists are well aware that having the world economy driven so singularly by the United States isn’t in America’s economic interests. When America encounters cyclical weakness or other problems, the world economy is severely affected, putting further pressure on the U.S. economy. A more robust China could help keep the global economy churning during a U.S. downturn.

Mr. Evans and other U.S. officials have conversely been concerned about China’s economic vulnerabilities, not its strengths. These factors are creating a bubble in China’s economy and undermining U.S. exports to China, and beyond. Primarily, the bad loans that state-owned banks in China dole out to state-owned businesses are imposing a dangerous burden on the Chinese financial system that could become a crisis. These bank subsidies further detach Chinese companies from the economic realities that U.S. companies must confront and hurt U.S. exports. Last year, the United States posted a $103 billion trade deficit with China.

During his stay in Beijing, Mr. Evans said: “We have been patient, but our patience is wearing thin. The American market will not remain open to Chinese exports indefinitely if the Chinese market is not equally opened to U.S. companies and American workers.” His remarks are given added weight by the readiness of Congress to act if China fails to improve trading conditions.

Most commentators insist America should simply enjoy the cheap goods from China and quit the “protectionist” posturing. But negotiating for genuine reciprocity is a legitimate part of a free-trade regimen.

China missed key deadlines set by the World Trade Organization. Last December, China was slated to address foreign companies’ ability to import to China components needed to make products, commonly referred to as trading rights. But Beijing has failed to implement regulations to clarify and expand trading rights.

Foreign companies complain that their ability to distribute goods within China remains arbitrarily constrained. According to a U.S.-China Business Council survey of a wide range of member companies involved in trade with China: “Members highlighted trading rights, distribution rights and non-discrimination/national treatment as areas in which there has been a pronounced lack of progress and in which new problems have appeared.”

In December, China must meet a deadline for reducing its import quotas. China’s deadlines next year are comprehensive, ranging from an increase to 49 percent in the stake that foreign companies can have in mobile, voice and data services to allowing majority-owned foreign companies to strike joint ventures with other foreign companies. They also include reducing restrictions on insurance companies’ ability to open branches in China.

If China doesn’t meet its more modest requirements, it will be too far behind to meet its more demanding 2004 obligations.

The international community must get behind Mr. Evans’ call to China for action. Reform in China will improve conditions for workers in America and beyond. A free-trade regimen is likely to be politically sustainable only if it is more or less genuinely reciprocal between parties.


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