- The Washington Times - Tuesday, April 10, 2007

1:43 p.m.

BEIJING (AP) — China reported a sharp monthly drop in its ballooning trade surplus today and angrily rejected two U.S. complaints filed with the World Trade Organization over product piracy and market access for American movies, music and books.

The exchanges threatened to add tension to one of the world’s biggest — and thorniest — trading relationships, already strained by U.S. pressure on Beijing to close its trade gap and allow its currency to appreciate more quickly. Last month, the U.S. also imposed higher tariffs on Chinese paper in a dispute over subsidies.

China’s trade surplus in March fell to $6.9 billion from $23.7 billion in February, according to figures released by the Chinese customs agency.

However, economists said the drop probably was only temporary.

“Our expectation is that the monthly trade surplus will stay above $20 billion,” said Citigroup’s Shen Minggao.

Beijing says it is trying to cut its trade gap, which is growing amid surging exports of everything from consumer electronics to toys and clothing.

While Chinese leaders have appealed for patience, the Bush administration’s patience seems to be running out.

The U.S. today filed two complaints against China at the WTO over its lax enforcement of copyright policy and barriers on the sale of U.S. movies, music and books in the country.

China’s Commerce Ministry expressed “great regret and strong dissatisfaction” with the complaints, which U.S. Trade Representative Susan C. Schwab announced yesterday.

China is one of the world’s biggest sources of illegally copied goods, ranging from movies, music and designer clothes to sporting goods and medications. U.S. companies contend that they are losing billions of dollars a year in potential sales to piracy.

However, China’s top intellectual-property official criticized the U.S. move, appealing for cooperation and dialogue, the official Xinhua News Agency reported.

“It’s not a sensible move for the U.S. government to file such a complaint,” Tian Lipu, commissioner of the Intellectual Property Office, was quoted as saying. “To do a better job in combating piracy, we need dialogue and cooperation, not confrontation and condemnation.”

Senior officials from the two countries are due to meet in May in Washington for the latest round of a “strategic economic dialogue” led by U.S. Treasury Secretary Henry M. Paulson Jr. and Chinese Vice Premier Wu Yi. The dialogue is meant to address issues ranging from market access to complaints about Chinese currency controls.

While March’s sharp drop in China’s trade gap came as a surprise, China’s export gap for the full January-to-March quarter doubled over the same period last year, reaching $46 billion, according to the customs figures.

The February bulge might have been caused by Chinese exporters rushing to ship goods abroad to beat a proposed cut in export tax rebates, leaving less to ship in March, Mr. Shen said.

Authorities have cut export rebates for steel and some other products and are prodding consumers to spend more, which would boost imports and help close the gap.

It is too early to know whether the government’s latest changes are working, Mr. Shen said.

“If new data in April or May continue the March trend, then the government can say it is working,” he said, “but I don’t think that will happen.”

China’s official steel industry group said today that Beijing is cutting export rebates again, effective Sunday, and eliminating them for some steel products. China, like many other nations, refunds value-added and other taxes on exported goods to help companies hold down their prices abroad.

Last year, China reported a record-high global trade surplus of $177.5 billion. Economists say the figure could soar past $250 billion in 2008.

Meanwhile, U.S. lawmakers are threatening to introduce measures to compel Beijing to relax controls on its currency, the yuan, that critics say are driving up China’s trade surplus. The United States and other governments say the yuan is kept undervalued, giving Chinese exporters a price advantage and hurting foreign competitors.

Beijing has let the yuan rise by 4.6 percent against the dollar since a July 2005 revaluation, but the U.S. wants faster action.

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