WASHINGTON—Many U.S. lawmakers and businesses believe that China’s trade and currency policies have become increasingly detrimental to the global free markets.
A recently released U.S.-China Economic and Security Review Commission 2010 Annual Report added additional fuel in the China-U.S. trade spat.
The German Spiegel Online International website said in a recent report, “The Chinese apply international agreements as they see fit, and when the rules get in their way, they ‘creatively’ circumvent them or rewrite them with the help of compliant allies.”
Nevertheless, Hong Lei, the Chinese Foreign Ministry spokesperson, said in a published remark on the Chinese Embassy website, “In disregard of facts, the report [U.S.-China Economic and Security Review Commission 2010 Annual Report] is full of Cold War mentality and political prejudice. We urge the so-called commission to stop interfering in China’s internal affairs.”
China’s Empty Promises
In 2001, China became a full-fledged member of the Word Trade Organization (WTO) by officially accepting WTO regulations concerning international trade.
After long and hard negotiations, during which China had to convince the United States and the Europeans that it would open its economy to the international community, the world believed that a new leaf was turned, and China would become a responsible trading partner.
“The near-universal acceptance of its [WTO’s] rules-based system will serve a pivotal role in underpinning global economic cooperation,” said Mike Moore, WTO Director-General, in a Sept. 17, 2001, WTO statement.
China accepted the WTO premises, which called for nondiscriminatory treatment of not only all WTO members, but also all foreign enterprises trying to do business in China. Furthermore, price differentiation between goods produced by China and foreign trading partners were to be eliminated. Domestic laws favoring local products had to be eliminated and new legislation enacted that complied with WTO agreements. Import and export controls were to be eliminated with few exceptions.
In 2010, nine years after China was granted membership into the WTO, as well as after extensive research, investigations, visits to four Chinese cities, committee hearings, engagement of research firms, and a slew of other activities, the U.S.-China Economic and Security Review Commission realized that despite China’s promises and acceptance of WTO rules and agreements, China has not become a viable trading partner, but just the opposite.
“The 2010 Annual Report reflects the Commission’s conclusions that China has failed in some notable areas to fulfill the promises it made nine years ago when it joined the World Trade Organization,” said Dan Slane, Commission chairman, and Carolyn Bartholomew, Commission vice chairman, in published opening remarks at the rollout of the 2010 annual report.
They pointed out that China not only continued but established increasingly discriminatory policies that excluded foreign producers and manufacturers from competing in the Chinese market.
“Under the guise of fostering ‘indigenous innovation’ in its economy, the government of China appears determined to exclude foreigners from bidding on government contracts at the central, provincial, and local levels,” according to their statement.
China most recently demanded that Chinese state-owned enterprises be granted exempt status concerning WTO procurement rules, essentially eliminating foreign competition. On the other hand, China still insists that its state-owned companies must be able to freely compete for foreign government contracts.
The Chinese “denounce protectionism, and yet they are more protectionist than most fellow players in the great game of globalization,” argues the Spiegel article.
Currently, the world’s attention is focused on green technology. Expectations are that nations, including China, which experiences dangerous air and water contamination, will concentrate on their respective environments, instead of flooding the international market with environmental products.
“China may be more interested in developing a world class green technology export sector rather than cleaning up its environment. For example, although China is the world’s largest producer of photovoltaic solar panels, 90 percent are exported,” according to the Commission’s 2010 annual report.
Awareness of Chinese Intentions
“From the World Trade Organization to the United Nations, Beijing is happy to use its soft power to get what it wants—and it is wrong-footing the West at every turn,” states the Spiegel article.
Voices are heard over the Internet asking why the worlds’ governments and corporate leaders are naive when dealing with the Chinese. No matter how tough these leaders are when negotiating deals among themselves, they cave in the minute the Chinese demand preferred trade status.
The Spiegel article suggests that China is adept in circumventing trade laws to outfox their Western trading partners. Western government and corporate leaders must understand that “the People’s Republic acts out of self-interest and needs the West about as much as the West needs China. Besides, the Chinese are used to playing hardball.”
The Taiwanese are the most adept at dealing with China. Taiwan signed a trade agreement in mid-2010 and was granted a $13.8 billion cutback in trade tariffs, while China itself only received a $2.9 billion tariff reduction for goods sold to Taiwan.
“Perhaps one needs to be Chinese in order to avoid being ripped off by Beijing,” suggests the Spiegel article.
Dec 6, 2010
By Heide B. Malhotra