The US’s top trade official last night mounted a staunch defence of moves to get tough on China, amid growing fears that action by the administration could torpedo the two countries’ delicate relationship.
US trade representative Susan Schwab said in a telephone interview with Emerging Markets that the recent filing of the US’s first ever cases against China with the WTO did not mark a change of tack.
That claim contradicts observers who say the Bush administration is upping the ante, to try to wrest back control of the trade debate from the Democrats in Congress.
“There has not been a fundamental shift in US policy,” Schwab said. “It’s part and parcel of a mature trading relationship.” The WTO cases are “a way of taking a dispute, a way of taking unfair practices and moving them into a multilateral dispute setting, if you’re unable to resolve them outside of that forum”.
The action was “far more healthy than rhetoric and retaliation,” Schwab said. “Both sides need to be mature and businesslike in terms of how we approach our differences.”
Her comments come days after Wu Yi, China’s most senior trade official, accused the US of ignoring Beijing’s efforts to curb copyright piracy and pledged to “fight until the end” against the WTO cases.
The moves – which could lead to WTO economic penalties against China – “betray” the US-China trade consensus, Wu said. “It’s unprecedented for a WTO member to file two complaints against another in such a short time.”
The administration last month announced new trade cases against China over copyright piracy and restrictions on the sale of American movies, music and books. Earlier this year, the US filed a WTO case against China’s use of government subsidies to support Chinese companies.
On March 30 the administration said it was imposing penalty tariffs on Chinese glossy paper imports. The case broke a 23-year precedent that had barred US companies from seeking such protection in cases involving nonmarket economies such as China.
Schwab said that “it can not surprise anyone” that the two sides’ “complex” trade relationship led to disputes.
China’s central bank governor Zhou Xiaochuan warned of the dangers of growing protectionist sentiment in an earlier interview with Emerging Markets. “Nobody really knows whether protectionism in today’s world will increase, or whether the world’s free trade regime and capital flows can successfully continue or not,” he said.
Protectionism could be “a disaster” for the global economy, and especially for countries with small, open economies, Zhou said.
Schwab admitted she worries that “[protectionist] sentiment is gaining traction” in the US. “There is a lot of discord in American trade politics, but not just in US trade politics. You see it in Japan, heaven knows you see it in China, you see it in developing and developed countries alike.”
Treasury Secretary Henry Paulson, who in December launched a “strategic economic dialogue” with China, recently acknowledged the need for further gains to head off protectionism. The US ran a $233 billion trade deficit with China last year, and this year’s first-quarter deficit of $46.4 billion was twice as large as in the comparable period the year before.
This month, during a visit to Washington, Chinese deputy premier Wu is expected to meet face to face with the US Congress, on the pointed issue of Beijing’s undervalued currency, which American lawmakers complain is hurting the US economy.