US-China Commission Finds Fault WIth Chinese Trade

The US/China Economic and Security
Review Commission has sent Congress its annual report, citing what it calls “troubling trends” as
China fails to live up to its international obligations as a major economic power. As the report
was released, the commission’s chairman, Larry M. Wortzel, said, “[W]hile China is a global actor,
its sense of responsibility has not kept up with its expanding power.”

The 12-member bipartisan commission was created by Congress to investigate and analyze US
relations with China and make recommendations to Congress and the administration with regard to
economic and national security implications of the US/China relationship. During this past year,
its members met with Chinese government and communist party officials, Chinese business leaders,
American diplomats and American business people working in China.

The commission’s report contains 44 recommendations, several of which are related to trade
in textiles and other manufactured products. Chairman Wortzel said that while China has
demonstrated it understands its obligations to the 149 other countries in the World Trade
Organization (WTO) and has made considerable progress in writing internal legislation and
regulations, it is “falling short on its implementation of new laws and regulations and is failing
to adequately enforce laws already on the books.” He said this is particularly true with respect to
protection of intellectual property rights. Wortzel said Congress needs to urge the US Trade
Representative to press ahead “ aggressively” with cases against China’s failure to enforce
intellectual property rights.

In connection with other international trade issues, the commission pressed particularly
hard for action to address China’s currency manipulation. In that regard, the commission
recommended that Congress urge the administration to take to the WTO and the International Monetary
Fund a complaint about China’s manipulation of currency. It also recommended that Congress pass
legislation to modify requirements for the Treasury Department’s biannual report on countries that
practice currency manipulation, making it clear that countries that artificially peg their currency
in order to gain a trade advantage are violating international trade rules. In addition, the
commission urged Congress to pass legislation granting the US Department of Commerce authority to
impose countervailing duties against products imported from nonmarket economies.

Auggie Tantillo, executive director of the Washington-based American Manufacturing Trade
Action Coalition, which represents a number of manufacturing industries, including textiles, said
the incoming Congress needs to seriously consider the commission’s recommendations and “act
appropriately,” adding that Congress needs to hold the Bush administration accountable for “
failures in its China policy.” He said a good first step would be enactment of legislation to
combat currency manipulation.

In 2005, the United States had a record $202 billion trade deficit with China, and it
appears 2006 is headed for a 10-percent increase over last year.

November 21, 2006