US to monitor China trade compliance
(Financial Times)
Updated: 2006-02-15 14:09

http://news.ft.com/cms/s/45d328d4-9d70-11da-b1c6-0000779e2340.html

The US is to set up a taskforce to monitor China's compliance with international trade rules, the first time the US has established a country-specific enforcement office.

Robert Portman, US trade representative, also said on Tuesday he was considering bringing a case against China at the World Trade Organisation if Beijing does not cut its barriers to car parts and crack down more effectively on intellectual property violations.

The announcements, which mark another racheting up of rhetoric against Beijing, came as the Office of the US Trade Representative published a comprehensive review of trade relations with China. The establishment of the new China enforcement office is unprecedented for the USTR. Even at the height of trade tensions with Japan in the 1980s, there was no country-specific taskforce.

Tuesday's report argued that China's period of apprenticeship in the world trading system - which started when the country joined the WTO in 2001 - was now over and that the US would hold the country to account for unfair trade practices.

"Chinese exporters have benefited enormously from the openness of the US market - more than US exporters have benefited from China's WTO accession," Mr Portman said in a letter. At a press conference, he added: "Our bilateral trade relationship with China today lacks equity, durability and balance in the opportunities it provides. The time has come to readjust our trade policy with respect with China."

While the US administration has preferred negotiation to litigation, protectionist pressure is rising in Congress, and the USTR has been shifting towards a tougher stance. Recently the US administration forced the Chinese to remove an antidumping duties on kraft linerboard - the material used in cardboard boxes - by threatening to take the case to the WTO.

But the administration still wants to head off proposals to raise tariffs on China by US lawmakers, who have become increasingly fed up with the country's reluctance to revalue its currency or enforce intellectual property laws.

The US has been exploring the possibility of launching a joint WTO case against China over high duties on auto parts that are imposed when the use of these parts exceeds a certain threshold.

The USTR said the new enforcement office would collect better information of China's trade policies, focusing on subsidies, regulatory transparency, and fair market access for telecommunications, financial services and healthcare.

Despite Tuesday's hard-hitting language, Mr Portman remained keen to stress the benefits of trade with China. Since China's accession to the WTO in 2001, US exports to the country have increased five times faster than export growth among the other US trading partners.

Although the bilateral deficit with China reached a record $202bn in 2005, Mr Portman said this partly reflected the use of China by other Asian economies as an assembly point. The share of the US trade deficit represented by the Pacific Rim countries has fallen from 57 per cent in 1999 to 43 per cent in 2005, the report said.