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US Officials Defend Bush Administration Trade Policy with China

U.S. officials have defended the Bush administration against charges it is not being aggressive enough in trying to level the playing field in trade with China. The comments came as members of Congress angry over job losses in their states, renewed threats to retaliate against Beijing for what they see as other unfair trading practices.

The long-term deficit in U.S. trade with China continues to rise, but officials appearing before the House Ways and Means Committee tried to put a positive spin on progress being made in addressing problems in the relationship.

They said U.S. exports to China have grown dramatically since 2000, to $35 billion last year. China is now the fifth largest market for U.S. goods.

Kristin Forbes, a member of the president's Council of Economic Advisers, argues the debate over China's role in the U.S. trade deficit has been the subject of misconceptions.

"The U.S. trade deficit excluding China has also risen sharply," said Ms. Forbes. "Trade with China accounted for roughly a quarter of the increase in the U.S. trade deficit since 1997. That is only slightly more than the contributions to the increase in the U.S. trade deficit from NAFTA and Europe. In fact, China's contribution to the overall U.S. trade deficit today is currently less in percentage terms than it contributed in 1997."

But members of Congress are fuming over China's currency policies, inadequate intellectual property protections and other issues, even as they focus on the deficit, and want to know what the administration is doing on a number of fronts.

Maryland Congressman Benjamin Cardin says President Bush needs to be more forceful with Beijing on the question of its currency, and other issues.

"We need action. We need action. Those who have lost their jobs because of unfair trade practices, whether it is piracy or the wrong exchange rates, they are not sitting back saying nothing is wrong with this," he said.

Michigan Democrat Sander Levin asserts the administration has not used the tools, such as the threat of sanctions, at its disposal.

"Almost everybody says to you, do something. And then you say you're making progress? Nothing has happened in terms of the rigging, the pegging of the [Chinese] currency. Zero. And you use all kinds of economic theories to essentially excuse, to go easy, to shrug your shoulders," he said.

That brought this response from Kristin Forbes.

"We are not shrugging our shoulders and acquiescing," she said. "We are very engaged with China on the issue of their exchange rate and strengthening their financial system."

Assistant U.S. Trade Representative, Charles Freeman, says the administration is working on numerous aspects of the trade relationship with China.

"The administration is working hard across the board to encourage greater market access for our agriculture producers, our property rights holders, service providers, and manufacturers," added Mr. Freeman.

However, manufacturing representatives testified much more needs to be done to confront China on several fronts, including its use of cheap labor and its intellectual property piracy.

Robert Stevenson, chief executive officer of the Eastman Machine of Buffalo, New York, described the impact on his company.

"Over the last 10 years we went from a company that employed 150 union workers and sold 20,000 of these [fabric cutting] machines worldwide, to a company that now employs 58 workers and sells less than 8000," he explained.

Strong emotions on U.S. competitiveness with China were reflected in this comment by Congressman Bernie Sanders who is sponsoring legislation that would deny China permanent normal trading relations (PNTR) because of its trade policies.

"I do not believe there is anything you can do to make America competitive with China in terms of wages," he noted. "How are we going to compete with a country that pays workers 30 cents an hour and puts them in jail when they form a union?"

Richard Wilkey, president of the Fisher-Barton Company in Wisconsin, spoke for the National Association of Manufacturers.

"U.S. manufacturers can and will compete with China, but only with fair rules," he said. "We should not have to deal with subsidized production, or deliberate currency undervaluation, and our government is telling us there is nothing they can do to see that the international rules are enforced."

Despite their frustrations, the manufacturing representatives said that imposing tariffs or other barriers on China would not be constructive, a position echoed by U.S. officials at the hearing.