China Blasts U.S. Over Trade Protectionism

China blasts U.S. over trade protectionism
Relations growing increasingly strained; Washington accused of security hyperbole

http://www.theglobeandmail.com/servl...ry/TPBusiness/

BARRIE MCKENNA
3/23/2006

WASHINGTON -- Beijing politely rolled out the red carpet this week as two leading U.S. senators began a fact-finding mission to determine how to punish China for manipulating its currency. But half a world away in Geneva, China's delegate to the World Trade Organization lobbed a rhetorical bomb at the United States, accusing Washington of hyping national security concerns to restrict foreign investment on its home turf.

"By interpreting and applying WTO national security clauses in an excessive way, [the United States] has again seriously undermined the credibility of the multilateral trade regime, over which China is highly concerned," Chinese WTO envoy Sun Zhenyu told his fellow ambassadors yesterday.

The comments appeared to be directed at U.S. political backlash that helped kill a bid last year by China's CNOOC Ltd. to acquire Unocal Corp., a Houston-based U.S. oil and gas producer.

"Recently the United States exerted pressure and imposed restrictions on inward [foreign direct investment] on account of national security, which prevent foreign companies from seeking mergers and acquisitions [there]," Mr. Sun added.

The verbal attack, which coincides with the release of a WTO report on U.S. trade policy, marks the latest flashpoint of an increasingly strained relationship between the two economic and military giants.

China wasn't alone in warning about rising protectionist tendencies in the United States. In comments filed yesterday with the WTO, the European Union urged the United States to strike "a better balance" between security concerns and avoiding "unnecessary and costly burdens" to legitimate business.

Responding to the criticism, U.S. Trade Representative Rob Portman said the Bush administration is "cognizant of the potential for protectionism in the U.S. and we are actively communicating the real world benefits of trade at home." But he pointed out that United States hardly has a monopoly on anti-trade tactics.

"Economic isolationism . . . is not just a phenomenon in the United States," Mr. Portman said in a statement released in Washington.

The recent furor over the proposed takeover of several East Coast ports by Dubai Ports World of the United Arab Emirates has caused concern that the United States may be turning increasingly inward as it wages a global war on terrorism.

In the United States, critics blame China for stealing U.S. jobs and pushing the trade deficit to record levels by keeping the value of its currency, the yuan, artificially low. Last July, China raised the value of the yuan by 2.1 per cent and introduced a system to gradually move the currency away from its peg to the U.S. dollar. But the currency has barely moved since.

In Beijing, Republican Senator Lindsey Graham said the next couple of months could be a defining period in U.S.-China relations.

"Our goal is to let the Chinese government realize that the politics of this issue is about to get out of hand," warned Mr. Graham, co-author of a bill with Democrat Charles Schumer that would slap a 27.5-per-cent tariff on all Chinese imports. He said the senators are stressing to leaders in Beijing that "if you think the relations between our two countries are good, you're misreading the tea leaves back home [in the U.S.]. They're not good, and they're getting worse."

Mr. Graham and Mr. Schumer have said they want to push for a vote on the widely popular legislation as early as this month. The senators were slated to meet yesterday with Zhou Xiaochuan, governor of the People's Bank of China.

The Congressional vote could be the first dust-up in the prelude to next month's U.S. visit by Chinese President Hu Jintao. The White House confirmed yesterday that Mr. Hu would meet U.S. President George W. Bush on April 20.

That's just five days after the U.S. Treasury Department is slated to release a report on whether to officially brand China a currency manipulator -- the first step in imposing sanctions.

Although largely drowned out by the politicians, U.S. business leaders have appealed for calm in the escalating dispute. Caterpillar Inc. chairman Jim Owens warned Congress not to be seduced by tariffs and other retaliatory measures against the Chinese.