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Government
Rejects China Trade Sanctions
By Paul Blustein
The Bush administration bluntly rebuffed critics of trade with China yesterday,
turning down requests by labor and industry groups to consider imposing duties
on Chinese goods over Beijing's treatment of workers and its currency policy.
Four Cabinet members, appearing at an unusual joint news conference, said the
administration would not accept a petition filed last month by the AFL-CIO calling
for stiff tariffs on Chinese imports to punish China for allegedly exploiting
workers. Nor, they said, would they accept a petition readied by some industry
associations that would threaten China with sanctions to force a rise in the
value of the Chinese currency.
Asserting that the most effective way to change China is to trade with it and "engage" it,
Robert B. Zoellick, the U.S. trade representative, said: "Accepting these
petitions would take us down the path of economic isolationism. That is a path
we will not take."
The defense of trade and engagement came despite widespread public anxiety about
job losses to Chinese competition, and it exposed the White House to renewed
election-year attacks over the issue of trade with China. On Monday, Sen. John
F. Kerry (D-Mass.) accused the administration of failing to enforce U.S. trade
laws, especially concerning China, and his presidential campaign responded swiftly
to yesterday's announcement.
"This administration has once again refused to make any serious effort to
use the legitimate rules that govern trade to level the playing field and prevent
our businesses and workers from being taken to the cleaners," Kerry said
in a prepared statement. "When it comes to China and defending American
jobs, this White House is all talk and no action."
Likewise, John J. Sweeney, president of the AFL-CIO, issued a statement denouncing
the administration's decision: "It shows decisively that this administration
will only enforce U.S. trade laws when corporate profits and concerns are at
stake. . . . It is the multinational corporations who benefit from the artificially
low wages and repressed rights of Chinese workers."
Since such attacks were predictable and could prove a rallying point for Democrats,
the administration's announcement surprised some trade experts. Under U.S. trade
law, the administration could have accepted the AFL-CIO petition but then taken
up to a year to study its allegations that China's suppression of worker rights
gives it an unfair commercial edge.
"I thought the politics at a minimum would lead them to accept the labor
petition," said Nicholas R. Lardy, a specialist in the Chinese economy at
the Institute for International Economics. "And if they didn't want to do
anything with it, they could have waited" until after the election.
But business groups were pressing for a summary dismissal of the labor-rights
claim raised by the AFL-CIO, and at the news conference Zoellick said: "We
do not need to conduct a year-long investigation to know that there are serious
concerns with labor rights and working conditions in China, as there are in many
other developing countries. We do not need a year-long investigation to know
that we have serious concerns with China's policies on the value of its currency." China
keeps its currency, the yuan, pegged at about 8.3 yuan per dollar, a rate that
many American manufacturers complain makes Chinese goods unfairly cheap.
Zoellick and his Cabinet colleagues contended that they have taken a hard-nosed
posture with China on other trade matters, noting that last week they extracted
a number of concessions at a meeting with a high-level Chinese delegation. On
the labor issue, they argued that China has already made substantial progress
as the nation's growth, fueled by trade, has lifted hundreds of millions of Chinese
out of poverty. On the issue of the yuan, they said, Beijing is moving gradually
for its own internal reasons toward complying with U.S. pleas to allow the yuan
to rise according to market rates, and it is held back mainly by concerns that
it must modernize its financial system further before letting the yuan float.
"With steady progress clearly being made, the most effective way at this
time to achieve the goal of a flexible, market-based exchange rate in China is
to maintain the persistent engagement we have established," Treasury Secretary
John W. Snow said.
The administration will also use leverage to prod the Chinese to move faster
on both the labor and currency fronts, the Cabinet members said, by dangling
the prospect that China will be designated a "market economy" by the
Commerce Department. Because China is currently deemed a "non-market economy," U.S.
firms filing anti-dumping cases against Beijing can more easily win the imposition
of duties against Chinese goods that are allegedly sold at unfairly low prices.
"China will be required to reform its labor standards and its currency policies
before it can be granted market economy status," Commerce Secretary Donald
L. Evans said, noting that of the six criteria for market economy status set
under U.S. law, one deals with currency policy and another concerns the extent
of free bargaining between labor and management.
The petition concerning currency policy was going to be filed soon by the Fair
Currency Alliance, which is led by the National Association of Manufacturers
and includes the AFL-CIO. The administration's rejection "took us by surprise," said
Frank Vargo, the NAM's vice president for international economic affairs. "We
don't want a confrontation with the administration, but we want to move forward
on getting a fair Chinese currency. What is the best way? Honestly, I don't know."
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