United States warns China of possible trade cases

Washington, Dec 12: The United States warned China it could face a number of formal complaints at the World Trade Organization unless it addresses US concerns over piracy and industrial policies that are costing American businesses billions of dollars.

The warning came just a few days before a high-level US-China trade and economic meeting in Beijing. It was contained in an annual report to Congress issued on the fifth anniversary of China's entry into the WTO.

The U.S. trade deficit with China has soared from billion in 2001 to a record 2 billion last year and is on to track to set a new record this year. The growing trade gap has fueled demands in Congress for tough U.S. action to ensure China plays by the rules.

''China has taken many important steps to implement its WTO obligations, but on the fifth anniversary of its WTO membership, China's overall record is decidedly mixed,'' U.S. Trade Representative Susan Schwab said in a statement accompanying the report.

While both countries have benefited greatly from increased trade over the past five years, ''certain industries face frustrating barriers to doing business in China and there are worrisome signs that China's market liberalization efforts has slowed in the last year,'' Schwab said.

China's own assessment on Monday of how well it has honored its WTO commitments was fairly glowing.

''Five years into its membership of the World Trade Organization, China is fully justified to take pride in its stellar performance as an increasingly important growth engine for the global economy,'' the official China Daily said.

The USTR report warns repeatedly the United States could file formal trade complaints against China at the WTO if efforts to resolve disputes bilaterally are not successful.

It criticizes China for not take tougher enforcement actions to stop rampant piracy and counterfeiting of U.S. goods ranging from music and films to auto parts and medicine.

''Counterfeiting and piracy in China remain at unacceptably high levels and cause serious economic harm to U.S. businesses in virtually every sector of the economy,'' USTR said.

The report cited industry figures that say U.S. businesses have lost billions of dollars in sales due to piracy.

China also ''continues to pursue problematic industrial policies that rely on trade-distorting measures such as local content requirements, import and export restrictions, discriminatory regulations and prohibited subsidies, all of which raise serious WTO concerns,'' the report said.

Schwab is part of a U.S. team led by U.S. Treasury Secretary Henry Paulson that will be in China on Thursday and Friday for high-level talks. The Bush administration hopes the initiative will quell anger in Congress over the growing trade gap, but Paulson has warned not to expect quick results.

The report was silent on one of the biggest irritants in the U.S.-China trade relationship -- Beijing's currency policy, which many U.S. manufacturers and lawmakers believe gives Chinese companies an unfair trade advantage by keeping the value of the yuan artificially low against the dollar.

That issue is considered in the jurisdiction of the U.S. Treasury Department, rather than USTR.

Meanwhile, Sen. Max Baucus, a Montana Democrat who is incoming chairman of the Senate Finance Committee, complained on Monday that China's market remains closed to U.S. beef despite a promise earlier this year to open it.

Overall, U.S. farm exports to China are growing rapidly, increasing 42 percent in the first nine months of 2006 to .8 billion from the same period of 2005.

But U.S. exporters continue to struggle with spotty application of food and plant safety measures, USTR said.

REUTERS

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