Congress needs to act on China trade - lawmakers

WASHINGTON, Feb 2 (Reuters) The US Congress needs to pass legislation this year to help reduce the huge US trade deficit with China because the Bush administration has failed to act, Democratic senators said.

''So far, our government has done nothing to stop China's unfair trade practices, and this is costing us jobs,'' Sen Carl Levin, a Michigan Democrat, said. ''Congress will need to take greater legislative initiative to force action.

Levin made his remarks in prepared testimony for the US-China Economic and Security Review Commission, a congressional watchdog group that has begun reviewing how well China is honoring the market-opening commitments it made five years ago when it joined the World Trade Organisation.

One reason the US trade deficit with China exceeded an estimated 230 billion dollars in 2006 ''is China's continued noncompliance with its WTO obligations and our failure to challenge this noncompliance,'' Levin said yesterday.

Levin, who also is chairman of the Senate Armed Services Committee, said the Bush administration should file cases against China at the WTO for a number of trade abuses.

Those include manipulating its currency to gain an unfair trade advantage, failing to protect US intellectual property rights against piracy and using industrial policies to discriminate against imports, Levin said.

Sen Sherrod Brown, an Ohio Democrat, and Sen Ben Cardin, a Maryland Democrat, also criticized the Bush administration for not bringing more complaints against China at the WTO.

Both mentioned Chinese industrial subsidies, which they said help Chinese companies sell their goods cheaply in the American market.

''I think we should place a priority on passing legislation making it clear that we will not let Chinese subsidies go unanswered,'' Brown said in prepared remarks.

One bill enjoying strong support in the US House of Representatives would define China's exchange rate practices as a subsidy under US trade law. That would open the door for steel producers, textile companies and other manufacturers to seek steep countervailing duties on Chinese imports.

The Commerce Department has refused for more than two decades to apply countervailing duties on goods from China because of its view that it is too difficult to calculate subsidy levels in ''non-market economies.'' Department officials are reviewing that policy and are expected to decide by early April whether to change it.

However, they are not expected to go as far as many lawmakers want and apply countervailing duties to offset the price effects of China's exchange rate policies.

Reuters SBA VP0655