Tough Year Ahead for US-China Trade: Official

This could be a very tough year for trade relations between China and the United States, despite pledges to work together to restore growth and fight protectionism, a U.S. government official said on Wednesday.

"It was clear to me there's more problems than ever in doing business in China," the government official said, reflecting on a trip last month to China. "I think we're going to have a very tough year ahead," he said at a discussion hosted by the Nixon Center.

China is the United States' second-largest trading partner, with two-way trade last year totaling $409.2 billion.

However, Chinese exports to the United States exceeded U.S. exports to China in 2008 by $266.3 billion, accounting for about 30 percent of the total U.S. trade deficit last year.

Persuading China to open its market to more U.S. goods is one of the three major challenges in the trade relationship, a second U.S. government official said.

The two others involve pushing back on Chinese industrial policies that favor domestic firms over foreign competitors and and China's weak enforcement of rules in areas ranging from product safety to copyrights and trademarks to labor, he said.

Both officials spoke on the condition on anonymity.

Presidential Phone Call

The frank comments followed a phone call between U.S. President Barack Obama and Chinese President Hu Jintao on Wednesday to discuss ways to enhance cooperation on the global economy and health issues, as well as regional security.

Obama and Hu met for the first time last month at a summit meeting in London of developed and developing countries leaders. Obama accepted an invitation to visit China this year, and that could happen when he travels to Singapore in November for the annual Asia Pacific Economic Cooperation summit meeting, the first government official said.

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The Obama administration avoided a trade fight with China last month when it decided against formally labeling Beijing as a currency manipulator, despite Obama's statements during last year's campaign that it was.

However, during a visit to Washington last week, Chinese Commerce Minister Chen Deming protested "vociferously" to U.S. Commerce Secretary Gary Locke about two new cases brought by U.S. workers and industry against Chinese imports, the first government official said.

In one case, U.S. tire workers want a three-year quotas on imports of Chinese-made tires that reached nearly $1.8 billion last year. In the other, U.S. steel companies want duties ranging up to almost 100 percent on pipes used to ship oil. Those imports from China totaled $2.6 billion last year.  China fears those big-ticket cases could encourage others if the petitioners get the relief they request.

"Colossal Headache"

A senior Chinese delegation objected to both cases in a April 22 meeting with the U.S. International Trade Commission, which investigates industry complaints of unfair trade and requests for import relief.

ITC Chairman Sharon Aran told the delegation it was "not appropriate" for the commission to discuss the facts of the cases with interested parties and a record of the discussion would have to be made, a commission spokeswoman said.

Meanwhile, China's use of export taxes to depress domestic prices of wire rod and inputs used to make finished goods "has become a colossal headache for us and we're struggling to find the right remedy," the second government official said.

The practice gives Chinese companies a cost advantage in producing many goods, creating a problem for many small U.S. producers who don't have the resources to file an anti-dumping or countervailing duty case asking for relief, he said.

One possibility would be for the United States to initiate dispute settlement proceedings at the World Trade Organization, but no decision on that has been made, he said.

The United States also is frustrated that China hasn't followed through a commitment to give foreign companies increased access to its huge public works market by joining the WTO's government procurement pact, he said.

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