[A2k] Financial Times: China hits out as US launches trade cases

[Thiru Balasubramaniam]

China hits out as US launches trade cases

By Richard McGregor in Beijing and Eoin Callan in Washington

Published: April 10 2007 12:09 | Last updated: April 11 2007 01:50

China on Tuesday reacted harshly to a US decision to take it to the
World Trade Organisation over piracy and copyright protection, saying
it would =93seriously damage=94 bilateral co-operation and harm business
ties.

The statement from China=92s commerce ministry followed the announcement
by the US that it was lodging two cases with the WTO =96 on intellectual
property rights protection and market access for US movies, DVDs, books
and music.

The decision to file the cases amid pressure from Congress and
Hollywood represents an ambitious attempt by the US to force
politically sensitive changes to China=92s tight media controls.

The response struck a significantly more combative tone than previous
Chinese reactions to other trade disputes with the US, which appeared
to accept that some tensions were part of the rough and tumble of being
a global trading power.

Wang Xinpei, a commerce ministry spokesman, said the WTO action was
=93against the consensus reached between the two countries=92 leaders on
developing bilateral trade relations and properly handling trade
problems=94. He added: =93China expresses great regret and strong
dissatisfaction at the decision of the United States to file WTO cases
against China over intellectual property rights and access to the
Chinese publication market.=94

The Chinese claim that the litigation violates a consensus between the
two countries contrasts sharply with the Bush administration=92s
insistence that the actions are a sign of a maturing trade partnership.
A US trade official said: =93We have worked with China for many, many
months to resolve our concerns about China=92s compliance with its WTO
obligations and we have acknowledged China=92s progress in this area.
Fortunately, we have the WTO to sort out tensions in a rational
manner.=94

Beijing=92s stinging response bodes ill for the second meeting in May in
Washington of the bilateral =93Strategic Economic Dialogue=94, set up by
Hank Paulson, Treasury secretary, as a forum for top-level
consultation.

The former chief executive of Goldman Sachs has sought to cultivate a
consensual alliance with the Chinese leadership that builds on ties he
developed as head of the investment bank.

The goal of that dialogue includes persuading China to open its
financial services market and embrace reforms that would help address
the record $233bn annual bilateral trade deficit with the US.

Trade data in Beijing showed a sharply below-consensus surplus for
China of $6.87bn for last month. The March figure compared to a total
surplus of $40bn for the first two months of the year. Economists said
the March figures were an anomaly and did not represent a slowdown in
the growth of China=92s surplus. Stephen Green, of Standard Chartered in
Shanghai, said the smaller figure was probably a result of exporters
bringing orders forward out of concern about plans to cut export tax
rebates following a separate US challenge at the WTO. Even with a
smaller March number, the surplus for the first quarter of 2007 was
$46.5bn, double that for the same period last year.

Goldman Sachs, in a note to clients, said the March surplus would
maintain pressure on the renminbi to appreciate, which the bank said
was a =93more efficient=94 way to tackle imbalances.

---------------------------------
Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International (KEI)
voice +41.22.791.6727
fax +41.22.723.2988
mobile +41 76 508 0997
thiru@keionline.org