Pressure Builds on Chinese Trade Deficit

As members of Congress become increasingly concerned about the US $162 billion trade deficit with China, they are putting pressure on the Chinese government and the Bush administration to take steps that will effectively address the issue. Although China has announced plans to revalue its currency— a major factor in the trade deficit — the action was generally viewed as being far short of what needs to be done. The 2.1-percent revaluation against the dollar does not come close to what textile and other manufacturing industries have been asking for. Cass Johnson, president, National Council of Textile Organizations, said the action is “totally inadequate and much more needs to be done.” Senators Charles E. Schumer (D-NY) and Lindsey O. Graham (R-SC) have introduced legislation calling for a 27.5-percent tariff on Chinese goods if satisfactory action is not taken on the valuation of its currency. That legislation is generally viewed as a threat rather than something that could be enacted into law.

However, the House of Representatives has passed a bill by a vote of 255 to 168 that would permit US companies to seek relief from what they view as illegally subsidized goods from China. Among other things, it would permit the companies to seek countervailing duties on goods from non-market economies such as China. The US textile industry has long sought that authority after government officials ruled that anti-dumping and countervailing duties could not be levied against state-run economies.

Textile industry lobbyists and members of Congress are pressing the administration to negotiate a comprehensive agreement with China that would extend import quotas until 2008, when the authority to use a safeguard mechanism to impose quotas unilaterally expires. US Secretary of Commerce Carlos Gutierrez this week deferred action on several safeguard petitions until the end of the month, saying that would give him time to confer with members of Congress and domestic textile interests to determine what course of action might be taken with respect to a comprehensive agreement.

Following a series of meetings at the World Trade Organization in Geneva, US Trade Representative Rob Portman told reporters the administration has “internal discussions” underway to determine if it should enter into formal discussions of an agreement similar to what the European Union recently reached with China .

The legislation could be acted upon shortly after Congress returns from its August recess, depending upon what lawmakers will hear from their constituents when they are home, and talks with China could come soon.