On February 14, 2006 the USTR released a comprehensive review of the U.S.-China trade relation in a report titled “U.S.-China Trade Relations: Entering a New Phase of Greater Accountability and Enforcement.” (http://www.ustr.gov/assets/Document_Library/Reports_Publications/2006/asset_upload_file921_8938.pdf) This report was also sent to the Congress, i.e., the Senate Finance and House Ways and Means Committees, which hold a jurisdiction in trade matters.
In a cover letter to the Congress, USTR Rob Portman concluded that the U.S. recent bilateral trade relationship has been inequitable and imbalanced, and that China should do more in opening its market and enforcing intellectual property rights to “live up to its responsibilities.” In order to better monitor and ensure China’s compliance with trade obligations, Portman announced the establishment of a “China Enforcement Task Force” within USTR. (http://www.ustr.gov/Document_Library/Press_Releases/2006/February/USTR_to_Strengthen_Enforcement_in_Readjustment_of_US-China_Trade_Policy.html)
The release of this unprecedented, in its inclusivity and audacity, report generates many observations. First, the Bush Administration seems to respond to the rising anti-China campaign in the Congress, especially under the U.S.-China Economic and Security Review Commission. Second, the U.S. may be signaling that it is now about to change the gear in addressing China’s alleged violations from a negotiation mode to a WTO adjudication mode. The China Enforcement Task Force will “focus on the preparation and handling of potential WTO cases with China.” Third, the U.S. reaffirmed its wish list vis-à-vis China, i.e., more market opening in such areas as telecommunications, financial services and healthcare. Fourth, the U.S. will also strengthen the traditional pressure through various bilateral dialogue fora with China, such as the U.S.-China Joint Commission on Commerce and Trade (JCCT).
Yet, this initiative also raises many questions. First, would the U.S. employ its unilateral trade remedies, such as Section 301, Super 301, and Special 301, to change China’s behaviors to the direction which it favors? Second, would the U.S. have strong cases against China under the WTO dispute settlement system over some of the issues it raises, such as labor and environmental protection, transparency, and even rule of law? How much would the China’s accession protocol be helpful for the U.S. to win cases against China, considering its vague languages? Third, wouldn’t China retaliate against such move by filing its own complaints against the U.S.? Wouldn’t that be undesirable for the WTO’s institutional stability? These two giants may break the back of the WTO dispute settlement system. Lastly, but not least, wouldn’t trade restriction on Chinese imports in the name of readjustment eventually hurt the U.S. economy? One might take some lessons from the recent bra war between the EU and China. Also, consider the following facts. The U.S. bilateral trade deficit with China constitutes only a small portion in its overall trade deficit which basically stems from the U.S. domestic economic factors, such as a low saving rate. Also, many “made-in-China” products sold in the U.S. are brand name products by American firms. Large portions of those profits go to American firms, not to China. Moreover, most of made-in-Chinas are not being made in the U.S. (If you make a sneaker in the U.S. solely with American labor, it will be quite expensive.) Even if the U.S. successfully blocks Chinese imports, it will then embrace more made-in-Vietnam or made-in-Cambodia instead.
