U.S. Commerce Secretary Says China Economic Ties Under Scrutiny

By Andrzej Zwaniecki
Washington File Staff Writer

Washington - U.S. Commerce Secretary Carlos Gutierrez warns that the United States might be forced to reassess its economic relationship with China if Beijing fails to address economic frictions between the two countries quickly and effectively.

In March 14 remarks in Washington to the Asia Society, Gutierrez espoused the benefits of bilateral trade for both countries. But he said the potential to increase trade and related benefits increasingly is being overshadowed by the large U.S. trade deficit with China that in 2005 exceeded $200 billion.

“Without concrete results, the administration, and the American people, may be forced to reassess our bilateral economic relationship," Gutierrez said.

He said that China maintains a range of nontariff barriers that, in combination with other policies, prevent the United States from achieving balanced trade with that country.

Gutierrez also said that in sectors such as information technology, U.S. and other non-Chinese companies have to deal with burdensome industrial and procurement policies as well as technical standards that amount to trade barriers.

Regulations, direct and indirect subsidies, lack of transparency in the regulatory system and weak law enforcement in many instances place foreign companies at a disadvantage in sectors as different as telecommunications and steel, Gutierrez said.

He said that "with a stroke of a pen" China could open critical closed sectors to competition from abroad.

"Progress would greatly strengthen those of us who oppose protectionist policies," Gutierrez said.

But if the Chinese government refuses or fails to act quickly, the U.S. Congress might "go down a path that none of us want," that is "build protectionist barriers around the U.S. market," he said.

Gutierrez apparently referred to a number of bills moving through Congress that would penalize China economically for widespread intellectual property theft and an exchange rate policy that puts exporters to that country at a disadvantage.


He singled out the insufficient protection of intellectual property rights (IPR) as an area of great concern to the U.S. business community, Congress and the administration.

"The theft of music and movies in China is the norm and the legitimate sale of these items is the exception," Gutierrez said.

He cited statistics indicating that in 2004, some 17 of 20 music recordings and 19 of 20 film recordings in China were pirated. The piracy and counterfeiting also affect computer software, automotive parts, electrical goods and drugs, he added.

He said the administration believes Chinese authorities can make "far more progress" in fighting intellectual piracy and counterfeiting.

Gutierrez said that China's senior leaders support U.S. goals but suggested that they may have insufficient control over provincial and municipal authorities to enforce IPR protection.

At a March 8 hearing before a Senate Commerce, Science and Transportation subcommittee, Chris Israel, U.S. coordinator for international intellectual property enforcement, said effective enforcement is undermined in China not only by a lack of sufficient political will but also by corruption, local protectionism, misallocated resources and other problems. (See related article.)

He gave a mixed assessment of progress on China's IPR commitments made at the 2005 session of the bilateral Joint Commission on Commerce and Trade.

Israel said only a few of those commitments have been met, "quite few ... are still in progress," and "there has been little if any movement" on others.

The full text of Gutierrez's remarks is available on the Commerce Department's Web site; the full text  (PDF, 13 pages) of Israel's testimony is available on the Senate Commerce Committee Web site.