Limits on trade has deal under spotlight

As the United States government steps up its efforts to promote trade and investment, the prospect of whether it intends to ease restrictions of high-tech exports to China remains unknown.

During his visit to the US a week ago, Vice-President Xi Jinping repeatedly urged the US to take measures to back off on its restrictions, saying it would be an effective way to rebalance bilateral trade and create opportunities for American businesses.

Hans Klemm, the US senior official for Asia-Pacific Economic Cooperation (APEC), said Wednesday that he was aware that the topic was discussed.

“Our export control regime is under constant review. As technological development and world environment permit, we’ll make adjustment to the regime,” Klemm said Wednesday at a panel discussion on US economic engagement with Asia, part of the two-day Global Business Conference hosted by the State Department.

But he said he has nothing concrete to announce resulting from Xi’s visit.

Klemm, however, pointed out that senior US administration officials, from the president to the vice-president, have commented that the visit last week by Xi was very positive and constructive and resulted in either resolution or very important progress toward resolving some of the outstanding issues between the two countries. Again he did not mention what specific progress has been made.

On the widespread concern in China that the US championed the Trans-Pacific Partnership (TPP) as a way to contain China, Klemm emphasized that participation in the TPP is open to any APEC members. But he acknowledged that the threshold for entering the free trade agreement is high.

US Ambassador to ASEAN David Carden noted that the US has been involved with TPP for some years and it’s a mistaken notion that it has anything to do with containing the economic rise of China.

But at a meeting at the Americas Society in New York a week ago, former US commerce secretary Carlos Gutierrez, now vice-chairman of the Institutional Clients Group at Citigroup, suggests the US should play the TPP card against China.

Columbia University professor and economist Jagdish Bhagwati criticized the TPP as a testament to the ability of US industrial lobbies, Congress and presidents to obfuscate public policy.

Bhagwati was surprised that China is not a part of this agenda. In an op-ed piece last month, he described the TPP as “a political response to China’s new aggressiveness, built therefore in a spirit of confrontation and containment, not of cooperation.”

The advocate for free trade believes that the US purposely includes numerous agendas unrelated to trade, such as labor standards and restraints on the use of capital account controls, to preclude China’s accession.

On another move that was also perceived by many as targeting China, Klemm noted the Trade Enforcement Unit announced by US President Barack Obama in his State of the Union address last month was a reorganization of the work that is currently spread across a number of government agencies in support of US exports, such as export financing and negotiations of new agreements.

“I would not suggest these measures are undertaken to prepare the US to enter into a trade war with China or any other countries,” he said.

Obama mentioned the name of China while announcing the establishment of the enforcement unit. Many analysts believe that Obama’s move is an election year response to Republican presidential hopeful Mitt Romney’s attack that he has been soft on China.

Speaking on Tuesday at the opening of the Global Business Conference, Secretary of State Hillary Clinton mentioned that the new Trade Enforcement Unit was established to go after unfair trading practices. She said the administration has already brought trade cases against China at nearly twice the rate of the previous government.

Clinton suggested the US government is going to play a bigger role in the economy, despite the fact that Republican presidential candidate have always resisted such a notion.

“We have worked to position ourselves to lead in a changing world where security is shaped in financial markets and on factory floors, as well as in diplomatic negotiations and on the battlefield,” Clinton said. “That’s why more than 1,000 economic officers on six continents are working with American companies, chambers of commerce, local businesses and local and national governments to open markets and find new customers. Our power in the 21st century depends not just on the size of our military, but also on what we grow, how well we innovate, what we make and how effective we sell.”

“Rising powers like China, India, and Brazil understand this as well, and we can’t sit on the sidelines while they put economics at the center of their foreign policies,” Clinton added.

Clinton cited the example of Chinese heavy equipment manufacturers Sany’s announcement of a $60 million investment in Atlanta, Georgia, with plans to invest an additional $25 million and to hire 300 engineers in the next five years as a major achievement of Obama’s SelectUSA initiative to attract foreign direct investment into the US.