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Lawmakers urge administration to press China on adopting economic reforms
As the U.S. economic relationship with China takes center stage this week, business groups and lawmakers are urging top officials to press China to move forward with economic reforms, including letting their currency rise, during meetings in Beijing.
House Ways and Means Chairman Dave Camp (R-MI), along with the Republican members of the panel, sent a letter on Friday to the Obama administration pressing leaders to address long-standing and specific concerns, such as improving U.S. market access in China, allowing more investment, protecting intellectual property, further rebalancing China's economy and restarting bilateral investment treaty negotiations.
"These unfair barriers take various forms, but all cost U.S. jobs.”
Specifically, lawmakers want China to move toward opening its financial sector, which includes lifting equity caps and eliminating other restrictions that limit foreign participation.
Treasury Secretary Tim Geithner, Secretary of State Hillary Clinton and U.S. Trade Representative Ron Kirk are among those headed to China to meet with their counterparts, including Vice Premier Wang Qishan and State Councilor Dai Bingguo.
The already tense relationship between the U.S. and China became more strained over the weekend after news that activist Chen Guangcheng had escaped house arrest.
The blind lawyer railed against China's family planning policies, exposing the nation's forced abortions and sterilizations as a challenge to its long-standing one-child rule.
He is presumed to be in U.S. custody, possibly at the embassy in Beijing, but, even by Sunday afternoon, there was no confirmation of his whereabouts.
The State Department was gathering officials on Sunday to head to Beijing in an effort to calm tensions before Clinton and Geithner arrive for the meetings, according to news reports.
On Thursday, Geithner made another plea to China to let its currency rise, saying that while the Obama administration welcomes recent changes to China's exchange rate system "the Chinese renminbi needs to appreciate further against the dollar."
"While we welcome the reforms to China’s exchange rate system, the process of correcting the misalignment of the exchange rate remains incomplete, and the Chinese currency needs to appreciate further against the dollar and the other major currencies," he said during a speech in San Francisco.
China’s exchange rate has appreciated about 13 percent in the past two years and nearly 40 percent since 2005.
The yuan hit a record high on Friday for the second consecutive day, ahead of next week's meetings.
"China’s currency misalignment continues to be a serious problem and one that attracts significant political attention," Camp said in a Thursday speech.
"The disagreement is not over whether China's currency is misaligned, but how to most effectively address this misalignment," he said.
Legislation to compel China to let its currency rise and revamp its intellectual property system hasn't gained traction in the House over business concerns that it would inevitably slow the process.
John Frisbie, president of the U.S.-China Business Council (USCBC), told The Hill that his group is less concerned with the currency issue because, during the past several years, it has been proven that the exchange doesn't affect the trade balance between the two nations.
He said there has been a "fair amount of movement" on currency because U.S. officials and groups like his have been maintaining contact with the Chinese on the issue.
Currency legislation is the wrong approach and would "demotivate" China to make the necessary reforms that would eventually help businesses, Frisbie said.
The endgame is for a fully convertible currency on a market-driven exchange, he said.
Overall, Geithner said U.S. priorities range from the exchange rate to China's treatment of intellectual property, expanding opportunities for U.S. companies to export and sell to China, and reform that would move China away from its export-oriented growth model and extensive subsidies for Chinese companies.
He acknowledged that China has improved its protection and enforcement of intellectual property rights, started to unwind its indigenous innovation system, opened up new sectors to foreign firms, such as auto liability insurance and bond underwriting, cut some tariffs and has shown a willingness to negotiate new rules on official export financing so U.S. products compete based on quality and price rather than the terms of foreign government financing.
"We have unfinished business and new challenges ahead," Geithner said.
U.S. exports to China last year eclipsed $100 billion for the first time ever and 30 states count the country as one of their top three export markets, according to a report by the U.S. China Business Council.
Geithner urged China to continue reforming its financial system, which is dominated by state-owned banks that he says channel resources to state enterprises at the expense of private companies.
To help combat problems in China and around the globe, Obama recently announced the creation of the Interagency Trade Enforcement Center.
China has frequently taken advantage of its time in the spotlight before important face-to-face meetings, especially with U.S. officials, including vowing to let its currency rise and promising to implement government reforms.
Kirk has said China could be much more aggressive in combating piracy and theft of intellectual property and, while the the nation's officials pledge changes during special events, they often fail to follow through.
The Group of 20 meeting is scheduled for June and Kirk and Commerce Secretary John Bryson will meet with top Chinese officials at this year's U.S. China Joint Commission on Commerce and Trade later this year.
For Frisbe, "movement is happening" in China and he is pressing for similar changes as lawmakers and Geithner while supporting a "stepped up engagement" to work with the communist nation to open their market to businesses, including the service sector such as insurance and healthcare.
Frisbie says China could move faster on dropping certain regulations that determine whether a business is designated as a foreign or domestic entity. He said China has drafted language that would allow the changes.
On the intellectual property front, Frisbie suggests China move to an international standard that includes criminal penalties, a tougher deterrent that is needed.
In a Thursday speech at the Center for Strategic International Studies (CSIS), Camp said the frequently strained relationship can't be ignored, especially as China is the U.S. second largest trading partner and third largest export market.
China presents the potential of 1.4 billion customers for our exports, yet "it purposefully impedes market access for U.S. goods and services and blatantly steals the intellectual property of American businesses," said Camp.
"The fact is that despite benefitting significantly from globalization and a more integrated global economy, China remains stubbornly closed to U.S. companies, farmers, ranchers, and workers," he added.
"The litany of China’s trade distorting policies is deeply troubling and cannot be allowed to stand.
"Plain and simple, we cannot allow China to continue its unacceptable trade practices, and I have concerns that countries such as India, Brazil, and Argentina are emulating some of China’s poor trade practices. We need better engagement with these countries to prevent them from going down this slippery slope."
Camp and Senate Finance Chairman Max Baucus (D-Mont.) have ramped up pressure this year on the Obama administration to encourage U.S. officials to bring the Chinese currency issue to the World Trade Organization.
"While there have been some encouraging signs as China seeks to rebalance its economy away from export-led growth and undertakes limited financial sector reforms, China must do more," Camp said.
This story was updated at 12:54 p.m.
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