Trade lawmakers press for more progress with China on economic reforms

Congressional trade leaders urged top Obama administration officials to make more substantial inroads with China this year on economic and investment issues.

House and Senate committee heads sent a letter late Tuesday to several Obama administration officials urging them to push China toward a market-driven economy at this week's meetings of the U.S.-China Strategic & Economic Dialogue and the upcoming Asia-Pacific Economic Cooperation (APEC) summit, both being held in China.

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The four lawmakers —  House Ways and Means Committee Chairman Dave Camp (R-Mich.), Senate Finance Committee Chairman Ron Wyden (D-Ore.), Ways and Means Committee ranking member Sander Levin (D-Mich.), and Senate Finance Committee ranking member Orrin Hatch (R-Utah) — said China must change its outdated economic model, which is dominated by state-owned enterprises (SOEs) and trade-distorting policies that closes off their market.

“We are troubled by the slow pace of China’s domestic reforms,” they wrote to Treasury Secretary Jack Lew, Secretary of State John Kerry, Commerce Secretary Penny Pritzker, U.S. Trade Representative Michael Froman.

“As we mentioned to you before, we remain very concerned that China has abandoned many of its market reforms and flouts its international obligations.”  

In his remarks to open the meetings, Lew said the United States supports the reforms China laid out in the Third Plenum "that encourage competition and officially give the market a decisive role in the economy."

"Strong determination in the implementation of Third Plenum reforms will help China achieve sustainable and balanced growth in the future," he said. 

He citied boosting household incomes and mobilize the profits of state-owned enterprises to strengthen social welfare as major parts of the economic rebalancing.

In addition, greater exchange rate flexibility and adjustment would help raise household purchasing power, boost domestic demand and ensure U.S. companies can compete equally.

Lew said last week that while he has appreciated the scope of China's reach on the issues “tends to be frustrated is at the pace of the change" saying that "time is of the the essence."

Meanwhile, the lawmakers said that China has consistently fallen short on making needed economic reforms from letting their currency, the yuan, appreciate at a faster rate to slowing down on a commitment made last year to move toward concluding a bilateral investment treaty (BIT) with the United States.

"We must also ensure that the BIT is part of the ongoing and broader strategy to ensure that China rebalances its economic relationship with the United States and the world," they wrote. 

Furthermore, China still does not have an adequate framework to protect intellectual property rights and "has failed to fully implement its past commitments to strengthen and enforce" those right.

China also must accelerate financial sector and make other structural reforms, they said.

“Without taking these actions, China will be unable to rebalance its economy and U.S. workers and companies will continue to be harmed," they wrote.

They said that the lack of progress on longstanding issues “calls into question China’s ability to play a constructive role in the global economy and in new market-opening initiatives.”

"We recognize that China will not undertake all of its reforms overnight,” they wrote.

"But much more progress than we have seen in the past must be made through S&ED, and other forums, to ensure that U.S. companies, farmers, ranchers, and workers are competing on a level playing field in China.”  

They said this week’s meetings in Beijing come at “an important time for multilateral trade.”  

In December, World Trade Organization members finalized a trade facilitation agreement that has the potential for removing barriers and improving global trade flows and that could prove particularly beneficial for developing countries like China. 

They expressed disappointment that WTO members have not completed an agreement to expand the Information Technology Agreement (ITA), which they said would “create substantial economic opportunities for both the United States and China.”  

“Yet, we are increasingly concerned that China appears to be standing in the way of an ambitious deal, seeking instead to exclude significant products from coverage and demanding unnecessarily long phase-outs of tariffs,” they wrote.

On Monday, Froman said that China must show "leadership" in breaking the stalemate on those talks. 

They also argued that China hasn’t demonstrated that it is willing and able to meet the ambitious objectives set out in the Trade in Services Agreement (TiSA) talks and urged negotiators to move forward with nations that are ready.

“Further deepening our concern, particularly as a matter of systemic importance, China continues to engage in retaliatory trade practices, including through discriminatory policies,” they wrote.

They also expressed alarm at the trade secret theft and economic espionage activity targeting the United States and U.S. companies, carried out with the support of the Chinese government for the benefit of Chinese companies.  

This theft and espionage is rapidly and significantly eroding trust and undermining our economic relationship,” they said.