U.S. to Continue Tightening Trade Policy on China

U.S. President Barack Obama signed an executive order on February 28， 2012 to set up Interagency Trade Enforcement Center (ITEC) in a bid to coordinate with U.S. trade rights， and domestic trade laws enforcement matters. This can be seen as a more tightening protectionism sign for U.S. bilateral trade relation especially with China. As stated in the executive order， the purpose of the Center is to advance U.S. foreign policy and protect the national and economic security of the United States through strengthened and coordinated enforcement of U.S. trade right under international trade agreement and enforcement of domestic trade laws.

Establishment

When President Obama an- nounced the establishment of this center in the State of the Union Message， he mentioned China as the main objective of the trade enforcement center. While in fact， the U.S. has witnessed strong growth in trade with China. In 2011， it reported $122 billion exports to China， an increase of 20% from a year before， and a total trade of $226 billion with China. China has been the fastestgrowing market of the U.S. for eleven consecutive years since 2001. But still， China-bashing is popular in U.S. Congress.

US Trade Representative (USTR) declared that， by increasing the resources devoted exclusively to trade enforcement as well as leveraging existing resources more efficiently across the Administration， ITEC will level the playing field for American workers and businesses by bringing a more aggressive “whole-of-government” approach to addressing unfair trade practices around the world. A more level playing field will enable American exporters to create more jobs in the United States and hire more workers.

There are several features of the establishment of the Center.

First， it was established in a very short time. It is only more than a month from President Obama’s proposition in the State of the Union Message to the official establishment of the Center. This is really rare high efficiency in U.S. government administration.

Second， it was given great importance by the Congress. According to the executive order of the White House， the center shall coordinate matters relating to enforcement of U.S. trade rights between USTR and such agencies as the Department of State， the Department of the Treasury， Justice， Agriculture， Commerce， Homeland Security， and the Office of the Director of National Intelligence. In matters relating to the enforcement of U.S. trade rights involving intellectual property rights， the Center shall consult with the Intellectual Property Enforcement Coordinator.

Third， the Center has sufficient funding from the Congress budget. Obama’s request for fiscal budget 2013 to the Congress seeks $26 million in funding for ITEC， which will enable the center to hire the personnel it needs.

Fourth， the staff which the center will employ is not a small number compared with its parent agency USTR. This center will employ at least 50 people to deal with trade investigations and conflict settlements including litigation lawyers， foreign language skilled researchers， economic analysts， and foreign staffs.

Major role

Trade enforcement has been a consistent priority in Obama Administration. It is clear the U.S. Government will give great support for the operation of ITEC. U.S. Trade Representative Ambassador Kirk said in ITEC’S established statement， “President Obama and I have been very clear from day one that we will not hesitate to fight for every American job， every dollar worth of U.S. exports， and every chance for American producers to compete that depends on having a level playing field in global markets. As with every enforcement action， our goal here is to get real results for American exporters and support American jobs that depend on trade. The ITEC will help us do that in unprecedented ways.”

The Center has both offensive and defensive functions. From the offensive function perspective， this center can help a lot to open the export market as well as mentoring whether important competitors’ trade policies such as exchange rate policy， market access， intellectual property protection and so on are consistent with WTO rules. It will also improve the capacity of the United States in the implementation of market opening， create a beneficial playing field for U.S. Companies， and guarantee the implementation of U.S. trade right and domestic trade laws’enforcement.

From the defensive function perspective， the center will strengthen protecting American’s domestic market. According to the contents of the executive order， this agency will set up trade barriers with the framework of WTO rules and make more dispute settlements in WTO. The center will also strengthen the enforcement of domestic trade laws and protect domestic market. Particularly， it is declared that the center will investigate if the import products have unfair competitive advantage in domestic market.

Implications on China

With the establishment of ITEC， it is a clear sign that Sino-U.S. trade relations will become more serious but not reparative.

First， there would be more trade disputes between the United States and China. According to the statement of USTR， they have brought cases against China in the World Trade Organization (WTO) in 2011 at essentially twice the rate of the previous seven years. Since China accessed into WTO in 2001， there have been 25 cases in which China was a respondent; more than half of them were complained by the U.S. itself or jointly.

Second， there is a trend that the United States would initiate more SCM cases than anti-dumping cases in the future. As China will get the market economy status automatically after 15 years of China`s accession to WTO， the non-market economy status will not be a crucial factor when complaining cases of anti-dumping by China. According to USTR’s record， the number of antidumping cases is decreasing but that of SCM (Subsidies and Countervailing Measures) cases is increasing.

Third， the main focus of the trade conflicts is changing gradually from RMB exchange rate to Chinese industry policy such as independent innovation and raw materials exporting restrictions such as the rare earth. The RMB topic is being less highlighted compared with last several years， because the U.S. has continued executing quantitative easing policy which has lead to RMB’s depreciation of 30% from 1995. In fact， criticizing China’s industry and trade policy has become a fashionable trend in the U.S. Congress and even academic circles.

Fourth， the examinations of Chinese corporations’ request for merger and acquisition in the United States are becoming stricter especially in fields involving high technology. For example， the proposed merger between Chinese networking provider Huawei， U.S. networking company 3Com， and privateequity firm Bain Capital was turned down by the Committee on Foreign Investment in the United States (CFIUS) on the ground that it failed the national security check. There is no sign that the examinations will be relaxed in the near future.

(Author: Doctoral student in China Institute for WTO Studies， University of International Business and Economics)