US trade push threatens China

Rising rivalry: A four-part series on US-China tensions

The recent flare-up in tensions in the Pacific has raised new doubts about America and China’s ability to peacefully coexist as both set their sights on Asia’s booming potential.

On a range of issues — from territorial claims to business practices, economic policies to the environment — the two countries’ struggle to find common ground is all but certain to dominate the headlines for years to come.

Staff writer Julian Pecquet visited China for 10 days in October at the invitation of the China-United States Exchange Foundation, a Hong Kong-based nonprofit that funds visits by lawmakers, journalists and others. He found that Beijing’s suspicions about the great power across the Pacific mirrored those in Washington, DC.

BEIJING — Congress and the White House are pushing broad trade deals that risk triggering an economic fight with China.

Pacts the Obama administration is negotiating with the European Union and Pacific Rim countries are intended to help the U.S. compete with China, a growing economic power that drives much of the global economy.

{mosads}The administration is worried the U.S. could lose influence to China, particularly in Asia, as trading partners fight for access to the region’s largest economy, which is growing at a 7 percent clip.

The U.S. is particularly keen on building international support for high standards on issues such as labor, health and the environment, as well as cracking down on companies that steal others’ inventions and curtailing government support for state-owned enterprises. The goal is to avoid a race to the bottom while pushing back against what it sees as unfair competition from China.

“The EU and the United States share the goal of using the agreement to jointly pioneer new and more effective approaches to issues of common concern in third countries and in the global trading system itself, such as state-owned enterprises and measures that favor domestic industries,” a spokeswoman for the Office of the U.S. Trade Representative told The Hill.

But the push is triggering a negative reaction in China, which sees the negotiations as an act by the U.S. to try to force changes to China’s domestic laws.

“Now they’re talking about policies that are more concerned with sovereign, domestic decisions,” said Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, which advises China’s Commerce Ministry. “That means behind borders, within your own countries.

“There are many new rules – we need to get their meaning and understand whether all these rules will apply to the whole world,” he said. “That’s most difficult – how to unite, how to connect different countries’ policies and make it fair and open.”

The press for higher standards is popular in the U.S. Congress.

“I think the broader we can get international codes, the better off we are,” said Sen. Ben Cardin (D-Md.), a member of the Senate panels on Foreign Relations and Finance, which has jurisdiction over trade deals. “And if through [EU and Pacific trade deals] we can start to establish international norms on non-tariff barriers, that’s good news. I’m for that. I’m for moving as aggressively as possible.”

Huo said China was initially “very nervous” about the Trans-Pacific Partnership talks, which include 12 countries in Asia and the Americas but not China. Beijing has since come around and now envisions one day joining the partnership if a deal is achieved.

But is increasingly worried about the talks with Europe.

A U.S.-EU deal, one Chinese expert recently opined, would be the “last straw” and a “harbinger of a trade Cold War.”

“The US and the EU are forging a G2 for global rule-setting,” wrote Zhang Xiaotong, an associate professor at Wuhan University in central China. “China has been the major target of these rules, and has been criticized by the US and the EU for not obeying them. Once the transatlantic community sets its rules, it can be predicted that Chinese exports will find market access even more difficult.”

A White House fact sheet issued when it launched talks with the EU this summer stated that they would seek to “develop rules, principles, and new modes of cooperation on issues of global concern, including intellectual property and market-based disciplines addressing state-owned enterprises and discriminatory localization barriers to trade.”

Huo said China is trying “to go further with its market-oriented reforms” to adapt to new international requirements.

The Communist Party last month announced a series of economic and social reforms that include opening up its banking sector and reducing government interference in the economy, but U.S. lawmakers continue to accuse it of keeping its currency artificially low to boost exports.

Those arguments have lost some weight internationally, however, given the Federal Reserve’s unprecedented actions to prop up the U.S. economy.

Experts say China has made good use of its alliance with other rising powers, notably Brazil and India, to stall U.S. and EU demands that they open up their agricultural and industrial sectors in exchange for cuts to farm subsidies. The latest round of talks at the World Trade Organization was launched 12 years ago.

The stalling at the WTO, however, has given momentum to the Pacific and EU deals, since those are seen as the areas where progress is possible.

“The reality is that it doesn’t appear we’re going to be able to have a successful new round of WTO negotiations,” said Sen. Chris Murphy (D-Conn.), the chairman of the Senate Foreign Relations panel on Europe. “And that can’t mean that trade negotiations stop.

“If the U.S. and Europe are together on issues like product safety, it becomes much harder for the Chinese or Indian standard to win out in the end, so we avoid a race to the bottom on something like product safety by getting our two systems together,” he said.