Who's the real meddler?

US should stop politicizing trade issues with China and loosen its export control on high-tech products

The financial crisis has profoundly affected Sino-US economic relations, which is the foundation of their relationship. The trade imbalance, the renminbi exchange rate, intellectual property rights and export bans now embody the frictions between the two.

The economic relationship between China and the US is often heavily influenced by US political interference, which seeks to politicize economic issues and internationalize domestic issues.

However, some Americans like to claim the Sino-US trade imbalance is caused by the difference between the Chinese and US political systems. The Chinese government plays a large role in the economic development process so they say the trade imbalance is the result of intervention by the Chinese government, suggesting, for example, that the Chinese government manipulates the exchange rate of the renminbi to favor its exports, which is tantamount to offering subsidies to Chinese exporters.

Some in the US even try to argue the US' economic problems are the result of intervention by the Chinese government.

But the truth of the matter is, it is the US that is the superpower that makes political, economic and military interventions around the world to further its own interests.

In fact, one of the main factors behind the imbalance in Sino-US trade is the severe controls imposed by the United States on exports of high-tech products to China.

In June 2007, the US Department of Commerce issued new control rules on high-tech exports to China, including The Export and Re-export Control Policy Changes and Interpretation, The New Authorization Qualified End User System, and The Revised Licensing Policy for Items that Required a License for Export Prior to the New Rule, which made it even more difficult for US companies to export high-tech products to China.

There are 31 categories of controlled items, including aircraft and aircraft engines, navigation system, lasers, optical fibers, depleted uranium and software. The US also implements tighter export controls to China than other trading partner in biotechnology, photoelectric technology, new advanced materials, weapons and nuclear technology.

This strict export control regime has forced China shift its import focus in these areas from the US to Europe, Japan and other countries. The result is that the proportion of US imports in the rapid growth of China's high-tech imports is becoming less and less.

Under the guise of national security, the US has also blocked Chinese enterprises from investing in the US high-tech industry.

In 2005, China National Offshore Oil Corporation (CNOOC) attempted to purchase Unocal, which was then the ninth biggest oil company in the US, for $18.5 billion, but ultimately the deal failed when it was strongly opposed by US politicians. In 2007, China's telecom-equipment company Huawei Technologies offered $2.2 billion to purchase 3Com, but several members of Congress claimed the deal was a threat to US national security and took a series of actions to scupper the deal. Eventually, in February 2008, Huawei withdrew.

In 2009, China Northwest Nonferrous International Investment Company tried to invest $26.5 million to buy 51 percent of Firstgold Corp, which would result in the acquisition of the rights to exploit four Nevada gold mines, but under pressure from the US government and media, which claimed the mines were close to US military installations, the bid was withdrawn on Dec 21, 2009.

In 2010, Tangshan Caofeidian Investment Corporation's proposed acquisition of 60 percent of the equity in Emcore's fiber optic business was withdrawn when the Committee on Foreign Investment in the United States (CFIUS) expressed security concerns, and in the same year Huawei Technologies' attempt to buy assets and technology of 3Leaf was withdrawn when the Committee of Foreign Investment in the United States (CFIUS) said the deal should not proceed.

Also in 2010, fifty members of the House of Representatives wrote to US Treasury Secretary Geithner and requested that CFIUS "thoroughly investigate" the plan by Anshan Iron & Steel Group, China's fourth largest steelmaker, to invest in steel plants owned by the Steel Development Company, on the grounds that it would endanger national security as Anshan would give China access to "information regarding American national security infrastructure projects".

The US frequently uses its advantages to pass its domestic contradictions onto other countries. Moreover, having the US dollar as the global reserve currency makes it convenient for the US to internationalize its domestic issues.

As Stephen Roach, a professor of Yale University, said at a seminar last year: The US made wrong policies, Washington senators created the largest budget deficit in the US history, then, we blame China for them.

The author is deputy secretary-general, China Society for World Trade Organization Studies.

China Forum

(China Daily 08/12/2011 page8)