Posts Tagged ‘World Trade Organization’

China says US trade probe would violate international rules

August 15, 2017

By Joe McDonald
The Associated Press

Image result for shanghai skyline

Pictured: Shanghai

BEIJING (AP) — China criticized President Donald Trump’s order for a possible U.S. trade investigation of Beijing’s technology policies as a violation of global rules and said Tuesday it will “resolutely safeguard” Chinese interests.

Trade groups for technology companies welcomed Trump’s order Monday but the Chinese Commerce Ministry said it violated the spirit of international trade and Washington’s World Trade Organization commitments. The ministry said Beijing will take “all appropriate measures” if Chinese companies are hurt but gave no details.

Trump told U.S. trade officials to look into whether to launch a formal investigation into whether Beijing improperly requires foreign companies to hand over technology in exchange for market access.

“If the U.S. side disregards the fact it does not respect multilateral trade rules and takes action to damage the economic and trade relations between the two sides, then the Chinese side will never sit back and will take all appropriate measures to resolutely safeguard the legitimate rights and interests of the Chinese side,” said a Commerce Ministry statement.

Beijing requires automakers and other foreign companies in China to work through joint ventures, usually with state-owned partners. They often are required to give technology to partners that might become competitors.

More than 20 percent of 100 American companies that responded to a survey by the U.S.-China Business Council, an industry group, said they were asked to transfer technology within the past three years as a condition of market access, according to Jake Parker, the group’s vice president for China operations.

“We don’t believe market access should be contingent on transferring technology,” said Parker. “It goes counter to China’s WTO commitments.”

Foreign business groups complain companies are being squeezed out of promising Chinese markets or pressured to hand over technology for electric cars and other emerging industries.

Trump said in April he was setting aside trade disputes while Washington and Beijing worked together to persuade North Korea to give up nuclear weapons development. But American officials have resumed criticizing Chinese policy in recent weeks.

“The White House is right to make clear all options are on the table,” said Robert D. Atkinson, president of the Information Technology and Innovation Foundation, an industry group in Washington, in a statement.

The Commerce Ministry complained Trump’s order was “strong unilateralism” that violated the spirit of multinational trade agreements.

“We believe the U.S. side should strictly adhere to commitments and should not become the destroyer of multilateral rules,” said the statement.

Ahead of Monday’s order, the Chinese foreign ministry appealed to Trump to avoid a “trade war.” A state newspaper, the China Daily, said an investigation could “intensify tensions,” especially over intellectual property.

Parker noted then-President Barack Obama ordered a similar investigation of Chinese policy on green technology in 2010. That ended in a negotiated settlement.

“It didn’t lead to any unilateral sanctions against the Chinese,” said Parker. “Nor did it undermine the overall U.S.-China trade relationship.”

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Chinese Ministry of Commerce (in Chinese): http://www.mofcom.gov.cn

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Chinese state newspaper says Trump trade probe will ‘poison’ relations

August 14, 2017

BEIJING (Reuters) – U.S. President Donald Trump’s order to his top trade adviser to investigate supposedly unfair Chinese trade practices will “poison” relations between the two countries, a Chinese state-run newspaper said on Monday.

Trump will later on Monday issue the order to determine whether to investigate Chinese trade practices that force U.S. firms operating in China to turn over intellectual property, senior administration officials said on Saturday.

The move, which could eventually lead to steep tariffs on Chinese goods, comes at a time when Trump has asked China to do more to crack down on North Korea’s nuclear missile program as he threatens possible military action against Pyongyang.

Trump has said he would be more amenable to going easy on Beijing if it were more aggressive in reining in North Korea.

In an editorial, the official China Daily said it was critical the Trump administration doesn’t make a rash decision it will regret.

“Given Trump’s transactional approach to foreign affairs, it is impossible to look at the matter without taking into account his increasing disappointment at what he deems as China’s failure to bring into line the Democratic People’s Republic of Korea,” the English-language paper said.

“But instead of advancing the United States’ interests, politicising trade will only acerbate the country’s economic woes, and poison the overall China-U.S. relationship.”

An administration official has insisted diplomacy over North Korea and the potential trade probe were “totally unrelated”, saying the trade action was not a pressure tactic.

The China Daily said it was unfair for Trump to put the burden on China for dissuading Pyongyang from its actions.

“By trying to incriminate Beijing as an accomplice in the DPRK’s nuclear adventure and blame it for a failure that is essentially a failure of all stakeholders, Trump risks making the serious mistake of splitting up the international coalition that is the means to resolve the issue peacefully,” it said.

“Hopefully Trump will find another path. Things will become even more difficult if Beijing and Washington are pitted against each other.”

Chinese Newspaper Warns Trump Risks ‘Trade War’

August 14, 2017

BEIJING — A Chinese state newspaper warned Monday that President Donald Trump “could trigger a trade war” if he goes ahead with plans to launch an investigation of whether China is stealing U.S. technology.

In a commentary by a researcher at a Commerce Ministry think tank, the China Daily said Trump’s possible decision to launch an investigation, which an official says he will announce Monday, could “intensify tensions,” especially over intellectual property.

The official told reporters Saturday the president would order his trade office to look into whether to launch an investigation under Section 301 of the Trade Act of 1974 of possible Chinese theft of U.S. technology and intellectual property.

The Chinese government has yet to comment on the announcement.

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A decision to use the Trade Act to rebalance trade with China “could trigger a trade war,” said the commentary under the name of researcher Mei Xinyu of the ministry’s International Trade and Economic Cooperation Institute.

“And the inquiry the U.S. administration has ordered into China’s trade policies, if carried out, could intensify tensions, especially on intellectual property rights.”

The commentary gave no indication of how Beijing might respond but Chinese law gives regulators broad discretion over what foreign companies can do in China.

If an investigation begins, Washington could seek remedies either through the World Trade Organization or outside of it.

Previous U.S. actions directed at China under the 1974 law had little effect, said the China Daily. It noted China has grown to become the biggest exporter and has the world’s largest foreign exchange reserves.

“The use of Section 301 by the U.S. will not have much impact on China’s progress toward stronger economic development and a better future,” said the newspaper.

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U.S. Plans Trade Measures Against China

August 2, 2017

Trump administration aims to force Beijing to crack down on intellectual-property theft and ease market access

A cargo ship is loaded at a port in Qingdao, in eastern China's Shandong province. China had a $347 billion trade surplus with the U.S. last year.
A cargo ship is loaded at a port in Qingdao, in eastern China’s Shandong province. China had a $347 billion trade surplus with the U.S. last year. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

WASHINGTON—The Trump administration is planning trade measures to force Beijing to crack down on intellectual-property theft and ease requirements that American companies share advanced technologies to gain entry to the Chinese market.

The administration is considering invoking a little-used provision of U.S. trade law to investigate whether China’s intellectual-property policies constitute “unfair trade practices,” according to people familiar with the matter.

That would pave the way for the U.S. to impose sanctions on Chinese exporters or to further restrict the transfer of advanced technology to Chinese firms or to U.S.-China joint ventures.

American business frustration with Chinese trade and market-access practices has mounted in recent years, with U.S. business groups urging the government to take a tougher trade line with China. Many organizations have complained that the Trump administration hasn’t pushed hard enough in areas like intellectual property, as it has focused more on Chinese manufacturing and China’s $347 billion trade surplus with the U.S. last year.

That discontent has intensified as China’s economy continued to expand and its computer and software sectors became bigger competitors internationally. Western firms fear China will use the regulations to bar foreign investments in areas that Beijing targets for investment, including semiconductors, advanced-machine tools and artificial intelligence.

One big question hanging over the White House review is whether the administration pursues any complaint through the World Trade Organization, or whether it chooses to impose penalties on its own without first seeking permission from the international body, which some Trump advisers have argued is incapable of dealing with China’s trade practices. Trump aides have regularly vowed to pursue a more unilateral approach to trade but have so far done little along those lines.

It is unclear how long the administration’s internal review will take before an announcement is made. Officials at one point had signaled that an announcement could come as soon as this week.

A White House spokeswoman declined to comment on the prospect of trade sanctions.

The White House has been wrestling in recent weeks with how to navigate trade relations with China following a stalemate during mid-July bilateral economic talks that yielded no concrete progress. President Donald Trump in recent days has also expressed open disappointment with Chinese efforts to curb North Korea’s nuclear program and administration officials have been increasingly outspoken in their criticism of Chinese trade practices.

Mr. Trump’s commerce secretary, Wilbur Ross, wrote an op-ed in Tuesday’s Wall Street Journal blasting China, as well as the European Union, for “formidable nontariff trade barriers” and vowing to “use every available tool” to fight those limits.

The White House expects that a crackdown on alleged Chinese intellectual-property expropriation would have widespread support among U.S. businesses, which have complained about Chinese business practices.

The response may be more divided, say industry officials. Those U.S. companies that want to keep their most advanced technology from Chinese hands would probably back the move, while others that want to license technology to Chinese firms could find the measures a hindrance.

China could also retaliate by blocking U.S. investments or making life tougher for U.S. companies in China.

Still, any action on Chinese intellectual property is bound to be more popular with the business sector than other trade moves the president has made, including his decision to withdraw from the Trans-Pacific Partnership as well as his threats to pull out of the North American Free Trade Agreement and to impose tariffs on steel imports.

Treasury Secretary Steven Mnuchin, Chinese Vice Premier Wang Yang and Commerce Secretary Wilbur Ross
Treasury Secretary Steven Mnuchin, Chinese Vice Premier Wang Yang and Commerce Secretary Wilbur Ross.  PHOTO: BRENDAN SMIALOWSKI/AGENCE FRANCE-PRESSE/GETTY IMAGES

The Trump administration’s exploration of new trade remedies against Beijing is significant in that they might involve dusting off long-ignored or little-used powers. In this case, one option under discussion is to use Section 301 of the Trade Act of 1974, which gives the U.S. government the authority to investigate alleged wrongdoing by trading partners and decide by itself the relevant penalty—to act, in the eyes of critics, as judge, jury and executioner.

Another option under discussion would be to invoke the International Emergency Economic Powers Act, a 1977 law that gives the president broad powers to regulate commerce after declaring a “national emergency.”

Widely used in the 1970s and 1980s, Section 301 cases have largely disappeared since the 1995 creation of the WTO, which has its own dispute-settlement process. A main goal of the Geneva-based institution was to curb such unilateral trade actions and to have them handled by a more neutral international arbiter. U.S. administrations over the past two decades have decided to steer nearly all trade complaints through the WTO and have rarely touched Section 301.

But Trump aides have often said they didn’t consider WTO rules sufficient to deal with Chinese practices and have indicated they may resort to pre-WTO unilateral practices.

“If any other administration self-initiated a Section 301 investigation, I would have found it highly unusual,” said Chad Bown, a trade-remedy expert at the Peterson Institute for International Economics. “But with Trump’s administration of U.S. trade policy, it appears that even the most obscure and unused U.S. law on the books is fair game.”

In May, more than four dozen U.S., European and Asian trade associations wrote a letter to the Communist Party group overseeing cybersecurity, for instance, complaining about a new law that the associations felt would require their companies to place data centers in China, find Chinese partners and transfer technology to the joint ventures. Beijing generally argues that it is trying to protect itself from efforts by Western intelligence services to tap into Chinese computer systems.

“All countries have legitimate concerns over privacy and national security, but China is the principal country addressing these concerns by requiring foreign companies to transfer their technology and to surrender their brand and operating control in order to do business,” the group wrote.

Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com and Bob Davis at bob.davis@wsj.com

Appeared in the August 2, 2017, print edition as ‘U.S. to Press China on Trade.’

https://www.wsj.com/articles/u-s-plans-trade-measures-against-china-1501635127?mod=e2fb

Qatar Takes Fight With Boycotting Arab Bloc to WTO

August 1, 2017

DUBAI, United Arab Emirates — Qatar has filed a complaint with the World Trade Organization against three of the four Arab countries that are isolating it, opening up a possible new path for negotiations with its opponents.

The Gulf nation said late Monday it had filed the grievance with the WTO’s dispute settlement body alleging that Saudi Arabia, the United Arab Emirates and Bahrain are violating laws and conventions related to trade.

The three countries, along with Egypt, cut diplomatic ties and severed air, land and sea links with Qatar on June 5, accusing it of supporting extremists. Qatar denies the charge and sees the boycott as politically motivated.

Qatar’s appeal to the WTO coincided with a visit to Geneva by Sheikh Ahmed bin Jassem bin Mohammed Al Thani, the country’s minister of economy and commerce, who met with the head of the trade organization and lawyers specializing in trade disputes.

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Sheikh Ahmed bin Jassem bin Mohammed Al Thani

It calls for the start of formal consultations with the three Gulf states and lays out specific trade violations, according to a statement released by Qatar’s government communications office. It argues the boycott hurts not only Qatar, which is the world’s biggest exporter of liquefied natural gas, but also its trading partners.

“This positive step taken by the State of Qatar clearly demonstrates to all member countries of the WTO the level of transparency exhibited by the State of Qatar through requesting formal and transparent dialogue and consultations with the siege countries,” the statement said.

Under WTO rules, the parties have 60 days to resolve their dispute through negotiations. If they fail, Qatar can request the establishment of an independent panel that could force the trio to end their boycott or face penalties.

Qatar has rejected a tough 13-point list of demands from the Arab bloc, arguing that accepting them wholesale would undermine its sovereignty.

Fellow Gulf state Kuwait is mediating the crisis, but it and Western-led diplomatic efforts have so far failed to secure a breakthrough. Neither side has shown any significant sign of backing down.

The isolation campaign, which sealed Qatar’s only land border with Saudi Arabia, has proved costly for the 2022 World Cup host, however.

Qatar Airways, one of the Mideast’s biggest long-haul airlines, has been forced to reroute flights on costly detours over friendlier airspace and is blocked from flying to key regional feeder airports such as Dubai. The boycott has dramatically driven up costs to import food, medicine and likely even building materials that Qatar needs for extensive infrastructure projects.

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Qatar Launches Wide-Ranging WTO Complaint Against Trade Boycott

July 31, 2017

GENEVA — Qatar filed a wide-ranging legal complaint at the World Trade Organization on Monday to challenge a trade boycott by Saudi Arabia, Bahrain and United Arab Emirates, Qatar’s WTO representative Ali Alwaleed al-Thani told Reuters.

By formally “requesting consultations” with the three countries, the first step in a trade dispute, Qatar triggered a 60 day deadline for them to settle the complaint or face litigation at the WTO and potential retaliatory trade sanctions.

Qatar is also raising the boycott at a meeting of the U.N. International Civil Aviation Organization on Monday, al-Thani said.

(Reporting by Tom Miles; Editing by Alison Williams)

Big Brother Comes for Foreign Firms in China — ‘IT-backed authoritarianism’ — Can The West Do Business in China Safely? — Can the Playing Field Ever Be Level?

May 23, 2017

Beijing’ aims to harness big data to monitor and rate companies; ‘IT-backed authoritarianism’

China is harnessing big data to keep tabs on companies as part of a ‘social-credit’ system to be rolled out in 2020.

China is harnessing big data to keep tabs on companies as part of a ‘social-credit’ system to be rolled out in 2020. PHOTO: OU DONGQU/XINHUA/ZUMA WIRE
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May 23, 2017 5:30 a.m. ET

SHANGHAI—The all-seeing eyes of the Chinese state are focusing on businesses.

China is already rolling out an IT-enabled rating system to govern the behavior of individuals. Less attention is being paid to its other application: Big Brother is also harnessing big data to create the world’s most extensive system of corporate surveillance and control.

Think of it as the ultimate tool of Chinese state capitalism.

The Mercator Institute for China Studies, a German think tank, calls it “IT-backed authoritarianism.”

Foreign companies had better get used to the attention, the institute warns in a new report. They are very much part of the Social Credit System intended to produce conformity not just with laws and regulations covering such things as factory emissions and worker safety but the state’s long-range industrial plans.

The backbone of the system will be up and running by 2020. As it becomes more sophisticated, it will generate corporate scorecards from masses of data extracted from cameras, sensors and e-commerce trading platforms. Low scorers might expect higher taxes, or more expensive loans; high scorers lucrative investment opportunities.

The world’s liberal trading order has never faced a challenge quite like it, and foreign investors are just now trying to fathom its implications. “Data ownership helps autocratic systems,” says Jörg Wuttke, the outgoing president of the European Chamber of Commerce in China.

The Trump administration is fixated on traditional threats to trade. Wilbur Ross, the commerce secretary, recently hailed a new U.S.-China trade agreement that opens the Chinese market to U.S. beef, liquefied natural gas and selected financial institutions as “a herculean accomplishment.”

That may be true, though it misses the wider point: The real challenge to foreign businesses in China these days is occurring behind its borders.

Despite China’s pledges to give markets a greater role, President Xi Jinping is leading a retrograde drift toward industrial command-and-control.

Invoking security concerns, authorities are squeezing foreign technology suppliers out of critical infrastructure projects, such as banking networks. A “Made in China 2025” industrial blueprint aims to replace foreign technologies with Chinese ones in areas from artificial intelligence to robotics and semiconductors. A firewall shuts out U.S. media giants.

If Deng Xiaoping’s economic “open door” is indeed clanging shut, behind it lies an increasingly hostile environment for multinationals. They are now on notice to actively support Mr. Xi’s grand statist project to turn China into a “manufacturing superpower.”

The social-credit system of rewards and punishments is the enforcement mechanism.

To view it solely as a kind of Orwellian dystopia, though, would be a mistake. Frauds and fakes plague the Chinese marketplace; better data will boost consumer trust.

Likewise, stronger data collection will help enforce environmental regulation; monitors lurking in chimneys will spot excessive factory emitters, while smart meters will spy on surges in energy usage beyond permitted levels.

Dash cams aboard truck fleets will identify errant drivers. Digital feeds from e-commerce sites will expose glitches in customer service and payment irregularities.

Big data will capture infractions in real time, allowing instant downgrading of rolling credit scores. Yet this self-enforcing regulatory system is at the same time pernicious.

Eventually, predicts Mercator, Chinese and foreign companies watching their credit scores are more likely to fall in line behind state planning objectives, whether or not they make commercial sense. Already, car makers are under pressure to pour investments into clean-energy vehicles under a production-quota arrangement.

The Mercator report, which draws on publicly available Chinese documents, predicts that the social-credit system “could become a powerful, big-data-enabled tool kit for monitoring, rating and steering the behavior of participants into a politically desired direction.”

Of course, the system could end up wrecking the economy. Excessive regulation risks upsetting the delicate balance between government control and commercial disruption that allows innovation to flourish.

Then there are IP concerns. Chinese authorities, openly committed to nurturing state-owned national champions, will wind up with troves of highly sensitive commercial data from foreign competitors. A data breach could be calamitous.

And how will the ratings be compiled? The suspicion of antiforeign bias will be hard to dispel. The National Development and Reform Commission, the main body overseeing the project, declined to comment.

It’s unclear what the West can offer as a defense. The best hope of dealing with state capitalism is the Trans-Pacific Partnership, which the Trump administration has abandoned. The giant free-trade deal is intended to set new regulatory benchmarks in areas like the digital economy and the role of state-owned enterprises—domains not properly covered by the World Trade Organization. (The remaining 11 countries in the pact are struggling to keep TPP alive.)

As it is, foreign players in the world’s fastest-growing technology and consumer markets will shortly find themselves looking over their shoulders at the whizzing numbers on their scorecards. When Big Brother is the regulator, their fortunes will be at the mercy of invisible eyes and mysterious algorithms.

Write to Andrew Browne at andrew.browne@wsj.com

https://www.wsj.com/articles/big-brother-comes-for-foreign-firms-in-china-1495531800

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Trade Groups Appeal to Beijing to Postpone Cybersecurity Law — “Law completely contradicts what Xi Jinping said Sunday at Belt and Road forum.”

May 15, 2017

BEIJING — A coalition of 54 global business groups appealed to Chinese authorities Monday to postpone enforcing a cybersecurity law they warned violates Beijing’s free-trade pledges and might harm information security.

The appeal by groups from the United States, Japan, Britain and other countries adds to complaints Beijing is improperly limiting access to its markets for technology products, possibly to support its own fledgling suppliers.

In a letter to Chinese regulators and the ruling Communist Party’s cybersecurity committee, the groups said the Cybersecurity Law due to take effect June 1 might violate Beijing’s trade commitments and make theft of information easier. It would limit use of foreign security technology and require data about Chinese citizens to be stored within the country.

Signers included the Business Software Alliance, the U.S. Chamber of Commerce and trade groups for insurers, technology suppliers and manufacturers from Britain, Japan, Australia, Mexico and South Korea.

Many of them were among 46 groups that made a similar appeal in 2016 for changes in the cybersecurity law, which weren’t made.

“We are deeply concerned that current and pending security-related rules will effectively erect trade barriers,” said the letter. “China’s current course risks compromising its legitimate security objectives (and may even weaken security) while burdening industry and undermining the foundation of China’s relations with its commercial partners.”

The groups appealed to Beijing to postpone enforcing the law until it can be made consistent with Chinese market-opening commitments and World Trade Organization rules.

The complaint coincided with a trade forum in Beijing that began Sunday at which Chinese President Xi Jinping appealed to foreign leaders from two dozen countries in Asia, Africa and Europe to resist political pressure to limit trade.

Xi’s government has promoted itself as a champion of free trade in response to calls in the United States and Europe to limit imports. Despite that, China’s trading partners complain it is the most-closed major economy and business groups say Beijing is further reducing access to markets for technology and other products in which it is trying to develop its own suppliers.

Communist leaders say China needs the data controls to prevent terrorism and anti-government activity. But officials of Chinese industry groups quoted in the state press have said previous restrictions on use of foreign security technology also were intended to shield the country’s fledgling providers from competition.

Trade groups have previously said planned Chinese data storage rules do nothing to improve security and create market barriers for foreign providers.

They say the requirement for foreign e-commerce and other companies to store data about Chinese customers within the country would add to the cost and difficulty of doing business by requiring them to set up duplicate storage operations.

Restrictions on use of security technology in an earlier Chinese anti-terrorism law and rules for banks prompted a similar outcry from business groups that said they would prevent most use of foreign products.

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Xi Jinping Positions China at Center of New Economic Order

BEIJING — President Xi Jinping of China delivered a sweeping vision of a new economic global order on Sunday, positioning his country as an alternative to an inward-looking United States under President Trump.

Mr. Xi, surrounded by autocratic leaders from Russia and Central Asia at a forum in Beijing, pledged more than $100 billion for development banks in China that he said would spearhead vast spending on infrastructure across Asia, Europe and Africa. Noticeably absent from the gathering were leaders of major Western democracies.

Sparing no modesty for the plan, Mr. Xi called the initiative, known as “One Belt, One Road,” “this project of the century.” The program, based on Chinese-led investment in bridges, rails, ports and energy in over 60 countries, form the backbone of China’s economic and geopolitical agenda.

In a new twist for China, which has generally been skeptical of social programs by the World Bank, Mr. Xi said the initiative would tackle poverty in recipient countries. He promised to deliver emergency food aid and said China would begin “100 poverty projects,” though he stopped short of providing details.

He portrayed the plan as “economic globalization that is open, inclusive, balanced and beneficial to all.” China would invite the World Bank and other international institutions to join it in meeting the needs of developing — and developed — countries, he said, in a suggestion that he is seeking to forge new markets and export China’s model of state-led expansion.

Mr. Xi stressed the differences between the United States system of alliances and his notion of commerce under China.

“We have no intention to form a small group that would dismantle stability but we hope to create a big family of harmonious coexistence,” he said, with the Russian president, Vladimir V. Putin, in the front row of the convention center where he spoke.

So far, China has spent only $50 billion on the initiative that Mr. Xi announced four years ago, a relatively small amount compared with the vast domestic investment program.

But Mr. Xi told the audience — made up of more than two dozen national leaders, envoys from more than 100 countries and officials from various financial institutions and businesses — that he was increasing the amounts available to China’s main policy banks.

Source:https://www.nytimes.com/2017/05/14/world/asia/xi-jinping-one-belt-one-road-china.html?ribbon-ad-idx=5&rref=world/asia&module=Ribbon&version=context&region=Header&action=click&contentCollection=Asia%20Pacific&pgtype=article

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U.S. fails to reassure Europe, Japan over ‘Trumponomics’

May 14, 2017

Reuters

Sat May 13, 2017 | 2:23pm EDT

By David Lawder and William Schomberg | BARI, ITALY

The United States said on Saturday the world’s other rich economies were getting used to the policy plans of President Donald Trump, but Europe and Japan showed they remained worried about Washington’s shift.

Officials from the Group of Seven nations met in southern Italy hoping to hear more about Trump’s plans which they fear will revive protectionism and set back the global approach to issues such as banking reform and climate change.

U.S. Treasury Secretary Steven Mnuchin said the United States reserved the right to be protectionist if it thought trade was not free or fair.

“We do not want to be protectionist but we reserve our right to be protectionist to the extent that we believe trade is not free and fair… Our approach is for more balanced trade, and people have heard that,” Mnuchin told reporters at the end of the two-day meeting.

U.S. Secretary of the Treasury Steven Mnuchin attends a news conference during a G7 for Financial ministers, in the southern Italian city of Bari, Italy May 13, 2017. REUTERS/Alessandro Bianchi

“And as I say, people are more comfortable today, now that they’ve had the opportunity to spend time with me and listen to the president and hear our economic message.”

Other ministers from the G7 countries made it clear they did not share his view.

“All the six others … said explicitly, and sometimes very directly, to the representatives of the U.S. administration that it is absolutely necessary to continue with the same spirit of international cooperation,” French Finance Minister Michel Sapin told reporters.

Bank of France Governor Francois Villeroy de Galhau said there was a “light breeze” of optimism within the G7 about the recovering global economy after years of sluggish growth following the financial crisis that began nearly a decade ago.

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But he said the continued uncertainty about the direction of U.S. policy represented a risk, echoing comments made on Friday by Japanese Finance Minister Taro Aso.

“We must not backpedal on free trade as it has contributed to economic prosperity,” Aso said.

European G7 officials complain that no-one knows what the United States understands by “fair trade” and that the only way to establish fairness was by sticking to the rules of the World Trade Organization – a multilateral framework.

They also say the U.S. demand to balance trade bilaterally was not economically sound, because trade deficits and surpluses could only be analyzed in a global context.

A senior Japanese finance ministry official said on Saturday uncertainties remained over how quickly the U.S. Federal Reserve would raise interest rates, but the biggest question mark was over possible U.S. tax cuts that could fire up an already recovering U.S. economy.

Trump has proposed slashing the U.S. corporate income tax rate and offer multinational businesses a steep tax break on overseas profits brought back home.

He dropped, however, a controversial proposal of a “border-adjustment” tax on imports as a way to offset revenue losses resulting from tax cuts.

The tax reform plans were also questioned by some European officials. “I am not so sure that with an economy already at full employment and working at full speed a fiscal stimulus would add a lot,” European Commissioner for Economic and Financial Affairs Pierre Moscovici told reporters.

“(But) we avoided some discussions which would have been more damaging, like the border adjustment tax, which is no longer on the table at this moment,” he said.

(Writing by Jan Strupczewski)

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U.S. Treasury Stops Short of Calling China a Currency Manipulator

April 15, 2017

Department’s report does sharply criticize Chinese exchange-rate policies

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy.

Chinese 100-yuan notes being counted in Hong Kong. The U.S. Treasury Department said China would remain on a ‘monitoring list’ of trade partners with policies deemed to be a risk to the U.S. economy. PHOTO: XAUME OLLEROS/BLOOMBERG NEWS

WASHINGTON—The U.S. Treasury sharply criticized China’s exchange-rate policies on Friday, though it stopped short of labeling the Asian trade giant a currency manipulator, as President Donald Trump said he would do while running for office.

“China has a long track record of engaging in persistent, large-scale, one-way foreign-exchange intervention,” the Treasury Department said in its semiannual report on foreign exchange policies of major U.S. trade partners. Although Beijing has allowed the yuan to slowly appreciate in recent years and actively fought depreciation recently, its past interventions “imposed significant and long-lasting hardship on American workers and companies,” the Treasury said.

The report followed an apparent warming of relations between the U.S. and China following a visit to Washington and Mr. Trump’s Mar-a-Lago resort by Chinese leader Xi Jinping last week. Mr. Trump is counting on Mr. Xi for support in a confrontation with North Korea. After the visit, Mr. Trump told The Wall Street Journal he wouldn’t name China a currency manipulator, a label that may have led to a deepening trade confrontation.

Still, the administration sought to stick to some of the tough themes Mr. Trump laid out as a candidate and as president on trade and currency.

“Treasury will be scrutinizing China’s trade and currency practices very closely, especially in light of the extremely sizable bilateral trade surplus that China has with the United States,” the Treasury report said.

The report has traditionally been used as a diplomatic tool to prod other countries whose currency policies were deemed a threat to U.S. industries. The latest report’s censure of China and other countries, including South Korea and Germany, could be used in the future as a pretext for new tariffs.

“Treasury is committed to aggressively and vigilantly monitoring and combating unfair currency practices,” the report said.

Preserving a two-decade precedent, no country was named a currency manipulator.

Along with Friday’s about-face was an acknowledgment by Mr. Trump and his team that Beijing has been propping the yuan up over the last two years, instead of pushing it down as the president had previously alleged. Building debt problems and a slowing economy has put downward pressure on the yuan, forcing the central bank to burn through $1 trillion, or a quarter of its foreign-exchange reserves, to keep the currency from falling.

“The administration clearly realized this was not the right time to have a fight with China over currency,” said Brad Setser, a senior fellow at the Council on Foreign Relations and a former senior U.S. Treasury official in the Obama administration.

Still, “there’s a clear suggestion that China needs to do more to open up its markets to U.S. goods and services,” Mr. Setser said. “The challenge will be getting real changes that have a real impact on the size of U.S. exports to China.”

Most Western economists agree Chinese authorities in the past used an undervalued exchange rate to help fuel its rise to being the No. 2 economy in the world. A cheaper currency makes products less expensive to produce and more attractive to buyers overseas. That was an essential factor in making China the world’s biggest manufacturing base, but it cost the U.S. and other countries millions of jobs.

During his campaign, Mr. Trump tapped into anger at China that was pent up in major manufacturing states, saying he would label the country a currency manipulator and slap fresh tariffs on its imports.

Amid rising concerns about an increasingly belligerent North Korea sparking a dangerous conflict with U.S. allies Asia, Mr. Trump earlier this week said he decided to treat Beijing with more leniency on trade and currency in exchange for Beijing’s help in reining in Pyongyang.

China was not alone in being targeted in Treasury’s latest report.

Repeating criticisms made under the Obama administration, the Treasury Department also kept China, Japan, South Korea, Taiwan, Germany and Switzerland on a special “monitoring list” that flags trade partners with currency and other economic policies deemed to be a risk to the U.S. economy.

The name-and-shame list can trigger sanctions against offending trade partners if the countries can be shown to intervene in foreign-exchange markets and maintain large trade surpluses with the U.S. and rest of the world. None of the countries met all of the criteria.

Japan and South Korea, two major U.S. trade partners, have long been on Treasury’s radar in part because they have pushed down the value of their currencies in the past. And even though Germany doesn’t control the value of the euro because it is only one member of the European currency union, the country has been targeted because its economic policies and a relatively weak euro have helped the country to achieve the world’s largest trade surplus.

Future reports could step up the criticism, given Treasury’s latitude under the original laws guiding the report to Congress.

China could again allow the yuan to fall, triggering fresh criticism from U.S. manufacturers and renewed political pressure on the administration to label them a manipulator. There are costs to keeping the yuan stable beyond selling exchange-rate reserves. It also makes it harder for the government to meet its growth targets.

Also, the Commerce Department is preparing a study of why the U.S. has such large trade deficits with other nations, and some analysts believe that could lay the foundation for applying countervailing duties against countries that manipulate their currencies. The exchange-rate undervaluation, under a proposal the Commerce Department is considering, would be considered a subsidy.

While some trade experts question whether that plan would be compliant with current World Trade Organization rules, the administration could still use it as a pretense for levying across-the-board tariffs on imports from a currency-manipulating country.

Although many of the findings in the report repeated the basic assessments made under the Obama administration, the report still carried a distinct Trump administration tone. For example, it used sharper language in its warning trade partners against exchange-rate offenses.

“Though there has been a trend in the last two years towards reduced currency intervention by key trading partners, it is critical that this not represent merely an opportunistic response to shifting global macroeconomic conditions…but a durable policy shift away from foreign-exchange policies that facilitate unfair competitive advantage,” the report said.

“The United States cannot and will not bear the burden of an international trading system that unfairly disadvantages our exports and unfairly advantages the exports of our trading partners through artificially distorted exchange rates,” it added.

Write to Ian Talley at ian.talley@wsj.com

https://www.wsj.com/articles/trump-treasury-department-declines-to-label-any-country-a-currency-manipulator-1492204704?mod=e2twa

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