In a move that helped smooth the way for President George W. Bush's November visit to Beijing, China and the US signed a three-year deal to limit Chinese exports of 34 types of textile products to the US until 2008. The deal curbs the growth rates of China's garment shipments to between 5.5% and 16%, depending on the clothing category, with the growth rates increasing incrementally each year.
The agreement follows a similar pact signed between China and the European Union in September as industrialized countries seek to come to terms with China's rising status as an economic powerhouse. China isn't the only loser here, however. While the move was aimed at protecting the US textile industry, American consumers will also take hits in the form of higher clothing bills, to the tune of an annual increase of US$6 billion by some estimates. With China's textile exports to the US jumping more than 50% in the "first eight months of 2005 to nearly US$17.7 billion following the end of a global quota regime in January, it comes as little surprise that China's trade surplus with the US continues to widen. US trade chief Rob Portman predicted China's trade surplus with the US would exceed US$200 billion this year, about US$40 billion more than 2004, and called on China to further open its markets to US companies and crack down on IPR violations.
Earlier, the US, invoking a rarely used WTO authority, asked China to prove it was trying to contain "rampant" piracy and counterfeiting of American goods from movies to software to drugs. Portman told the Wall Street Journal that he wants "to put the Chinese on notice that we're serious", and asked Beijing to produce evidence of its piracy crackdown including descriptions of cases it has pursued. American film, software and other copyright-based industries estimate annual losses of more than US$2.5 billion in China due to counterfeiting.
Calls on China to end piracy could prove as fruitless as demands for a significant revaluation of the yuan. The undervalued currency, many manufacturers in the West argue, makes Chinese goods cheaper in the West and western goods more expensive in China, giving China an unfair competitive advantage.
The Bush administration, most notably through Treasury Secretary John Snow, has been pressuring China on the currency front, though it has been keen to avoid branding China a "currency manipulator." Meanwhile, legislation that would impose 27.5% across-the-board tariffs on Chinese goods is gaining momentum in Congress.
Trade surplus widens China's October trade surplus rose to a record US$12 billion, with exports rising 29.7% year-on-year to US$68.1 billion and imports gaining 23.4% to US$56.08 billion. Electronics shipments led the surge. The country's trade surplus for the "first 10 months of the year was US$80.4 billion, compared with US$11.1 billion a year earlier. China's exports in the "first 10 months rose to US$614.5 billion and imports increased to US$534.1 billion. The US trade deficit with China increased in September to a record US$20.10 billion.
ROK grants China market status South Korea granted China market economy status Wednesday, a move that would provide China greater shelter from anti-dumping duties on its exports. ROK president Roh Moohyun made the announcement during Hu's state visit to Seoul, his "first since taking the warming of relations between them. The two countries were enemies until the early 1990s after China fought on North Korea's side in the 1950-53 Korean War. Under the terms of China's 2001 accession to the World Trade Organization, members of the trade body can treat China as a "non-market economy" until 2016. Separately, China and the ROK agreed to end their row over the kimchi controversy, in which both countries said parasite eggs were found in the kimchi produced by the other country.
High-tech exports could close deficit
China urged Washington to lift restrictions against high-tech exports to China as a way to put a dent in America's swelling trade deficit with China. Barring the export of nuclear power technology and equipment, satellite components and other high-tech products to China costs the United States at least US$25 billion annually, according to Chinese Vice Commerce Minister Liao Xiaoqi.
Caracas and Beijing sign deal
Venezuela has signed a deal to buy a communications satellite from China, the AP reported. Venezuela, the world's fifth-largest oil producer, has also bought three Chinese military radar units and already awarded China contracts to build 10,000 homes in the country. Caracas said oil sales to China will rise dramatically in coming years.
Brazil disappointed with China pact
Benefits for Brazil after permitting China market access have disappointed government assessors, according to Brazilian Foreign Minister Celso Amorim. "We need to evaluate what Brazil has obtained in terms of investments and we don't have that evaluation yet, but our expectations were greater. Investment is coming slowly," he told the Financial Times.
EU considers shoe export sanctions
The EU is planning to introduce anti-dumping tariffs on China's exports of leather and reinforced shoes after inspectors found "quite compelling evidence" of manufacturers selling shoes below the cost of production, the Financial Times reported. The potential sanctions, which would also affect India and Vietnam, differ from the WTO safeguard clause used to control textile exports this year but it is feared they could see the situation escalate to a similar level. China is the world's largest exporter of footwear.