ZOELLICK ROSE TINTED LENSES IN RED CHINA

Trade envoy Robert Zoellick, Agribusiness ambassador Ann Veneman, and general schill Donald Evans returned late last week from a fact finding mission to China (finding out how they can better exploit Chinese workers and screw American ones, no doubt).

Upon return, the USTR's office released a number of "fact sheets" to dress up the largely one way Sino-American trade relationship. I love reading these fact sheets because they are always so patently propagandistic as to stand up to scrutiny like a double-wide in a tornado.

USTR fact: China entered the World Trade Organization (WTO) in 2001 – opening its large and growing market to American goods and services and committing to a series of sweeping economic reforms. -- The United States did not reduce a single tariff or make any other market-opening
concessions to China as a result of China’s WTO accession.

The US did not reduce a single tariff because China already had been accorded "most favored nation" (MFN) trade status. MFN means that imports from China get treated the same as imports from the countries with the most open access to the US market. WTO entry did not change this. What China's WTO entry did achieve was forcing China into the rules-based trading system and making it subject to dispute settlement, which on balance, given that China already enjoyed unfettered access to the US market, is a good thing. I would hope that the government agency responsible for managing US trade affairs would understand this, in which case the statement above is merely disingenuous.

USTR fact: Opening the motor vehicle financing sector and easing auto import quotas, paving the way for increased sales of U.S.-designed and produced automobiles and parts.

The US runs a substantial trade deficit with China in auto parts (with about $3 of imports for every $1 export). Meanwhile, almost all of the world's automakers have been lavishing China with massive direct investments in plants producing finished autos. While currently, automakers are importing parts into the US for final assembly of cars, soon most production--at least for the Chinese market and probably for the world market--will all take place in China. Opening the financial sector should help stimulate domestic demand for aspiring drivers in China (though the ripples of capital market liberalization may spark other economic problems), but to think that US production will benefit from this is entirely misguided.

USTR fact: In 2003, the United States exported nearly $5 billion in agricultural goods to China...cotton exports reached a record of nearly $740 million.

As we learned earlier this week, the level of cotton exports has been driven by ill-conceived and dammaging US agricultural policy, that has been found in violation of WTO rules. (More on this later: The issue of ag subsidies is much more complex than the cursory treatment it is given by the media and trade punditocracy. While the subsidies are now largely illegal according to the WTO ruling, it is not the subsidies per se, but the failure of overall US agriculture policy which is the main culprit of impoverished farmers around the world. Simply axing subsidies will do little to fix the problem. See this great article for more details). Why is China importing so much cotton? Because it is booming in textile and apparel exports. In other words, America is now exporting (heavily subsidized) raw materials and importing processed, finished manufactured goods in a sort of backwards mercantilism.

USTR fact: Strong U.S. exports of transportation and education services contributed to a $2 billion U.S. services trade surplus with China in 2002.

This means we are training Chinese engineers and scientists in American universities and graduate schools. Educational and cultural exchanges are a good thing for bringing our countries together, but it also means that much of the advanced science and research work once done in the US can now easily be done, and for much less money, in China.

USTR fact: The Bush administration's major US trade concerns with China include protecting the technological monopolies of pharmaceutical manufacturers, opening China to genetically modified crops, and so on. Major priorities of the Bush administration DO NOT include (by absentia) egregious human rights abuses in export industries in violation of the WTO and a number of international treaties, nor do the Bush administration's priorities include China's manipulation of its exchange rate for competitive advantage, also in violation of WTO rules as well as the IMF Articles of Agreement.