Trade gap with China arouses Congress

WASHINGTON – The administration’s new get-tough approach with China could involve filing trade charges against the Asian giant over auto parts and copyright piracy and branding the Chinese as currency manipulators. But the betting is that the harder line won’t have much impact, at least right away, on the soaring U.S. trade deficit, which hit an all-time high of $726 billion last year.

It is that deficit that is getting a lot of attention in Washington, especially the one-fourth of the deficit that is accounted for by a single country – the $202 billion trade gap with China.

That figure prompted howls of protest in Congress. Lawmakers contended it showed President Bush is not doing enough to counter China’s unfair trade practices, which they contend have contributed to the loss of nearly 3 million U.S. manufacturing jobs since mid-2000.

Lawmakers rushed to introduce more bills to slam China with tough economic sanctions.

Hoping to head that off, the administration last week unveiled its own get-tough strategy, a 29-page “top-to-bottom review” of trade relations between the two nations.

U.S. Trade Representative Rob Portman announced the creation of a new China enforcement task force in his office. He indicated that without progress soon in two areas of tension – high Chinese tariffs imposed on American auto parts and continued widespread copyright piracy of American products – the administration would probably file unfair trade cases against China before the World Trade Organization.

Treasury Secretary John Snow did his own tough talking last week, sending hints that the administration was considering designating China as a currency manipulator in a report it must make to Congress in April.

That designation would trigger talks between the two nations and could lead to trade sanctions if the United States won a WTO case on the issue. The administration for more than a year has resisted pressure to make such a designation, arguing that it could make more progress with quiet diplomacy to nudge China to stop depressing the value of its currency in relationship to the U.S. dollar.

American manufacturers contend China is blatantly manipulating its currency, keeping it undervalued by as much as 40 percent, to make Chinese goods cheaper for Americans and U.S. products more expensive in China.

Sens. Charles Schumer, D-N.Y., and Lindsey Graham, R-S.C., are sponsoring legislation that would impose across-the-board penalty tariffs of 27.5 percent on Chinese goods unless the Chinese stop the practice. That measure is just one of a number of bills that would seek to punish China by imposing penalty tariffs on Chinese goods, higher tariffs that would be paid by American consumers.

But given that this is a congressional election year, analysts said the pressure is likely to keep building in Congress to retaliate unless China changes its trade policies.