China Resists U.S. Pressure On Textiles, Currency

By Peter S. Goodman
Washington Post Foreign Service
Saturday, May 28, 2005

BEIJING, May 27 -- China warned on Friday that it would not restrain its surging textile exports to the United States unless Washington first removes limits it has imposed on some Chinese-made goods, ratcheting up a simmering trans-Pacific trade conflict.

China on Friday also continued to rebuff pressure from Washington for a swift increase in the value of its currency, the yuan. The Bush administration and a vocal contingent in Congress accuse China of keeping its currency artificially low to make its goods unfairly cheap on world markets. China argues that it is being made a scapegoat for the inevitable decline of American manufacturing, which faces intense competition from dozens of other low-cost countries.

At a conference in Seoul, China's central bank governor, Zhou Xiaochuan, said any changes to China's currency policy would be introduced at a pace of the government's own choosing, with an eye toward protecting the country's fast-growing exports -- a crucial source of employment.

"We should go further to reform but respect economic stability." Zhou said, according to the Associated Press. "Timing is important."

[In Washington on Friday, the Bush administration announced it was turning down a request by members of Congress to bring a trade sanctions case against China because of its currency valuation system, the Associated Press reported. A spokesman for U.S. Trade Representative Rob Portman said officials don't think bringing such a case "is appropriate or a productive way" to get the Chinese to be more flexible in valuing the yuan.]

Europe on Friday intensified its conflict with China over textile shipments by lodging a complaint at the World Trade Organization that immediately limits a flood of Chinese-made T-shirts and flax yarn reaching the continent. European officials expressed hopes of reaching a "mutually satisfactory agreement" in talks with China that are to continue as the dispute process unfolds.

Textiles and the value of the yuan have emerged as the two primary issues at the center of an evolving trade conflict between the United States and China. Beijing's twin pronouncements Friday underscored its resolve to give no ground in the face of sustained pressure from abroad.

Last week, China appeared to take a step back from the textile dispute when it said it planned to sharply increase tariffs paid by its producers -- a self-imposed restraint. But Friday's announcement undercut that gesture: China said it would not increase tariffs on any goods that have been limited by foreign countries.

"Enterprises that already are subject to textile limitations abroad will not be subject to the export tariffs," state television said during a national newscast, citing the Commerce Ministry.

China reinforced its stance ahead of a visit by U.S. Commerce Secretary Carlos M. Gutierrez. He is scheduled to arrive in Beijing next week for talks aimed at easing the conflict.

In an interview with the Associated Press, Gutierrez declined to say whether China's latest shift would alter the Bush administration's approach.

The current conflict from the ending of a four-decade-old system of quotas that limited how much clothing could be exported from any country to the United States and Europe. Since the lifting of those limits on Jan. 1, the volume of Chinese-made clothes into the United States has surged by more than 50 percent, according to the U.S. Commerce Department. Imports of some goods, such as cotton shirts and pants, have swelled by more than 1,000 percent.

The Bush administration this month began to crimp the flow by invoking a so-called safeguards clause written into the 2001 agreement under which China entered the World Trade Organization. That clause gives Washington the right to cap the growth of imports of selected goods at 7.5 percent annually for the next three years if it finds a threat to U.S. industry.

The Bush administration signaled last year that it was almost certain to invoke the safeguards clause and limit China's shipments, and Chinese officials have long said that they have expected such a move even as they have called it a violation of the spirit of the global trading system.

"Everybody acts very surprised and China acts mortally offended, but they agreed to [the safeguards clause] when they joined the WTO," said Pietra Rivoli, a trade expert at Georgetown University.

"This was the price for getting the U.S. textile industry a little more on board.

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