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The Honolulu Advertiser
Posted on: Tuesday, March 13, 2007

China pledges trade action as monthly gap nears record

By Joe McDonald
Associated Press

Chinese Commerce Minister Bo Xilai said America's proposed punitive tariffs would be a violation of free trade and would hurt American companies.

GREG BAKER | Associated Press

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BEIJING — China's government said yesterday that it is trying to shrink its swollen trade surplus, but it said its monthly gap soared to the second-highest level on record in February amid threats of possible U.S. sanctions.

Commerce Minister Bo Xilai criticized proposed U.S. punitive tariffs as a violation of free trade and said they would hurt American companies.

"The Chinese government never intends to pursue a large-scale trade surplus with others," Bo said at a news conference. He said his ministry was "assigned to cut our trade surplus" but he gave no details and announced no new initiatives.

U.S. lawmakers who blame low-priced Chinese imports for the loss of American manufacturing jobs are pushing for a 27.5 percent increase in tariffs on Chinese goods unless Beijing eases currency controls that they say give its exporters an unfair advantage.

"That would be disastrous for companies from both sides, including the United States, who have benefited from our trading relations," the commerce minister said. "If it were imposed, that would be not only trade protectionism but also trade hegemony."

China's customs agency reported yesterday that the monthly trade gap in February rose to $23.7 billion, up 32.9 percent from the same month last year, according to its Web site. That was just below the monthly record of $23.8 billion in October.

The figures were released after Bo's news conference, and he did not comment on them.

Last year, the United States reported a record $232.5 billion trade deficit with China.

The White House has filed a World Trade Organization complaint accusing Beijing of violating commitments to the WTO by providing unfair subsidies to Chinese companies.

The communist government has said repeatedly that it is trying to close its trade gap. It has cut export tax rebates for steel and other products and is trying to encourage its consumers to spend more, which would boost imports.

Critics in the United States and elsewhere are pressing for Beijing to ease controls on its currency, the yuan, which they say is intentionally kept undervalued, making China's exports unfairly inexpensive and adding to its surpluses.

Bo, the commerce minister, argued that a large share of the trade gap with the United States consists of goods made in China by American companies and exported to the U.S. market.

The minister appealed for patience to let Chinese measures work.

"It is not wise for us to expect to see very tangible effects within a short time period simply due to the exercise of some trade measures," he said.

Beijing raised the yuan's value by about 2.1 percent against the dollar in July 2005 and has allowed the currency to rise by about 5.3 percent since then in tightly controlled daily trade.

That should help close the gap by making Chinese exports cost more, while imports are more attractive to Chinese consumers.

U.S. officials say Beijing is moving too slowly, but Chinese leaders have rejected pressure for a quicker appreciation.

China's flood of export revenues is forcing the central bank to drain billions of dollars from the economy every month by selling bonds to reduce pressure for prices to rise.

U.S. Treasury Secretary Henry Paulson, Washington's top official on trade with China, said in January that he would make action on currency the benchmark to judge Beijing's responsiveness.

Paulson visited Beijing last week and met with Vice Premier Wu Yi, his counterpart in a long-range "strategic economic dialogue." Paulson was expected to press for currency action, but no details of the talks were released.