At last, the mountain moved. After months of subtle diplomacy from the US Treasury and not so subtle threats from Congress, China two weeks ago grudgingly gave its currency, the renminbi, a little more freedom to rise.
The exchange rate issue dominates a relationship that will shape the future of the world economy – the confrontation between the US, the economic superpower of the 20th century, and China, the rising industrial hegemony of the 21st. Washington, with occasional support from Europe and selected emerging markets, says Chinese currency policy unbalances the world economy and disadvantages foreign companies.
But even if the currency rises significantly, as the White House demands, the US still faces myriad challenges managing its trade and investment relationship with Beijing.
With discontent rising across American business, fuelled by incidents such as the Google China censorship spat, Washington is recognising to its intense frustration that it lacks the instruments to conduct international trade policy in a modern economy.
“China is distorting global trade and investment patterns with a web of state-sponsored industrial policies,” says Jeremie Waterman of the US Chamber of Commerce. “The tools the US government has are inadequate to cope with this interlocking web.”
“中国正在撒下一张政府支持的产业政策大网，扭曲了全球贸易与投资格局，”美国商会(US Chamber of Commerce)的王杰(Jeremie Waterman)表示。“美国政府所拥有的工具，不足以对付这张环环相扣的大网。”
The old-fashioned architecture of US trade policy largely reflects the metal-bashing economy of the past. It is predicated – as is the focus on the exchange rate – on its manufacturers competing head-on with Chinese companies, particularly in the American market.
The US has a panoply of “trade defence” instruments – antidumping, countervailing duty and safeguard measures – that allow it to block imports it deems unfairly priced, state-subsidised or flooding in too rapidly. One such tool was used in September last year to restrict Chinese tyre imports, provoking a storm of protest from free-traders.
But the goods to which the US applies such measures are mainly basic, low-margin industrial components in which American competitiveness is being eroded against many countries. The list hit with trade defence protection in recent months does not read like a tour of America''s economic future: drill pipe, phosphate salts, coated paper.
Francisco Sánchez, undersecretary for international trade at the Commerce department, notes such products cover less than 3 per cent of US trade with China. Yet because the industries are long established and often have powerful labour unions, they exert disproportionate control over trade policy. When China joined the World Trade Organisation in 2001, the negotiators'' focus was on goods such as these, and particularly the eternally controversial area of garments and textiles.
“When China joined the WTO, the US and Europe put huge amounts of effort into keeping Chinese clothes out through negotiating multiple layers of trade defences,” says Gary Horlick, a leading Washington trade lawyer. Now these measures “are becoming not just an irrelevance but a distraction”, he says. Time and political capital are expended pursuing trade policies irrelevant to most American companies.
direct industrial development with government procurement.
As China''s domestic market has rapidly grown, US and European companies have become increasingly interested in locating production there – and particularly in selling services such as telecommunications, information technology and media. But many are struggling. Beijing, under the rubric of its “indigenous innovation” policy, is instituting what foreign companies say is a complex system of skewed government procurement, unfair and arbitrary licensing policies and forced technology transfer that violates intellectual property rights (IPR).
Mr Waterman traces the policy back to 2002, when China had finally joined the WTO. “Once the negotiations had ended, those elements who preferred a stronger role for government were freed up,” he says. “The Hu-Wen government from 2003 inherited an economy where they saw few [Chinese] companies in high-wage sectors and in IPR-dependent industries, and set about trying to change it.” The gigantic $568bn fiscal stimulus Beijing announced in November 2008 gave them more ammunition to direct industrial development with government procurement.
Beijing says it is merely trying to do what other countries have done – modernise its economy, ascend the value chain and ease away from dependence on foreign companies for investment and technology.
But US companies say “indigenous innovation” goes way beyond familiar problems with software and movie piracy, and amounts to a full-blown system of government manipulation of large swaths of the economy.
Procurement is used to favour Chinese companies. Idiosyncratic technical standards such as a homegrown wireless technology – “Wapi” – are given a clear run by denying licensing to more familiar international standards. Information, communication and technology companies complain about restrictions, such as requirements for products to be certified and tested in government laboratories, and for businesses to disclose source code.
Alarm about this is rising to the point where business representatives are increasingly prepared to criticise policy publicly. “We are feeling less and less welcome in China, which is why you are seeing more people speaking out and reconsidering their futures in China,” says John Neuffer of the Information Technology Industry Council.
关于这个问题的忧虑情绪已经上升到一定高度，以致商界代表日趋准备公开批评政府政策。“我们感觉在中国越来越不受欢迎了，这就是为什么你会发现有更多人大胆表态，并反思自己在中国的未来，”信息技术产业理事会(Information Technology Industry Council)的约翰•纽佛(John Neuffer)表示。
Last week Jeffrey Immelt, chief executive of GE, expressed his growing concern about Beijing, telling an audience of Italian executives that “I am not sure that in the end they want any of us to win, or any of us to be successful”.
The menu of options available to cope with such problems is limited. The most obvious is litigation at the WTO. Here the US has had some, but not spectacular, success. In 2004, in its first complaint against China, it forced Beijing to remove preferential treatment for local semiconductor producers; in 2008, it won a case against Chinese rules on car parts. More recently it was successful in two landmark cases – one on enforcement of IPR and one on restrictions on the domestic distribution of films and books. It is currently considering a case over restrictions on foreign credit cards.
But this strategy costs time and effort, and is not a cure-all. After the two or three years it can take to bring and win a case and an appeal, the remedy often comes too late. In the car-parts case, US business experts say, the delay gave Chinese industry more time to develop and American industry to weaken, foiling the goal of allowing US car-parts companies export significant quantities to China. Mr Neuffer notes that dispute settlement is even slower for high-tech industries, where product lifecycles can be less than a year.
Scott Lincicome of White & Case, a Washington law firm, says WTO litigation is one of the more attractive options, especially as Beijing has started to accept it as a normal part of trade relations, not a declaration of war. But it has drawbacks: “On issues like IPR there is very limited case law, and governments are very reluctant to bring cases unless they are fairly certain they will win them.”
华盛顿伟凯律师事务所(White & Case)的斯科特•林西科姆(Scott Lincicome)表示，WTO诉讼是比较有吸引力的选择之一，尤其是北京如今已开始接受其为贸易关系中正常的组成部分，而非外国向自己宣战。但这种手段存在缺陷：“在知识产权这类问题上，判例法非常有限，所以，政府十分不愿意提出申诉，除非他们相当确定自己会赢得官司。”
The fact that much of what China is doing falls outside normal WTO agreements presents a wider problem. The prospect of changing this in the medium term, with the Doha round of global trade talks in limbo, looks bleak. Indeed, Michael Punke, US ambassador to the WTO, complains that Chinese negotiators are not even engaging seriously in talks.
There are no strong rules about promoting competition in markets in WTO agreements. There is an agreement whereby governments commit to put public purchases of goods and services out to international tender but China has never signed.
“Government procurement in China is actually much more important to the American and European economies and companies [than issues such as textiles], but much less effort was put into getting China to join,” Mr Horlick says. China says it will make an offer to sign up this month but appears to have ruled out including regional and local government and state-owned enterprises, thus punching huge holes in any new commitment.
Debbie Stabenow, Democratic senator from Michigan, has proposed a bill that would cut China off from US government procurement if it does not open its own market. But few investors seem to think that would make a tremendous difference. Rules such as the “Buy American” provision already restrict China from bidding for some government contracts, against which Beijing has in turn complained.
密歇根州的民主党议员黛比•史戴布诺(Debbie Stabenow)已经提交了一份议案，称如果中国不开放自己的市场，美国将不允许其参加本国的政府采购。但似乎没有投资者认为，这会让事情有巨大的改变。“购买美国货”(Buy American)规定等规则，已经限制中国投标某些政府合同，中国政府也已对此提出抱怨。
In theory, companies could try using bilateral investment treaties – which prevent host governments maltreating foreign investors – and argue that Beijing''s actions are in effect expropriating their investment. But the US does not have a tradition of signing such treaties, and an investment pact Washington was negotiating with Beijing has been put on hold pending a US review.
This leaves companies and the government having to rely on suasion through regular contacts, including the annual official strategic and economic dialogue.
Private US business associations say that in cases involving product standards, Beijing will often announce a restrictive policy and then retreat after an outcry from foreign business groups.
Tim Stratford, a former assistant US trade representative, now at the law firm Covington & Burling in Beijing, says that China is susceptible to some political arguments. “You can make the case that most countries behave in a particular way and China is placing itself outside those norms,” he says. “Or you can argue that China will lose support from other countries if it acts this way.”
美国前助理贸易代表、如今任职于柯温顿-柏林律所(Covington and Burling)北京分公司的夏尊恩(Tim Stratford)表示，中国容易受一些政治主张的影响。他说：“你可以辩称，大多数国家都以某一特定的方式行事，而中国却将自己放在这些行为规则之外。或者，你可以辩称，如果它继续这种作为，中国将失去其它国家的支持。”
But at the moment, he says, a mutual lack of trust hampers the resolution of a wide range of issues. A fundamental mismatch of expectations, it appears, is the real problem currently bedevilling relations.
What China sees as legitimate tools to promote its economic development are regarded in Washington as abuses of state and market power, and it is becoming painfully obvious that the US lacks the power to correct them.
One thing is clear: the temporary resolution of the currency problem has not ended the friction in trade and economic relations between the US and China.