Originally created 09/24/98

China's trade deficit threatens U.S. relations



BEIJING -- A senior U.S. trade official warned Wednesday that China's soaring trade deficit with the United States threatens to spoil steadily improving relations between the two countries.

Undersecretary of Commerce David Aaron urged Chinese trade and industry ministers in two days of meetings to do more to open markets, revive a seemingly stalled effort to join the World Trade Organization and head off a confrontation with Washington.

Barriers to U.S. investments and exports are "taking a toll on our bilateral commercial relations," Aaron told a gathering of U.S. business executives.

"Ironically, our commercial relationship, which in the past has helped us through difficult times, threatens to become the source of increasing political friction," he said.

China's trade surplus with the United States is projected to reach $60 billion by the end of the year -- more than $1 billion a week -- a 20 percent increase over the level in 1997, Aaron said.

The unusually blunt tone Aaron took before the U.S. business community signals a resurgence in trade tensions after a relaxing year or so while U.S. and Chinese presidents Bill Clinton and Jiang Zemin held summit meetings.

China reacted angrily this month when Washington set a 90-day deadline for new rules requiring treatment and certification of wooden packaging from China to prevent the destructive Asian long-horned beetle from infesting shipments.

The regulations could affect up to half of China's U.S.-bound exports, but Aaron said he heard "no talk of retaliation" from Chinese officials. He explained to them that the beetles, native to China but not North America, threaten to wipe out U.S. hardwood forests.

Most worrisome for the U.S. side are Chinese moves to set up new barriers to trade and investment. Aaron noted that China restricted imports of some power plant equipment in May, is expected to impose price controls on imported medicines next month and may close a loophole that has allowed foreign companies to invest in the restricted telecommunications market.