Originally created 09/10/04

Group petitions for unfair trade practices case against China



WASHINGTON -- A group of industry, farm and labor groups, seeking to put pressure on the Bush administration before the presidential election, petitioned the government on Thursday to file an unfair trade practices case against China.

The group accusing China of manipulating its currency to gain trade advantages against U.S. firms.

The administration will have 45 days to decide whether to pursue the case, a timeframe that will require a decision in the days right before the Nov. 2 presidential election.

Last April the Bush administration rejected a similar case accusing China of unfair labor practices, and said it did not plan to pursue either the labor case or the currency case before the World Trade Organization, arguing that its policy of diplomatic engagement offered greater hope of changing Chinese policies.

But the China Currency Coalition said Thursday it hoped that the administration would change its position in the face of a swelling Chinese trade deficit and no movement by China in recent months to alter its currency practices.

"We can wait no longer for China to act on its own," said Bill Hickey, president of Lapham-Hickey Steel Corp. in Chicago. "We vigorously reject the administration's characterization of supporters of this petition as 'economic isolationists."

The Bush administration has contended that opponents of its trade policies, including Democratic challenger John Kerry, are pursuing a policy of economic isolationism that will leave the country less able to compete in the global economy.

The currency coalition said that China, by pegging its currency tightly to the U.S. dollar, is keeping the value of its currency at least 40 percent below where it would be if the yuan's value was set by market forces, giving the country a tremendous competitive advantage.

America's trade deficit with China hit a record $125 billion last year, the largest imbalance the United States has ever suffered with any country, and it is expected to top $150 billion this year.

Critics of the administration's policies contend that Bush has not applied enough pressure on China to open its markets to U.S. manufactured goods and farm products and is instead pursing a failed free-trade strategy that has cost millions of lost manufacturing jobs.

Kerry has pledged that if he is elected president his administration will review all of the government's trade agreements during the first 120 days in office to make sure they provide adequate protections for labor rights and the environment.

China's practice of fixing its currency to the dollar instead of letting it be set by market forces has kept the currency undervalued by a significant amount, many private economists believe, meaning that U.S. products cost more in the Chinese market and China's goods are cheaper in the U.S. and other foreign markets.

Chinese officials have said they plan eventually to allow the yuan's value to be set on currency markets but argue that the action cannot be taken now because it could destabilize the country's debt-burdened banking system.

David Hartquist, a Washington attorney who prepared the 175-page petition for the currency coalition, said the group hoped that Treasury Secretary John Snow will raise the currency issue when Chinese officials attend the upcoming meeting of finance officials of the world's seven largest industrial countries in Washington on Oct. 1.

"This is an opportunity for the United States to use the leverage of a Section 301 case in face-to-face meetings with the Chinese," Hartquist said.

Section 301 of U.S. trade law allows the United States to pursue economic penalties against foreign nations, primarily by bringing cases before the WTO, the Geneva-based body that sets the rules of world trade.

Zoellick's office will have 45 days to decide whether to accept the currency petition or reject it.