Evans: China Must Open Economy to Competition

WASHINGTON – The Bush administration, facing political pressure to take a tougher stance on China's trading practices, called on the Chinese government to open its economy to greater competition.

Commerce Secretary Donald Evans (search) said the administration needed to see "tangible results" to stem a growing chorus of complaints in the United States about China's practices, which critics see as a major contributing factor in the nation's $124 billion trade deficit with China last year, the largest imbalance ever recorded with any country.

"We need to see tangible results and a strong commitment on the part of the Chinese to implement their commitments," Evans said in a speech prepared for delivery Wednesday to the American Chamber of Commerce in Beijing.

"There will not be a level playing field if China continues to drag its feet. The Chinese must show more cooperation and less manipulation," Evans said.

Evans pointedly noted that the administration had rejected requests by U.S. labor unions and business groups earlier this year to pursue unfair trade cases against China on the grounds that it was violating workers' rights by preventing collective bargaining (search) and was manipulating its currency to gain unfair advantages in competition with U.S. goods.

Evans said the administration rejected both cases because it believed it could achieve greater results through diplomatic negotiations.

But he warned, "Let us be clear, our commitment to positive engagement depends on results."

Sen. John Kerry (search), President Bush's Democratic challenger, was highly critical of the administration's refusal to pursue the labor and currency cases, saying that a Kerry administration would take a tougher stand against China in order to protect U.S. jobs.

Kerry said as president he would fight for American workers and won't "sit idly by when China or any other country pursues policies that hurt our economy."

While the United States has begun creating manufacturing jobs in recent months, the small gains followed more than three years of losses that wiped out more than 3 million U.S. manufacturing jobs (search).

Critics of the administration's trade policies contend that Bush has not taken a strong enough stand to force China to remove barriers to U.S. exports and halt unfair trade practices.

In his speech, Evans said that China needed to understand that there was "continuing, loud criticism" of China's trade practices in the United States and that support for free trade "erodes quickly in one-sided relationships."

Evans noted that China had promised at a recent joint meeting of U.S. and Chinese economic officials to crack down on piracy of U.S. copyrights in such areas as movies, music and computer programs, which U.S. industry contends cost $2.4 billion in lost sales in 2002.

"Sound trading relationships are based on partnership - not piracy," Evans said.

Evans noted that his agency is reviewing China's request to be classified as a market economy, a designation that would make it harder for U.S. companies to bring cases against Chinese firms accused of selling their goods at unfairly low prices in the U.S. market.

However, Evans said to be designated as a market economy, China will have to deal with a range of non-market-based policies such as its currency policies and the extent of government ownership of Chinese companies.

"Far too many key assets and means of production within the Chinese economy are owned and operated by the state," Evans said. "We have seen far too few 'for sale' signs on the commanding heights of the Chinese economy. We need to see them."

Evans said that government control of so much of the Chinese economy distorts free-market forces that a healthy economy needs to perform at optimum levels.

Evans also called for the Chinese government to lift capital controls and deal more forcefully with the bad loans being carried by China's banks.

Evans said all of these issues were raised by American companies at hearings the Commerce Department held this month on China's economy.

"Based on multiple submissions and testimony, it's clear that U.S. industry feels that many of China's policies, including its currency practices, place American companies at a significant competitive disadvantage," he said.

Evans said while China needed to show results, the administration was committed to helping the country enact the necessary reforms.

"China has a lot of work to do, but we know they are moving in the right direction," Evans said. "We're committed to working with the Chinese leadership to adopt the sweeping changes that can begin the first steps on the path toward free-market principles."