U.S. Pushes Trade Issues at APEC Summit, China Pushes Back

November 15, 2011 Posted by China Briefing Reading Time: 3 minutes

Nov. 15 – This year’s Asia Pacific Economic Cooperation (APEC) meeting came to an end on Sunday in Honolulu, Hawaii with the group’s 21 economic leaders successfully creating a new communique titled the “Honolulu Declaration” – aimed at helping the organization work “towards a seamless regional economy.” However, in reality, differences and contention – mainly between world’s two leading economies China and the United States – persisted throughout the two-day meeting.

The value of China’s currency
Feeling the pressure from his political rivals and wary domestic voters, U.S. President Barack Obama struck a surprisingly tough tone on China-U.S. trade issues. Obama called China a “grown up” economy and urged it to act like a “grown-up” in global economic affairs.

The value of China’s local currency (the renminbi or RMB), which Obama believes is kept artificially low at the expense of U.S. companies, remains a major U.S. concern. In spite of his acknowledgement that there has been a “slight improvement” in the RMB value, Obama insisted China should allow its currency to appreciate at a faster pace.

“We are going to continue to be firm that China operate by the same rules as everyone else. We don’t want them taking advantage of the United States,” Obama told reporters, emphasizing that China should create a level playing field for U.S. and other foreign businesses.

China quickly fought back, claiming it saw no motivation to abide by rules it took no part in writing.

“First we have to know whose rules we are talking about,” said Pang Sen, a deputy director-general at China’s Ministry of Affairs. “If the rules are made collectively through agreement and China is a part of it, then China will abide by them. If rules are decided by one or even several countries, China does not have the obligation to abide by that.”

Contesting the theory that a faster value rise in the RMB will contribute to more balanced global trade, China argued that rapid RMB appreciation will only harm China’s own economy and drive up domestic unemployment, which would finally hurt global growth.

In addition, major RMB appreciation will not help the United States with its trade deficit and high unemployment rate, said Chinese President Hu Jintao, whose words were quoted by the Beijing-based Chinanews.com.

Investors believe Hu’s comments indicate that China has no intention of allowing the RMB to rise faster in the near term.

Environmental goods and service trade
With a strong push from the United States, the APEC leaders pledged to advance free green technology trade within the region. Under the “Honolulu Declaration,” a list of environmental goods and services (EGS) will be developed next year and APEC members will be asked to reduce tariffs on those products to 5 percent or less and remove non-tariff barriers including local content requirements.

China had earlier showed resistance to the actual free EGS trade goals, calling them “too ambitious” and “beyond the reach of developing economies.”

China’s argument with the United States on the progress of free EGS trade came a few days after the U.S. Department of Commerce started an investigation into Chinese solar subsidies and trade practices in response to a petition filed by seven U.S. solar manufacturers last month.

“We have seen a lot of questionable competitive practices coming out of China when it comes to the clean energy space, and I have been more aggressive than previous administrations in enforcing our trade laws,” Obama emphasized in a TV interview earlier this month.

China, on the other hand, cautioned that such moves by the United Sates may create a lose-lose situation. If the United States decides to take anti-dumping measures against imported Chinese solar panels, U.S. equipment and raw material exports to China could be strongly affected as well, said the Chinese Ministry of Commerce.

Trans-Pacific Partnership
As part of its efforts to significantly increase exports, the move by the United States towards talks on the Trans-Pacific Partnership (TPP) carries specific importance following the stalled Doha Round at the World Trade Organization talks.

Current TPP talks are proceeding with Australia, Chile, Peru, Singapore, Malaysia, New Zealand, Vietnam and Brunei. Canada, Mexico and Japan also showed strong interest in joining the talks.

As much as the United States wants China to also become a member of the pan-Pacific free trade zone in the future, China’s Ministry of Commerce showed reluctance in joining the talks.

“TPP has set very high benchmarks, whether or not all these members will reach that high benchmark we’ll have to wait and see,” Assistant Commerce Minister Yu Jianhua said at a news briefing in Beijing, emphasizing that such regional agreements should not replace wider trade regimes.

Michael Green, a senior advisor with the Washington-based Center for Strategic and International Studies, believes the current TPP talks with some developing countries such as Vietnam – which also has closed-market economy – will help the United States to work through some similar issues it would possibly face later with China.

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