Senior officials from the US and China on Tuesday laid the groundwork for a January state visit by Hu Jintao, Chinese president, to Washington, with ongoing friction over trade dominating the agenda on the economic front.
Wang Qishan, Chinese vice-premier, and Tim Geithner, US treasury secretary, met to discuss “global economic developments” as delegations from both countries gathered for the annual meeting of the Joint Commission on Commerce and Trade, which ends on Wednesday.
“They discussed the importance of accelerating efforts to promote strong, sustained and more balanced growth and reducing barriers to foreign trade and investment,” the Treasury said of the meeting with Mr Geithner.
The US this week raised the pressure on China to improve market access for foreign companies with the release of a highly critical report examining Beijing’s policies. On the same day, the US won a critical ruling from a panel at the World Trade Organisation over its imposition of 35 per cent duties on Chinese tyre imports.
Meanwhile, lawmakers in the US Senate have continued to press for legislation that would force China to allow its currency to appreciate faster.
A package of Chinese policies aimed at encouraging local innovation are “expected to make it difficult for foreign companies to compete on a level playing field in China”, said the International Trade Commission, a US government agency, in a report released on Monday night just ahead of the annual meeting of the Joint Commission on Commerce and Trade.
The ITC report is the first of two which, on the request from the US Senate, will attempt to measure the impact of intellectual property rights infringement in China and Chinese innovation policies on the US economy. If the second one, due next May, diagnoses sizeable damage to US companies and jobs, it could become the basis for US trade action against Beijing.
The ITC also said US receipts of royalties and licence fees from exports to China suggested widespread infringement of intellectual property rights and market access problems.
In addition, it criticised Chinese policies aimed at promoting innovation that had spurred a boom in opportunistic and predatory patent filings used against foreign companies, and that China’s practice of establishing rival standards often amounted to a discrimination against overseas suppliers.
The report came as China’s Ministry of Commerce announced on Tuesday it was “disappointed” by a WTO ruling this week that cleared the US of any wrongdoing in imposing emergency tariffs on imports of Chinese tyres and stated its decision to appeal against the ruling.
An unnamed official from the Ministry was quoted in a statement saying that US trade measures against Chinese tyre imports were an example of US trade protectionism aimed at deflecting domestic political pressure. The official said the US measures “do not accord with the rules of global trade and have met with nothing but widespread criticism.”
The Ministry said that the US tariffs have increased the burden on low-income consumers in the US by helping to push the price of tyres up by between 10 and 20 per cent. It also noted that while Chinese tyre imports to the US have fallen, the total value of tyres imported to the US actually grew 30 per cent in the first half of this year from the same period a year earlier.
The US first introduced punitive tariffs of 35 per cent on all car and light-truck tyres from China in September 2009. The WTO ruled this week that those tariffs were justified and in accordance with global trade rules.
Meanwhile the ITC report’s findings echo growing complaints from foreign companies operating in China, most clearly expressed in a rare outburst by Jeffrey Immelt, GE chief executive, earlier this year. In July, Mr Immelt accused the Chinese government of becoming increasingly protectionist.
Chinese officials have repeatedly addressed this mood with public pledges that foreign companies continue to be welcome.
However, key Beijing policy measures which could have an opposite effect are still looming.
These include the creation of a catalogue of products eligible for favoured status under an innovation programme in government procurement and a definition of information security related products which could determine the range of future market access for foreign investors in the technology sector. Industry executives believe either could come before the end of the year.
Therefore Washington hopes to extract more concrete commitments to openness from Beijing during the trade talks.
Max Baucus, chairman of the Senate finance committee, and Chuck Grassley, ranking member, who requested the ITC investigation, accused China of trying to fob off American businesses with small steps and empty promises.
“This week’s US-China trade talks are the perfect opportunity for China to make serious commitments to address these issues. It is time for action,” said Mr Baucus.