Commerce Secretary Testifies on U.S.-China Trade Issues

Locke is Monitoring China Currency CVD Allegations

The Department of Commerce’s Import Administration is currently reviewing allegations in two countervailing duty cases (aluminum extrusions and coated paper) in which the petitioners claim that China’s currency policy constitutes a countervailable subsidy. Locke states that he is carefully monitoring the review of these allegations to determine whether they meet the legal threshold for investigation. Given the scrutiny that such decisions face in U.S. courts and at the WTO, he wants to make sure the U.S. decision on whether to investigate is warranted by the facts and the law.

In addition, Treasury Secretary Geithner will be closely monitoring how far and how fast the Chinese let their currency appreciate and will continue to raise this issue with Chinese officials. This comes after China’s recent announcement that it will increase the flexibility of its exchange.

U.S. Exports Must Access China on Equal Terms

The importance of the Chinese market to the global strategy of U.S. exporters and companies operating in China has been growing. The interaction between those U.S. businesses and their Chinese partners, suppliers and customers has improved as Chinese businesses have adopted more international business practices and as the commercial legal environment has improved.

But the U.S. needs to ensure that exports flow into China’s market on equal terms with Chinese products and services. The Commerce Department will do more to support the current exports trend. Under the National Export Initiative (NEI), the Commerce Department is expanding trade advocacy and working to remove barriers preventing U.S. companies from getting free and fair access to China’s market. At the same time, it is working to promote open trade and cross-border investment; urging China to create an open environment for innovation.

China’s Legal Remedies for IPR Violations are Still Inadequate

Improving the protection of IPR through enforcement mechanisms that exist in Chinese law is a priority for the Commerce Department. Chinese government officials express willingness to address the problem, but serious challenges stand in the way of their efforts. For example, penalties for IPR infringement generally are not severe enough to deter potential violators from breaking the law and the lack of meaningful injunctive relief continues to hamper enforcement.

The Commerce Department recognizes the seriousness of the problem in China and has devoted significant resources, in both the U.S. and China, to help improve the IPR protection and enforcement situation. The Department has been an integral part of an interagency committee charged with the development and implementation of the Administration’s strategic plan to combat intellectual property infringement. The “2010 Joint Strategic Plan on Intellectual Property Enforcement,” which was recently released, contains more than thirty recommendations to improve enforcement efforts here and overseas.

U.S. Needs to Find a Way to Balance its Relationship with China

Locke stated that the U.S. needs to find a way to adjust the course of its economic relationship with China to make that relationship more balanced and to ensure that it provides more opportunities for U.S. workers and businesses.

JCCT is Addressing Barriers that Limit U.S. Access to China

China has increasingly erected barriers at or behind the border in sectors that are supposedly open to foreign products and services. In over a dozen US-China Joint Commission on Commerce and Trade (JCCT) working groups, experts are addressing continuing sources of concern with an eye to making significant progress at this fall's JCCT meeting.

These working groups are addressing policies that favor indigenous innovation; policies to develop unique technical standards and burdensome and duplicative conformity assessment requirements; inadequate IPR enforcement; and government procurement policies that favor domestic products and services.

China Has Committed to Improving its Indigenous Innovation Policies

The U.S. government respects China’s desire to develop its innovation economy; this is a goal shared by many countries, including the U.S. Unfortunately, recent innovation policy developments in China, such as the proposed indigenous innovation product accreditation system, have generated concern within the U.S. business community that China is using its innovation strategy to displace foreign products and gain access to foreign technologies.

Locke notes that he and others have voiced their concerns with these policies and the U.S. government submitted comments opposing implementation of the accreditation system as envisioned. On May 10, 2010 the Chinese authorities delayed implementation of the system to review the comments submitted.

Locke stated that China has committed to ensure its innovation policies are consistent with important constructive principles, will join both high-level and expert bilateral discussions on what truly spurs innovation, and will take the results into account as it develops and implements its innovation policies.

(See ITT’s Online Archives or 06/25/10 news, [Re:10062537], for BP summary of other testimony given during the hearing.)