Sinomania!

With no fanfare from the White House and zero interest from mainstream media President Obama received a week ago the report (as required by Obama's March 11 Executive Order) from the Executive branch's Trade Promotion Coordinating Committee on the National Export Initiative (NEI).

Although mostly focused on policy and the creation of what promises to be another cumbersome interdepartmental and interagency bureaucracy the report does single out China as a major focus for US exports. China is the fastest growing market for American exports for many years now.

The NEI report emphasizes six fairly broad areas of focus for China trade: Green Tech including all aspects of 'green' energy and retrofitting, healthcare (medical equipment is already a major export), transport (think railways including urban transit), tourism (very underdeveloped), agriculture (China is already the USA's second biggest export market valued around $13 billion (US dollars) in '09), and lastly education.

The report mentions the importance of Chinese accession to the WTO Government Procurement Agreement but fails to make it a policy objective. Access to China's government procurement was a requirement for WTO acceptance and so far Beijing has kicked the ball for almost a decade. Most of the investment in China's enormous infrastructure and building boom is state-led via direct Central and Provincial government spending. The USA should focus on opening this market by demanding China adhere to the WTO Government Procurement Agreement versus wasting time on political posturing over the exchange rate of the Yuan.

Vice President Xi Jinping responded to criticism of "buy China" bias in Chinese government procurement and China's near decade long foot-dragging on agreeing to the Word Trade Organization's Goverment Procurement Agreement (GPA) - a requirement of China's WTO accession protocol - telling reporters in Beijing that "with regard to government purchases and construction projects, the Chinese government will adopt an open, transparent plan to let foreign companies and technological products enjoy equal treatment."

In October it is believed Beijing will restart talks toward China signing the WTO GPA. Regular readers know this is a hugely important negotiation to watch. If the USA and EU can compel China to own up to its WTO commitments regarding government procurement it could potentially open the biggest market of all for exports to China. The possibility of competing for Chinese infrastructure and technology projects could help give President Obama's neglected "National Export Initiative" a chance for success...

Bloomberg via Businessweek reports that US Trade Representative Ron Kirk may be considering a WTO complaint against China on behalf of Visa, American Express, MasterCard, and Discover Financial. The credit card giants want access to China's fast growing electronic payment processing market. Although Chinese still prefer to use cash for most transactions credit and debit cards are rapidly gaining popularity. The number of new cards issued is measured in hundreds of millions. Most growth has occurred in just the past few years and domestic ATM king UnionPay has the largest market share in China at around 65%.

America's card companies claim China committed to opening up the sector to foreign competition when it joined the WTO. Fact is, however, there is absolutely no mention whatsoever regarding credit or debit cards and electronic payment processing in either the USA China Trade Relations Act or the WTO Accession Protocol. Both documents are readily available at the Sinomania! website....

Headline writers this afternoon say President Obama "urged" China to stop controlling its currency. What did Obama say exactly? Long into a banal booster speech at the annual meeting of the Export-Import Bank of the United States (a federal government agency), Obama said

It surprises me Obama continues to spend political capital in a pointless pursuit to coerce Beijing to appreciate its currency. Washington can urge China all it wants but Beijing has made its position on Renminbi very clear. Just this week at the National People's Congress session China said the Yuan's unofficial peg to the US dollar will end and appreciation up to 10% over the short to medium term is expected.

A move by Beijing to drastically create a more "market-oriented" exchange rate would mean reducing China's dollar holdings in favor of other currencies or gold. Is this ultimately what Washington really wants? It is also hard to argue that the exchange rate of the Yuan is that out of whack for US exporters when China is year after year the fastest growing market for US exports.

A far better use of rhetoric and effort would be for Obama to push Beijing to fulfill its promise to enter into the WTO Government Procurement Agreement (GPA) and open up potentially billion$ in opportunities to American businesses. So far no moves on the GPA have been made by US Trade Rep Ron Kirk or anyone else in the Obama administration. Why not?....

The 20th US-China Joint Commission on Commerce and Trade concluded a vibrant two-day summit in Hangzhou with significant agreement on several areas of growing trade and investment and some serious-sounding lip service on traditional disagreements such as intellectual property.

In attendance was ethnic Chinese US Commerce Secretary Locke, Trade Rep Ron Kirk, the new US Ambassador to China Jon Huntsman, and many others from the Obama administration and mandarins from a wide range of Beijing's bureaucracies. Advances include:

All of the above is good news and represents a lot of potential positive business opportunities for Americans. As the dragon and Uncle Sam hug tighter will Europe be left out? Time will tell....

Attention Walmart shoppers: all tires at twice the price!! Late Friday President Obama proclaimed that additional duties on Chinese tires would be imposed although the top rate of the tariff was reduced to 35%. With this move Obama sets the stage for a difficult time in China trade for the rest of his (first?) term in office. After 2013 the USA will lose the ability to protect American industries from Chinese imports according to the 2000 China Trade Relations Act. Obama has clearly sided with his union constituents - the complaints originate with the United Steelworkers Union - and short term political gain. How hard will Beijing's Tit be for this Tat?....

The WTO released its official dispute recommendations (details here) on a trade dispute brought by the USA over China's restrictions on audio-visual and printed publications. The results overall are mixed - the WTO did not agree with USA claims on printed materials. But Hollywood is claiming a significant victory in its desire to expand and control distribution of movies in China. Given the popularity of Hollywood films among Chinese - the new Harry Potter flick was debuted for the first time in China simulataneously with its American release and Transformers 2 has broken box office records in China this summer - Hollywood may have good reason to celebrate.....

The World Trade Organization (WTO) has established a dispute panel on Beijing's complaint about the USA's ban on Chinese poultry. The request was initiated some months ago and the WTO will now hear and investigate the matter. Readers will recall that the US Congress inserted the ban into Obama's big stimulus program. China is also challenging anti-dumping duties imposed by the EU on machine parts (bolts, screws, etc.) from China....

The hoopla in American opinion pages, er, media on Beijing's "Buy China" direction for government procurement smacks of hypocrisy to this writer. President Obama allowed the American Recovery and Reinvestment Act of 2009 to maintain its "buy America" provisions and has publicly stated that he believes the $1 trillion spent every year on defense should adhere to "buy America". Further, the Obama administration is caving to US manufacturers in anti-dumping cases involving non-government procurement by US importers.

Fact is, the USA federal government under W and now Obama has failed year after year to pressure Beijing on its commitment to join the WTO Government Procurement Agreement. Could it be because Uncle Sam is reluctant to give up his protectionist prerogative too?

According to the London Financial Times today, Beijing expressed an explicit "Buy China" policy in government procurement. If true, this is a serious setback in China's long overdue accession to the WTO Government Procurement Agreeement (GPA). China is required under its WTO protocol to adhere to the GPA but there is no set time period. After being an observor to the GPA from 2002-2006, Beijing filed to join the agreement at the very end of 2007. Since that time little progress has been made.

Beijing may be responding to the explicit "Buy America" provisions in the US federal government's stimulus packages and defense spending. As a candidate, President Obama indicated he supported "Buy America" in defense procurement.

Are these more signs of looming trade war....?

Among the earmarks, pork, and other goodies in the 'imperfect' federal spending bill signed into law by President Obama on Wednesday is a restriction on poultry imports from China. US China poultry trade resumed in 2004 after a bird flu (and SARS) outbreak and former Senator Joe Biden of Delaware and Senator Mikulski of Maryland were very active in opening Chinese markets for their states' chickens. But USA imports from China did not restore in other words there was not 'tit-for-tat' the age old balance in China trade.

Now Chinese chicken will be completely restricted according to language in the new spending package. This is flat out protectionism and another dangerous sign that the US Congress - now with Obama's authority - may jeopardize USA-China trade relations. Beijing has signalled it my begin a WTO dispute in the matter...

The WTO this week issued a report on its panel resolving the USA's dispute with China over intellectual property rights. The WTO agreed with the USA that China must cover protection to all works but lost on two other very important points including upholding Chinese IP enforcement procedures. An interesting analysis is presented by Canadian law professor Michael Geist...

For much of 2008 the United Steelworkers union and the following US steel makers: Maverick Tube Corp., U.S. Steel Corp., Tex-Tube Co., TMK IPSCO Tubulars, Northwest Pipe, ACIPCO, and Stupp Corporation, have petitioned Washington for protection against imports from China of specialty steel pipes used chiefly in the oil & gas industry. The US International Trade Commission today granted their wish with a countervailing duty up to 40% on Chinese imports.

Meanwhile, Beijing has requested its first ever prope by the World Trade Organization (WTO) into the matter and on similar duties imposed on certain imports of vehicle tires.

The USW is one of the most vocal critics of trade with China. I suspect that we will see many such trade disputes over the course of the next year in particular and certainly between now and 2013 when the protectionist loophole in the China Trade Relations Act expires.