Eased Exports for China Unlikely

Major changes in U.S. restrictions on exports to China are unlikely following dialogue meetings, experts say.
By Michael Lelyveld
2009-08-10
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BOSTON--Trade experts doubt there will be any sudden or major change in U.S. limits on high-tech exports to China following strategic and economic talks in July.

The two-day meeting of the U.S.-China Strategic and Economic Dialogue in Washington that ended July 28 provided some cause for optimism among those who have urged an easing of restrictions on sales of high-tech goods to Beijing.

The two countries agreed to "accelerate" implementation of the "Guidelines for U.S.-China High Technology and Strategic Trade Development," an initiative for cooperation in civilian trade, established in 2007.

Negotiators also agreed to "expeditiously formulate" a new "Action Plan on Expansion of China-U.S. High Technology and Strategic Cooperation in Priority Sectors," according to a U.S. Treasury Department fact sheet on the talks.

Chinese officials hailed the agreements. "The U.S. pledged to facilitate exports of high-technology products from the U.S. to China," said Vice Premier Wang Qishan after the meetings. Washington agreed "to loosen restrictions on the export of high-tech goods," the official Xinhua news agency reported on July 30.

But trade experts said it is unclear how fast or how far the United States will go.

Security concerns

Washington has kept a tight rein on sales of dual-use goods with possible military applications and crime-control items since the Tiananmen Square crackdown on democracy demonstrators in 1989.

U.S. rules also reflect concerns about weapons proliferation and a host of other security worries about technology-sharing with China.

William Reinsch, president of the Washington-based National Foreign Trade Council and a former undersecretary of commerce for export administration, told Radio Free Asia that a consensus is growing in Washington that U.S. export controls are outdated and should be reviewed.

But those concerns are not specific to China, he said.

"I don't have a sense that there's anything special being planned for the Chinese right now," said Reinsch, who also serves as a commissioner of the U.S.-China Economic and Security Review Commission.

"I don't think anything significant has changed in terms of our thinking about technology and the security risks associated with it, both with respect to China and anybody else for that matter," Reinsch said.

Trade surplus impact?

Chinese officials have argued for years that the United States could reduce China's huge surplus in bilateral trade by dropping its restrictions on high-tech sales.

But arms control groups point to numerous U.S. sanctions against Chinese firms for weapons-related transfers to Iran, while economists say that China's undervalued currency is a far greater cause of the imbalance in trade.

In 2008, U.S. exports to China of advanced technology goods such as semiconductors and electronics amounted to $18.7 billion, or 26 percent of all U.S. sales to the country, according to a Congressional Research Service report in June.

But with a trade imbalance of over $266 billion, high-tech exports would have to grow more than 14 times to erase China's trade surplus with the United States.

China has also been seeking technology transfer as part of negotiations over a new climate change treaty to replace the Kyoto Protocol, which expires in 2012. Cooperation may be needed to promote new technologies like "carbon capture and sequestration," an emerging system to treat global warming gases and store them underground.

But Reinsch indicated that progress on the issue is still in early stages.

"Near as I can tell, nobody has yet very clearly defined what technologies we're talking about in that whole area, and until they do, I don't think that question can be answered," he said.

'Gradual' changes likely

Catherine Robinson, associate director for high-tech trade at the National Association of Manufacturers in Washington, said that any changes are likely to be moderate and gradual.

"I think there is agreement that we should be facilitating legitimate high-tech trade with China and with other trading partners," Robinson said.

"In doing so, they're looking at ways they can facilitate high-tech products to China that don't pose a threat to our national security or will not help advance the Chinese military."

Robinson noted that the agreements use the word "facilitate," which is open to interpretation.

"They do not use the word 'ease.' They do not use the word 'lessen,'" she said.

This may mean that review procedures will be revised for sales of some low-risk products to China without eliminating export controls, Robinson suggested, but she does not expect any change in rules regarding exports of militarily useful goods.

Robinson also said that prospects for trade liberalization suffer whenever China launches a crackdown, such as during the unrest in Tibet last year and following the riots in Xinjiang on July 5.

"Especially for those who really believe that we shouldn't be trading at all with China, that just adds more fuel to the fire," she said.

China restrictions have long been a major issue for U.S. export control law. Throughout the 1990s, trade interests were wary about pushing Congress to act on renewal or revision of the Export Administration Act of 1979 because of concerns that China critics would take the opportunity to add even tougher curbs.

The export law technically lapsed in 2001, but it has been renewed annually under presidential emergency powers.

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