Nov 7 (Reuters) - Following are key economic and trade issues between the United States and China:
U.S. labor groups and some economists and manufacturers say that China gains a hugely unfair trade advantage by intervening in currency markets to keep its currency, called the yuan or renminbi, below market value. The policy helps make the price of its exports more competitive.
The Democratic Party-controlled U.S. Senate passed a bill in October designed to press China to stop intervening in exchange rates, but the House of Representatives, run by Republicans, has refused to take up the legislation.
China denies that it manipulates exchange rates, saying that it has allowed the currency to appreciate some 30 percent in the past five years. Beijing also rejects the idea that its exchange rate is a factor behind China’s trade surplus with the United States.
The G20 leaders of the world’s largest economies, which includes China, routinely say that exchange rates should be set by markets. But at the Cannes summit on Nov 4, the G20 agreed on an Action Plan to boost jobs growth that for the first time, it specifically named China. It said the G20 welcomed China’s determination to increase exchange rate flexibility “consistent with underlying market fundamentals.”
SUBSIDIES TO STATE-OWNED ENTERPRISES
The state-owned enterprises that dominate China’s economy enjoy a range of government subsidies. Business costs such as land, energy, resources and loans are provided to state firms on preferential terms not available to foreign firms or to private Chinese firms.
Many U.S. experts believe these subsidies do far more to distort competition in China’s market and in the markets of third countries than an undervalued Chinese currency.
The United States recently took China to task at the World Trade Organization for its failure to declare nearly 200 types of subsidies in a required report to the WTO.
Foreign businesses have grown increasingly concerned about China’s “indigenous innovation” policies, aimed at fostering the creation of home-grown technology and know-how and reducing Chinese firms’ dependence on foreign technology and companies.
U.S. companies worry that indigenous innovation policies will force them to transfer technology development and ownership of intellectual property to China in exchange for allowing them to participate in the country’s huge government procurement market.
President Hu Jintao has indicated goods produced by Chinese affiliates of U.S. and other foreign firms would be considered indigenous innovation products eligible to compete for procurement bids with the national and with local governments.
The Obama administration and U.S. businesses say they want stronger follow-up from Beijing to ensure that commitment is kept.
The U.S. Commerce Department is expected to formally launch an investigation this week into charges that Chinese companies are selling solar cells and modules in the United States at unfairly low prices and receive generous Chinese government subsidies. The case was brought by the U.S. arm of German company SolarWorld and other members of the Coalition for American Solar Manufacturing, which have asked for anti-dumping and countervailing duties of more than 100 percent. China has slammed the action as a protectionist move and urged the Obama administration not to apply duties. A preliminary decision on duty rates is expected next year.
Beginning with statutory requirements that most major sectors of China’s economy — from autos to energy to telecommunications — be dominated by the state, U.S. industry says it faces discriminatory regulations that promote state-owned enterprises at the expense of private and foreign firms.
A related complaint is that China lacks regulatory transparency and does not spell out critical rules governing operations in China.
The Obama administration last week sent China a long and detailed formal list of questions on Beijing’s policies on controlling the Internet. Washington said China’s Internet policies resulted in the blockage of the websites of U.S. businesses, impeding their ability to serve customers in China.
China has long taken heat from trade partners over widespread unauthorized copying of software, music, films and other products, from luxury apparel to industrial machinery.
The International Intellectual Property Alliance, which represents U.S. copyright industry groups, estimated U.S. trade losses in China due to piracy at $3.5 billion in 2009.
China says it is making progress against intellectual property piracy and launched many enforcement campaigns to stamp out bootlegged books, music, DVDs and software — all of which all are openly available. China remains on the U.S. “priority watch list” of countries deemed to have serious copyright and trademark theft.
China, which controls 97 percent of the world’s rare earth supplies, alarmed its trading partners in 2010 by restricting exports of the minerals, which are used in a variety of clean energy uses and high technologies.
In some cases, foreign firms have come under pressure to relocate their businesses that use rare earths to China in exchange for access to those minerals.
China has defended the restrictions as measures to manage supplies and control pollution associated with rare earth production and to increase the domestic share of the value added in the manufacture of technology products that use the minerals.
China frequently demands that the United States end restrictions on the sale of U.S. high-technology products with possible military use to Chinese customers. Beijing also wants the United States to recognize China as a “market economy” — a status that would make it harder for U.S. firms to pursue anti-dumping cases against Chinese exporters.
China says that its firms have billions of dollars they are willing to invest in the United States, but that many proposed Chinese investments are held up or rejected due to onerous U.S. security evaluations or politicized decision-making. (Reporting by Paul Eckert; Additional reporting by Doug Palmer; Editing by Cynthia Osterman)