China drift toward more state control "troubling": U.S.

Reuters News
Posted: Nov 30, 2011 4:53 PM
China drift toward more state control "troubling": U.S.

By Doug Palmer

WASHINGTON (Reuters) - The United States on Wednesday criticized China for backing away from free market reforms and moving toward more state control of its economy as Beijing approaches the tenth anniversary of its entry into the World Trade Organization.

"China seems to be embracing state capitalism more strongly each year, rather than continuing to move toward the economic reform goals that originally drove its pursuit of WTO membership," U.S. Ambassador to the WTO Michael Punke said in remarks delivered in Geneva and made available in Washington.

"This is a troubling development, and the United States urges the Chinese government to reconsider the path it is on," Punke said.

His comments were part of a tenth and final review of how well China has honored commitments it made to join the WTO, which became official on December 11, 2001.

They follow recent testy exchanges, with President Barack Obama bluntly urging China to act more like a "grown up" economy and Beijing pledging to fight what it sees as U.S. protectionism in the green sector.

China's Defense Ministry on Wednesday also criticized the United States and Australia for upgrading their military ties, warning such steps could undermine trust and reflected Cold War thinking.

In the 10 years since joining the WTO, China has surpassed Japan to become the world's second largest economy after the United States. Its growth has presented a challenge to U.S. global leadership, already tarnished by an unpopular war in Iraq and burdened by a mountain of government debt.

Punke acknowledged that "China took impressive steps" during the first five years after joining the WTO to bring its laws and regulations into line with global rules and that led to a dramatic expansion in trade with the rest of the world.

But "the overall picture presented by China's first 10 years of WTO membership remains complex, given a troubling trend in China toward intensified state intervention in the Chinese economy over the last five years," Punke said.

"Increasingly, trade frictions with China can be traced to China's pursuit of industrial policies that rely on trade-distorting government actions to promote or protect China's state-owned enterprises and domestic industries," he added.

China's ineffective enforcement of intellectual property rights and selective use of border measures to encourage or discourage exports continue to raise concerns among many of its trade partners, as do policies that prevent U.S. manufacturers, farmers and service companies from doing more business there, Punke said.

He noted the United States has already brought 12 cases against China at WTO for what it believed were rule violations and has won on many of the complaints.

Punke also highlighted what he called China's apparent habit of retaliating against "legitimate actions taken by the United States or other trading partners under their trade remedies laws."

"This type of conduct is at odds with fundamental principles of the WTO's rules-based system," Punke said.

He did not give an example, but Beijing has responded to an unfair trade complaint brought by U.S. solar panel producers against China by initiating its own probe into U.S. government policy and subsidy support for renewable energy.

In a separate speech at the U.S. Chamber of Commerce, U.S. Trade Representative Ron Kirk said the United States would continue to press China to honor its WTO commitments, but did not signal any new specific new case on the horizon.

"We very much welcome China's economic growth, especially right now. The world very much welcomes a healthy China, a healthy Brazil but we just want to make sure that our producers have far access to their markets," Kirk said.

(Reporting by Doug Palmer, editing by Anthony Boadle)