NEWS ANALYSIS : U.S. May Be Closer to Sanctions on China

After a frustrating round of negotiations with Chinese officials in Washington last week, President Bush and his trade negotiators appear to be moving closer to imposing retaliatory punitive tariffs on some Chinese imports.

In closed talks that concluded Friday, U.S. negotiators tried to get their Chinese counterparts to agree to dismantle barriers to American imports and provide copyright protection for American-made software and other intellectual property. They failed.

Calling the series of meetings a “significant disappointment,” a senior U.S. trade official said the Chinese delegation contended that it had not been given authority to make concessions on market access and intellectual property rights.

Before last week’s negotiations, the Chinese government faced a Nov. 26 deadline for responding to U.S. grievances on intellectual property rights. If the Chinese do not make significant progress toward protecting software, books, movies and music from piracy by that date, the Administration has legal authority to retaliate.

Turning up the heat, negotiators with the U.S. Trade Representative’s Office responded to the Chinese delegation’s “no authority” stance with a specific list of trade-barrier objections, warning that the United States was prepared to commence the process for retaliation unless China responded to U.S. objectives by Sept. 30.

If the deadlines pass unheeded and the Administration opts for punitive measures, it could raise tariffs or impose quotas on one or more of China’s most important import lines--for example, toys or shoes or apparel--making them more expensive or less available in the United States.

In the past, the United States has issued deadlines as a negotiating ploy in trade talks with other nations. But observers in and out of government say the Administration is more likely to act this time because the ballooning U.S. trade deficit with China--expected to become second only to Japan’s by year-end--is becoming a sore point. Indeed, President Bush got some Senate support for his broader China policies by pledging a tough stand on trade with China.

The controversy has been fanned by members of Congress who estimate that the U.S. shortfall in trade with China could swell from the $10.4 billion recorded in 1990 to as much as $15 billion by the end of 1992.

Citing the trade imbalance and China’s human rights abuses, the House of Representatives on July 10 voted to revoke Beijing’s most-favored-nation trading status, which keeps tariffs on Chinese products as low as those for most other U.S. trading partners. The move, opposed by Bush, got enough votes to override a threatened Presidential veto. The House also imposed a series of conditions on any renewal of such benefits next year.

Reacting indirectly to the House vote--and directly to the 15 U.S. senators who urged a tougher stand on China’s human rights and trade policies--Bush in a July 19 letter vowed “further action” if the August talks “fail to produce Chinese commitments to take substantial measures to improve market access.”

The pledge helped win crucial Senate backing. The Senate on July 24 voted to impose tough conditions on renewal of MFN benefits for China, but the Democratic-sponsored foreign policy challenge fell far short of gaining enough support to overcome a promised veto.

The Senate vote was extremely important to the Chinese government because the United States is China’s largest market and Chinese products would have become prohibitively expensive without MFN status. The vote was also important to the Administration. Without MFN, it has contended, it would have little leverage in its efforts to encourage China’s Communist government to continue moving toward a market economy and fairer trade practices.

Various American industries are now seeking protection from “unfair practices” in China. The Washington-based International Intellectual Property Alliance, representing eight trade associations with copyright concerns, says losses due to piracy in China total about $400 million a year--more than any other country.

Many other industries complain about lack of access to the huge Chinese market. China keeps some products out by imposing high tariffs or restrictive licensing requirements. In other cases, a Chinese producer must first approve the importation of a competing foreign good before it can be sold in China. Since 1988, China has erected more than 40 new barriers to imports, trade officials say.

After the failed Soviet coup, some China-watchers say, Congress may again try to get the Administration to adopt a tougher China policy by contending that the Soviets--who have no MFN status--are now prepared to liberalize their political structure as well as their economy.

If the Chinese do not make concessions, the Administration may be forced to adopt retaliatory measures.