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Bush won't bring trade case against China

By MARTIN CRUTSINGER
The Associated Press

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But the administration quickly rejected the 175-page petition, declaring that it would not "retreat into economic isolationism" by bringing a case that could impose economic sanctions on Chinese goods.

Administration officials said President Bush believed that efforts to use diplomatic channels to get China to stop linking its currency, the yuan, to the U.S. dollar were beginning to show results that would be jeopardized if the United States brought a case before the World Trade Organization.

Democratic presidential challenger Sen. John Kerry said Bush's rejection of the petition was yet another example of the administration's failure to enforce U.S. trade laws to protect U.S. workers.

"Today, George Bush has made it clear that he wants to continue taking America in the wrong direction by refusing to enforce our trade agreements and continuing to allow China to manipulate its currency," Kerry said in a statement issued by his campaign. "As president, I would take America in the right direction — acting vigorously to end China's illegal currency manipulation."

The petition was filed by the China Currency Coalition, composed of 36 companies, business groups and unions, led by the AFL-CIO. The companies were concentrated in the steel and textile industries.

However, a broader group formed earlier this year on the currency issue, which included the National Association of Manufacturers (NAM), refused to go along with filing a petition yesterday.

"We're interested in making a difference, not just making a statement," said NAM Vice President Michael Baroody. He said some of those pushing for the petition "seem to be more serious about election-year politics than about currency values."

The petition was filed with Bush's chief trade negotiator, U.S. Trade Representative Robert Zoellick.

"In April, the administration made it clear that accepting such a petition would be a retreat into economic isolationism. That is a path we would not take then and it is a path we will not take today," Richard Mills, Zoellick's spokesman, said in a statement.

The Bush administration rejected a similar case accusing China of unfair labor practices last April.
 
Opponents of China's current regime contend that by pegging the yuan at a fixed rate of 3.8 yuan to one U.S. dollar, the Chinese government is keeping its currency undervalued by as much as 40 percent, giving Chinese products a tremendous competitive advantage against U.S. products.

The U.S. trade deficit with China hit a record $125 billion last year, the largest imbalance the United States has ever suffered with any country, and it is expected to top $150 billion this year.

Critics of administration policies contend that Bush has not applied enough pressure to China and other trading partners to halt unfair trade practices. They say the loss of 2.7 million manufacturing jobs over the past four years and a soaring U.S. trade deficit, which last year hit a record $496.5 billion, reflect those failed policies.

Chinese officials have said they plan eventually to allow the yuan's value to be set on currency markets but argue that the action cannot be taken now because it could destabilize the country's debt-burdened banking system.

Treasury Secretary John Snow believes the Chinese are taking the correct steps to prepare their financial system for a flexible currency regime, Treasury spokesman Rob Nichols said.