China Takes Hard Line on Trade Dispute With US

BEIJING has intensified a trade wrangle with the United States even though the dispute threatens to shut down factories that are considered crucial to social stability in China. A government spokesman denounced Washington last week for enforcing quotas on China's textile exports to the US.

``The one-sided action adopted by the US side will certainly and seriously influence the normal development of the trade between China and the United States,'' said Liu Xiangdong, a trade official, in a prepared statement. ``So the Chinese side reserves the right to adopt corresponding measures.''

Beijing made the criticism despite a growing movement in Washington among human rights advocates and the textile lobby to revoke most-favored-nation (MFN) trading status for China.

Without tariff exemptions under MFN, China's exports to the US would become too expensive for US consumers, say diplomats who specialize on China's economy.

Exports would plummet, they say, and many factories on the country's thriving coast would have to close.

Such a retrenchment could provoke discontent among idled workers. It could also affect countless inland companies dependent on the prosperous coastal factories, say the diplomats.

Beijing's criticism appeared to contradict dogged efforts by China since 1989 to defend its MFN status.

Beijing enjoys an estimated $12 billion trade surplus with the US, second only to Japan.

US customs officials determined last year that China was trading unfairly by shipping textiles through third countries and disguising the products as originating from those countries. China apparently aimed to skirt quotas on its textile exports to the US.

Washington responded last month by requiring that China this year reduce its direct textile exports to the US accordingly by 4.8 million items, worth $50 million to $100 million.

The US is likely to further slash textile shipments by 7.2 million more items in April, says a US source, on condition of anonymity.

The disclosure of unfair trading hurts China more than the financial loss of reduced direct shipments, diplomats say. The value of the affected shipments is just a fraction of the more than $3 billion in textiles China exported to the US last year.

The illicit trading gives ammunition to US citizens eager to curtail Sino-US trade because of China's human rights abuses, its challenge to the US textile industry, or its ballooning trade surplus, say the diplomats.

Facing such opposition in Congress, President Bush must decide by the end of June whether to renew Beijing's MFN status.

Mr. Liu said that China's trade surplus with the US is the result of sanctions imposed on China after the violent suppression of peaceful liberal protests in 1989.

For several months, however, China has not faced sanctions on its imports, and today only faces limits on purchases of military technology from abroad.

``It's a complete canard: There's no relation at all between sanctions and imports,'' says a Western diplomat.

In fact, Beijing has used strict administrative controls to drastically cut down imports, he says.