INSIGHT: US panel says China’s aggression belies its peace policy

17 November 2011 20:56  [Source: ICIS news]

By Joe Kamalick

WASHINGTON (ICIS)--A new report by a special US commission on China warns that fully ten years after it was granted entry to the World Trade Organisation (WTO), Beijing has largely failed to live up to its free trade obligations and instead has become more aggressive in its commercial, military and cyber developments.

In its tenth annual report, the congressionally chartered US-China Economic and Security Review Commission (USCC) said this week that China has taken only token steps to meet its WTO obligations and has even rolled back some of those modest open-trade steps in recent years.

In addition, said the commission, actions of the Beijing government across a wide range of commercial, military and diplomatic areas speak to “its excessive territorial claims” in East Asia and exhibit “an image of Chinese intentions that diverges significantly from Beijing’s official policy of peaceful development”.

The commission was established by the US Congress when in 2001 – over the objections of many in Congress and among other US policymakers – China was admitted to the WTO.

As part of the deal in being granted WTO membership, China agreed to a schedule of trade liberalisation. In return, the commission noted this week, the US agreed to give China most favoured nation status, as it does for all WTO members.

But many in Congress were deeply suspicious of China’s commitment to fair trade, so the commission was set up to closely follow China’s implementation of and adherence to WTO rules on open global trade and to monitor China’s impact on US security interests.

In issuing the commission’s 400-page report, USCC chairman Bill Reinsch gave a decidedly negative report card.

He said that while China has made progress in many areas, such lowering tariffs and eliminating some import barriers, “more work remains to be done”.

For example, “China has yet to create a system that effectively protects intellectual property [IP], something that is required of all WTO members”, Reinsch said.

“But US business software companies still report that China is the world’s largest source of pirated software [and] about 8 of 10 computers in China still run counterfeit operating system software.”

“Even more disturbing, China has stepped backward from its original promise to lower trade barriers and to treat foreign products and services fairly,” Reinsch said.

He charged that in 2009 China began adopting a series of policies to ban foreign goods and services from government procurement contracts.

“These policies, known as ‘indigenous innovation’, are intended to discriminate against foreign goods and services and to substitute domestic goods, apparently as a device to force the transfer of technology to Chinese firms,” Reinsch said.

“These policies, along with China’s failure to provide adequate IP [intellectual property] protection, strike at the heart of America’s greatest economic strength – its ability to innovate.”

In addition, he said, in recent years China has returned to relying on a system of state ownership and control of major sectors of its economy, directing a vast array of subsidies to favoured industries in order to nurture particular technologies behind protective barriers.

“This is contrary to the spirit, and in many cases the letter, of China’s WTO commitments,” Reinsch said.

Although China’s military developments ordinarily would fall outside the purview of its obligations under the WTO, the commission’s mandate specifically includes close monitoring of Beijing’s military status.

Here too, the USCC identifies broad areas of concern.

“This year also marked several milestones for China’s decades-long military modernisation efforts,” Reinsch said, “fuelled in part by a defence budget that has averaged 12% growth over the past decade.”

“China has recently achieved several military ‘firsts’: it flight tested its first stealth fighter, conducted a sea trial of its first aircraft carrier, and made progress towards deploying the world’s first anti-ship ballistic missile,” he said.

“While all nations have the right to develop the means to defend themselves, the commission continues to be concerned with the opacity of China’s military development and intentions, which invites misunderstanding.”

In particular, Reinsch said, the commission’s report “notes China’s development of its cyber capabilities, focusing on the growing evidence that Beijing sponsors or condones computer network intrusions against foreign commercial and government targets”.

The US intelligence community recently named the Beijing government as the world’s top industrial espionage agent, and multiple members of Congress have castigated Beijing for its cyber attacks against the US and its industries. Several bills are pending in Congress to counter or punish China for those activities and for Beijing’s refusal to abandon its persistent policy of currency manipulation.

Reinsch said that in addition to its military and cyber warfare advances, China has an “excessive focus” on disruptive military capabilities, such as counterspace operations.

All of which, he said, “presents an image of Chinese intentions that diverges significantly from Beijing’s official policy of peaceful development”.

In other, perhaps less diplomatic words, while China proclaims peaceful intent, its actions are aggressive and expansionary.

“As a result of China’s growing economic and military strength,” the commission said, “Beijing increasingly acts with greater assertiveness on the international stage.”

“In the South China Sea, for example, Beijing insists on treating a multilateral maritime dispute as a series of individual bilateral issues, much to the consternation of the other claimants.”

“Furthermore, newly acquired maritime security capabilities provide China with a means for backing up its excessive territorial claims in the region,” Reinsch said.

He pointed out that over the past year, “China has repeatedly asserted its interests by harassing Indian, Philippine and Vietnamese fishing and oil exploration vessels in the South China Sea”.

The USCC report was issued as President Barack Obama embarked on a week-long trip to various nations in East Asia and the western Pacific.

Significantly, Obama announced several military and naval arrangements and agreements with East Asian nations that can only be seen as moves to strengthen the US military profile in the western Pacific as a counterpoint to what the commission says is China’s increasingly aggressive expansionist moves in the region.

For the first time since World War II, the US is to station infantry forces in Australia, with an agreement announced by Obama and Premier Julia Gillard for some 2,500 US Marines to be based in northern Australia.

During the Asia trip, Obama also is expected to announce an agreement to position some US Navy assets in Indonesian ports, and similar arrangements are said to be in development with other western Pacific nations.

Remarkably, only 36 years after the fall of Saigon, there is talk of an imminent agreement between the US and Hanoi that would have Vietnam providing port services to and "hosting" US naval warships.

To put it mildly, and with apologies to Bob Dylan, the times, they are a-changin’.

($1 = €0.74)

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy
Bookmark John Richardson & Malini Hariharan's Asian Chemical Connections blog

By: Joe Kamalick
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