U.S-China Economic Ties: Doubling or Scaling Down Exports?

The current administration set goals to double exports by 2015 and to increase exports to China. In order to meet this goal, exports must grow from $1.57 trillion in 2010 to $3.14 trillion by 2015. At present, high levels of economic interdependency have made Chinese and U.S. interests highly intertwined. Some suggest that rather than increase exports there should be a cut back in both exports and imports due to "unfair" trade practices of the Chinese trade system. In both cases, there are several issues that should be addressed.First, one must take into account Chinese violations of intellectual property rights (IPR), piracy, and counterfeit goods. Since becoming a member of the World Trade Organization (WTO) the Chinese government has taken steps to strengthen its legal framework to amend its IPR, and regulations to comply with the WTO Agreement on Traded-Related Aspect of Intellectual Property Rights (TRIPs). Nonetheless, Beijing has still failed to fully carry out its commitments as a WTO member, particularly in regards to protection of intellectual property rights, patents, and regulations regarding restrictions on hazardous substances, supply-chain safety, information security regulations, and limitations on foreign participation in China's standards development processes.

According to a survey conducted in 2010 by the USCBS , China’s inadequate IPR protection adversely impacts the business of 66% of survey participants in some way. According to one of the copyright industry association , the rate of piracy in China remains among the highest in the world which has led to billions of dollars in losses for U.S. and other foreign companies every year.

Meeting what is referred to as "standards and conformance", which the international commerce is based on and they are the basis for support innovation, interoperability of technologies, and increase consumer trust and confidence, such as technical regulations, process of testing a product, and certification is other significant concern. Not meeting these standards could mean the creation of market barriers, disruption of trade, and severe limitations on foreign and domestic companies to access a broader, international market.

Another issue is the centralization of crucial trade, safety, environmental, health, and quality issues. State monitoring and regulation in addition to the work of independent bodies has created a wide variety of governmental bureaucratic hurdles.

The bureaucracy of licensing, processing, and managing results in wasted time and resources. As a result, foreign companies that undergo global markets inspections and conformity assessment work by qualified private-sector organizations carry out additional costly bureaucratic, certification activities in addition to those that they have already carried out. One example of these cumbersome certification processes is the China Compulsory Certification (CCC) program which requires that certification must be carried out in China by designated certification bodies (DCBs) affiliated with the Chinese government. This not only creates supply delays to the market but also generates major disadvantages for foreign companies competing with Chinese companies who have direct access to inspection, testing, and certification services. For instance, these designated Chinese certifications bodies do not have any branches outside China. This requires foreign companies that export products to China to arrange and fund travel for a Chinese agent to conduct pre-market inspections at the manufacturer's location as well as to submit to subsequent routine inspections. Foreign companies operating in China have reported that obtainment of office licenses and renewals, licensing for different business administrative functions approvals for new or modified products, approvals for different aspects of projects or investments are substantially more challenging and time-consuming in China than any other developed country. These difficulties undermine and create inconsistencies for long-term and short-term business planning. Another issue faced by these companies is sudden changes to requirements without notice and report in regard with the standards, regulations, and other requirements for their products in China.

In order to address these issues there are three possible approaches. First, the World Trade Organization should pressure China to comply with international trade standards and to adhere to the standards set for the protection of intellectual property rights, patents, regulations and inspection’s. In recent years the WTO has ruled several times against China in crucial cases against illicit taxes on imported auto parts and its lax enforcement of counterfeiting laws. On the other hand, both multilateral and bilateral approaches can be applied to address the aforementioned concerns. Since these concerns are experienced by various foreign companies and countries, they can be better addressed through a multilateral approach and in coordination with other governments.