LDN - Business

U.S. tech group urges global action against Chinese "mercantilism"

[March 16, 2017] By Michael Martina

BEIJING (Reuters) - A U.S. technology group said in a report on Thursday that China's mercantilist industrial policies were a risk to the global economy and trading system, and called for international pressure on China to force a policy "reset".

The report coincided with the release of a separate paper by an influential U.S. business chamber criticizing Beijing's "Made in China 2025" plan, which aims to dramatically increase domestically made products in 10 sectors, from robotics to biopharmaceuticals.

The two groups join a growing chorus of foreign business lobbies crying foul over such plans and the Chinese government's billions of dollars in subsidies they fear will force members to surrender key technology or weaken their global competitiveness.

Technology policy group Information Technology & Innovation Foundation (ITIF) said China's policies threatened the "entire global economic and trade system".

Efforts by the three previous U.S. administrations to engage Chinese officials had "failed", ITIF said, and with China no longer as economically dependent upon the United States, Washington has insufficient leverage to counter Beijing alone.

"America cannot respond with either flaccid appeasement or economic nationalism; it must assemble an international coalition that pressures China to stop rigging markets and start competing on fair terms," said ITIF, a Washington-based think tank whose board includes representatives from top companies such as Apple, Amazon, Cisco, Google, and Intel.

ITIF urged the United States, along with Australia, Canada, Germany, Japan, South Korea, the United Kingdom, and the European Union, to jointly pressure China into a "fundamental economic policy reset".

A new approach is needed that goes beyond the "naive push for further dialogue and instead makes it clear to Chinese leaders that such unfair, harmful policies cannot be practiced with impunity," ITIF said.

U.S. President Donald Trump's trade policy should focus on China and not Mexico, it added, warning that the Chinese government could "capriciously punish U.S. firms" in response.

"But doing nothing due to the fear of retaliation should not be an option," it said.

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AUGMENTING GLOBAL MARKETS

Premier Li Keqiang told China's parliament at the opening of its annual session this month that foreign and domestic companies "will enjoy the same preferential policies under the Made in China 2025 initiative".

Since Trump's November election win, China's President Xi Jinping has tried to position the country as a champion of free trade.

But such pledges have done little to allay the concerns of China's trade partners.

"Chinese efforts to exert greater control over where commercial data is stored and how it is transferred are skewing the decision-making process for companies that must decide where products are made and innovation takes place," the U.S. Chamber of Commerce said in a separate report.

"China's subsidy policies not only enhance the competitiveness of domestic companies at home, but also help to augment their competitiveness in global markets," it said.

A progressive increase in domestic parts used in high-tech sectors to 70 percent by 2025 is among targets set out in the plan, which is set to use subsidies, standards, financial policy and government-backed investment funds to reach them.

The European Union Chamber of Commerce in China last week called the plan "highly problematic".

The more vociferous complaints from the American business community in China mark a shift from years past, when many companies eschewed the idea of forceful action by Washington out of fear of retribution from Beijing.

Trump's choice for U.S. Trade Representative, Robert Lighthizer, who has long advocated aggressive action against China, told senators at his confirmation hearing on Tuesday that he expected the administration would have a "very rigorous enforcement policy".

(Reporting by Michael Martina; Editing by Ryan Woo and Simon Cameron-Moore)

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