In February 2006, the United States government escalated its criticism of China over the rapidly growing trade deficit between the two nations. Deputy US Trade Representative Karan Bhatia warned that China could face punitive trade measures if it failed to open its markets to American companies and ensure fair treatment for US firms. Bhatia emphasized that the US was not considering limiting China’s access to the American market at that time.
US Trade Representative Rob Portman echoed these concerns, stating the US government would establish a task force to monitor China’s adherence to global trade policies. The task force would focus on enforcing intellectual property rights, easing restrictions on local industries, and fulfilling commitments to open the market to US companies.
Bhatia argued that China had greatly benefited from access to the US market but was not reciprocating by providing a level playing field for American businesses. Critics also pointed out that a flood of low-priced Chinese goods into the United States had caused financial hardship for US competitors and job insecurity in industrial sectors. There were also reports that the Chinese government was deliberately keeping the yuan weak to boost exports.
The previous year, the US trade deficit had reached a record high of $725 billion due to rising oil prices and increased demand for imports.
In response to the trade deficit and potential job losses, US legislators proposed measures to restrict trade relations with China. The US government also issued strong warnings to China to revalue its currency and threatened tariffs on Chinese goods entering the country.
Analysts cautioned that the United States had limited options and that aggressive actions against China could backfire.
Chinese Foreign Ministry Spokesman Qin Gang responded to the US warnings by stating that punitive trade measures would not improve trade relations and would be detrimental to the business interests of the United States.
At the time, all eyes were on a potential resolution during Chinese President Hu Jintao’s upcoming visit to Washington for talks with the US President in April.