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USTR takes aim at China in trade barrier reports

By Paul Eckert and Roberta Rampton

WASHINGTON (Reuters) - China retains a raft of non-tariff barriers, including tax rebates and quotas, that discriminate against foreign manufactured and farm goods, the U.S. Trade Representative's office said on Wednesday in its annual report to the U.S. Congress.

The report, along with two new spotlights on technical barriers to manufactured goods and farm exports, comes at a time of rising economic tensions with China over Beijing's exchange rate policy and an import substitution campaign.

But the trio of reports, which comprise about 600 pages of trade irritants with more than 60 countries, did not include any mention of China's currency policy.

President Barack Obama faces intense political pressure to label China, in a semi-annual report slated for April 15, as a currency manipulator for keeping the yuan artificially weak, making it hard for U.S. firms to compete.

Not mentioning the currency policy in the USTR report could upset congressional Democrats who want the Obama administration to pressure Beijing on the issue, said Scott Lincicome, a trade lawyer with White & Case in Washington.

"It gives me hope that the whole currency issue is not going to devolve into some sort of tit-for-tat trade war," Lincicome said.

China has denied it is manipulating its currency and warned it will retaliate if its goods are hit with duties.

The USTR report covered longstanding concerns by U.S. businesses about counterfeiting, export subsidies and taxation policies that tilt the playing field to favor Chinese firms.

It lays out the U.S. case at the World Trade Organization against China's export constraints on materials used to make steel, aluminum and chemicals, noted trade lawyer Lincicome.

The report described the hot-button issues of Internet censorship and technology policies that discriminate against foreign firms operating in China -- but removed specific references to Google Corp that had been part of the previous year's report.

Google moved its Chinese search portal to Hong Kong from China this month in a censorship dispute.

"Chinese government authorities may issue lists of banned search terms or banned sites weekly, with little justification or means of appeal, putting Internet-enabled services in a precarious position," the USTR report said.

Echoing increasing criticism from U.S. and other foreign businesses in China, the USTR raised alarm about government procurement policy.

"A troubling trend that has emerged, however, is China's willingness to encourage domestic or "indigenous" innovation at the cost of foreign innovation and technologies," it said.

Democrat Sander Levin, chairman of the U.S. House of Representatives Ways and Means Committee, pointed to the government procurement policy as a priority issue for U.S. Trade Representative Ron Kirk.

"I look forward to working with Ambassador Kirk to ensure that the United States takes all necessary and appropriate steps to eliminate the barriers described in all of these reports," Levin said.

OTHER COUNTRIES NAMED AND SHAMED, TOO

The three reports cover a litany of U.S. trade concerns with all its trading partners, and cover issues for goods including food, wine, wireless devices, toys and ride-on lawnmowers.

In the new report focusing attention on technical barriers to trade, the European Union's regulations for chemicals -- affecting sectors ranging from automobiles to textiles -- are singled out as a major concern.

While the reports put offenders on notice about U.S. complaints, solving the problems is the real challenge, noted Gary Blumenthal of Washington trade consulting firm World Perspectives.

"The precedence of naming and shaming doesn't work," Blumenthal said. "The real key is, is the tactical approach going to be any different?"

(Additional reporting by Christopher Doering, Editing by Sandra Maler and Vicki Allen)

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