Billion-Dollar Threats Fly In US-China Trade Brawl

Three-weeks' grace until tariffs double on Chinese imports

THE United States appears willing to risk access to China's huge market in order to save such US products as Windows software, Rolling Stones compact discs, and Walt Disney cartoon characters from Chinese copyright buccaneers.

That's the dilemma before American trade officials who have slapped punitive levies on $1.08 billion in Chinese exports -- the largest amount in US history. The 100 percent tariffs take effect Feb. 26 and bring the two economic giants closer to an all-out trade brawl.

China responded to the weekend announcement by US Trade Representative Mickey Kantor by doubling tariffs on some American imports and putting a freeze on initiatives by American carmakers and other firms trying to break into the Chinese market, also effective Feb. 26.

The three-week cooling-off period will give the two sides another chance to resolve the trade dispute over rampant Chinese piracy of computer software, films, and music, which has become the most highly charged in a series of commercial conflicts that have roiled American and Chinese relations in recent years.

US negotiators estimate that American firms lose more than $1 billion annually to copyright infringement in China. They say they hope to salvage a compromise and have sent the Chinese government a list of talking points and agreed upon points.

On Sunday, Chinese trade and foreign ministry officials refused to say if they will accept an American invitation to hold further talks in Washington before the deadline.

After the announcement of tit-for-tat trade sanctions, a spokesman for the Chinese Ministry of Foreign Trade and Economic Cooperation said that ''responsibility for such a situation does not lie with the Chinese.''

Western businessmen and analysts say the types of goods targeted by sanctions shows the two sides are still willing to avert a damaging trade war. Hong Kong, the gateway for a large part of Sino-American trade, has estimated that the trade dispute could affect almost 2 percent of its exports to the US.

US tariffs were increased on 35 categories of imports. The largest in dollar terms are Chinese-made answering machines and cellular telephones, sporting goods, bicycles, and wood and plastic products. Not on the list were other electronics items, textiles, toys, and shoes, which are among China's largest exports to US markets and whose output employs millions of Chinese in booming coastal provinces. They are major factors in China's ballooning trade surplus of about $30 billion in 1994, triple the surplus of four years ago.

In an effort to moderate its retaliation, China has also singled out for higher levies or restrictions American goods already being undercut by pirating, including films, television programs, compact discs, cigarettes, and videotapes. Beijing avoided major imports such as aircraft parts, which are desperately needed by the troubled Chinese aviation industry.

But Chinese analysts say that Beijing's ability to compromise in the deepening dispute is limited by the country's political uncertainty. The reported failing health of paramount leader Deng Xiaoping has made senior Chinese leaders hesitant to make tough decisions.

The pirate compact-disc factories are also believed to be closely linked to the military, government ministries, and senior provincial leaders who protect their illicit, but lucrative business. ''The government cannot be seen to be giving in to the Americans at this time,'' says a Chinese analyst.

Likewise, President Clinton is under pressure from a conservative American Congress to stand up to China. This weekend, House Speaker Newt Gingrich lent support to the Clinton administration stance, saying that China ''can't cheat us and expect us to have our market open.''

Previous trade disputes averted all-out conflict with last-minute agreements. In 1992, the two countries skirmished over access to the Chinese market and intellectual-property rights, while in January 1994, they resolved trade tensions by agreeing on voluntary quota restrictions on Chinese textile exports.

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