Getting tough with China?

Worker advocates want a tariff on Chinese imports to protect American jobs, but others warn the move could hurt U.S. tech companies.

As a trade dispute escalates between the United States and China, the U.S. tech industry is keen to see changes by the Asian giant--but opinions vary on how hard to push.

U.S. business and labor leaders agree that China ought to adjust the value of its currency and do a better job of protecting intellectual property rights. But while industry leaders favor milder steps, worker advocates want more aggressive action. They argue a sweeping tariff on Chinese goods may be needed to stop job losses and level the playing field.

Critics, though, warn such a move could trigger a trade war that hurts U.S. tech companies, many of which have operations in China.

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What's new:
Worker advocates want a tariff on Chinese goods to protect American jobs and even the playing field with the country's manufacturers.

Bottom line:
Critics warn such a move could trigger a trade war that hurts U.S. tech companies, many of which have operations in China.

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There's still more at stake, said Richard Suttmeier, a political science professor at the University of Oregon. If the involvement of U.S.-based tech companies in China declines, Beijing's ambitious plans for technological advancement could wind up threatening America economically and on the geopolitical stage, Suttmeier said.

"We're better off if we keep China integrated into this global system whereby their technological progress is co-evolving, if you will, with the technological progress of multinational companies," he said.

China and the United States have been butting heads on trade matters for years. A key flash point is the U.S. goods trade deficit with China, which rose from $29.5 billion in 1994 to $162 billion last year.

The countries have grown more combative in the past week or so. The U.S. has moved to impose quotas on certain Chinese textiles and apparel products, and U.S. Treasury Secretary John Snow chided China publicly over its currency policy.

Many observers claim China effectively subsidizes its exports by pegging its yuan to the dollar, resulting in a currency value that is artificially low. In a report to Congress on Tuesday, Snow did not go as far as to claim that China manipulates the currency exchange rate to gain an unfair trade advantage. Still, he warned the country should change its ways.

"Current Chinese policies are highly distortionary and pose a risk to China's economy, its trading partners and global economic growth," Snow said in the report.

Although China has said it aims to reform its currency policy, this week its stance on the issue seemed to stiffen. According to official news service Xinhua, Chinese Premier Wen Jiabao said China will not yield to outside pressure in exchange rate reform. "The reform of (yuan) exchange rates is of China's own sovereignty," he said, according to Xinhua. "Any pressure or media play-up, or to politicize an economic matter, will not help solve problems."

Trade deficit with China

A stronger yuan could affect the tech industry in a number of ways. Products and services coming from China--which run the gamut from consumer electronics to software coding--would likely increase in price. If the price rises are significant, global companies could decide to locate operations elsewhere and U.S. operations could become more competitive. Consumers, meanwhile, would likely pay more at their local Wal-Marts, Gartner analyst Martin Reynolds said.

Given that such a pocketbook pinch could translate into public displeasure, Reynolds expects the U.S. government to back down on the currency issue. "By and large, it's saber-rattling," he said.

The U.S. technology industry has other concerns about trade with China. One is the still-rampant software piracy in the country. Losses from software piracy in China totaled $3.6 billion in 2004, making it second only to the United States in piracy damages, according to a study from research firm IDC and the Business Software Alliance trade group.

Another issue is market access. Particularly worrisome to some are draft regulations in China on software procurement by government entities. The proposed rules "essentially block international companies

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