China is increasingly exploiting loopholes in international trading rules to its advantage, according to The New York Times.
   
“Evidence is mounting that Beijing is skillfully using inconsistencies in international trade rules to spur its own economy at the expense of others, including the United States,” the report read. 

China has recently stepped up its activity at the World Trade Organization, challenging the trading practices of other nations.  At the same time, China has refused to even acknowledge that its currency is highly undervalued, much less take action to remedy the problem. 

Since entering the WTO in 2001, China remained relatively passive in taking cases to the international trading body, that is until very recently.  After filing just three cases at the WTO in seven years, Beijing has initiated more trade disputes in the past year than any other nation.  Of the 15 trade disputes brought to the WTO in the past 12 months, China has initiated four of them.   

China is also the world’s most well-known practitioner of the trade distorting practice known as currency manipulation.  By purposely undervaluing its currency, China is able to make its exports artificially cheap while inflating the cost of imports.  Beijing officials, however, have been able to game the system by suppressing reports from the International Monetary Fund that would outline the practice and likely bring pressure on the Chinese to allow their currency to appreciate to appropriate market-based levels.

A recent study by the U.S.-China Economic and Security Review Commission found that China’s currency may be undervalued by as much as 40 percent. 

This allows the Chinese to gain a competitive advantage in the world marketplace, and it shows.  The last time the U.S. and China had a balanced trading relationship was in 1985. Since 2005, Americans have spent $1.1 trillion on Chinese products; Chinese consumers have bought just $272 billion worth of goods over that same time.

Last year, even in the midst of the worst recession since the Great Depression, China was able to rack up an astounding $198 billion trade surplus with the rest of the world.  Through its massive trade surpluses, Beijing has accumulated $2.4 trillion in currency reserves, much is denominated in dollars.

There is strong opposition to the practice in the U.S., however, the Obama administration, despite rhetoric to the contrary, has failed to get tough on Beijing for currency manipulation.

Short of White House action, a bipartisan group of U.S. Senators is pushing for more to be done to stop China from distorting the market with its artificially cheap goods and services by pressing the U.S. Commerce Department to properly investigate the practice.
 
“China’s mercantilist policies are undermining the health of many U.S. industries — industries that inject billions of dollars into the U.S. economy and employ hundreds of thousands of American workers. In the face of China’s actions to subsidize its exports at the expense of U.S. manufacturers and workers, the Department needs to act,” the letter concludes. 

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