Multinationals fear US-China trade
wars By Dan Steinbock
After several Chinese product recalls in
the US, China retaliated by rejecting US goods for
quality deficiencies. Now, Washington and Beijing
have filed complaints against each other at the
World Trade Orgaization (WTO). The US Congress is
about to enact legislation that would levy
punitive duties on Chinese goods. This could lead
to unintended consequences for both American
consumers and the wider US economy.
Some
119 leading multinational companies agree -
including Boeing, Citigroup, General Motors, and
Microsoft. They have
called on Congress to reject
protectionist legislation against China, arguing
that "imposing unfair barriers to trade in the
name of currency valuation or product safety is
not a solution to the underlying concerns". It was
"a vote for free trade", reported the state-owned
China Daily, which, as so many other Chinese
observers do, argues that rising protectionism
among some US lawmakers "seriously threatens the
interests of China, the United States itself and
the world at large".
The flat world in
Guangzhou As the high-speed ferry took off from
Hong Kong, the young municipality worker continued
to read his copy of Thomas Friedman's bestseller,
The World is Flat. He had about an hour to
go before the ferry would dock in Guangzhou. "This
book has a great following in China," he said.
"The world is flat."
In Guangzhou, the
capital of southern China's Guangdong province,
such views are common. With 92 million people and
a GDP of US$284 billion in 2005, Guangdong is the
most prosperous province in China, accounting for
more than 12% of the national total. It also has
the highest volume of imports and exports.
But Friedman's world may be fading.
"Exaggerating individual cases and
doubting the quality of all made-in-China products
has hurt our reputation and caused economic losses
to our exporters," said Qi Xiuqin, a high-level
official at China's quality supervision
administration (GAQSIQ) in mid-September.
According to a recent GAQSIQ report, some
30% of a sample of 2,500 Chinese exporters
suffered economic losses from the imposition of
technical trade barriers last year. The companies
lost $35.9 billion, up from $28.8 billion in 2005.
Increasing friction Last April,
the United States took China to the WTO over
piracy and copyright protection. Beijing said that
the decision would "seriously damage" bilateral
cooperation and harm business ties. Washington has
brought four complaints against China to the WTO
since 2006.
International trade, however,
is a two-way street.
In mid-September
China filed a complaint against the US over its
combined countervailing anti-dumping rulings on
Chinese coated paper. The WTO case is the first
initiated by Beijing against Washington in five
years.
After high-profile Chinese product
recalls in the US, Chinese inspectors have seized,
returned or rejected a slate of US-made product
shipments - from orange pulp and dried apricots
with high levels of bacteria and preservatives, to
powdered milk imports too toxic for children.
In the most recent case, a shipment of 47
tons of frozen sardines originating from the US
was rejected. Chinese regulators said it was
infected with disease-inducing bacteria.
'Playing with fire' Last summer,
Senators Hillary Clinton and Barack Obama agreed
to co-sponsor legislation that would levy punitive
duties on Chinese goods. The bipartisan bill
introduced by senators Max Baucus, Chuck Grassley,
Charles Schumer and Lindsey Graham, would permit
US companies to seek anti-dumping duties on
Chinese imports based on the undervaluation of the
currency.
During the past few weeks, US
Treasury Secretary Henry Paulson has repeatedly
warned Congress against making legislation aimed
at punishing China over its economic policies.
"When we look at taking unilateral actions aimed
at another nation, this can have enormous
repercussions to our economic well-being," Paulson
said. "You know, we're playing with fire."
Typhoon arising As we approached
Guangdong, the municipality worker set aside his
book. "For Chinese people, it is sometimes hard to
understand America," he said.
"We have
opened our doors to Coca-Cola, Ford, Motorola, and
GE. We want to do business. We believe that it's a
win-win to China and America. We thought that
America believed in a flat world."
Dan Steinbock serves in the
India, China and America Institute. Focusing on
issues of international business and international
relations, he resides in the United States, China
and Europe.
(Republished with
permission from National Interest Online.
Copyright 2007, The National Interest)
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