The cause of China-US trade disputes

Home>>Opinion

Last updated at: (Beijing Time) Friday, November 21, 2003

The cause of China-US trade disputes

The recent discussions on Sino-US trade relations are becoming increasingly intense within China and the United States, and visits to China by ranking US economic and trade officials have therefore become more and more frequent. In spite of this, trade disputes between China and the United States seem to have not been calmed down and, in this process, the new game focus of the two sides actually is a dispute over fair trade.

DISCUSSION

CHINESE

SEND TO FRIEND

US adjusts its strategy of trade with China

On November 5, US Secretary of Commerce Donald Evans published in "Wall Street Journal" the columnist article entitled "America Carries Out Fair Competition, How about China?" in which he openly pointed out that the lack of reciprocity was the root cause of friction in US-China trade ties. Quoting the data of the US Business Software Alliance, the article asserted the piratical rate of China's software stood at over 90 percent and inferred that the overwhelming majority of departments of the Chinese government were using pirated software.

In addition, drawing support from the two proposals currently advanced by the US Congress (one is calling for revoking the permanent normal trade relation status granted to China, the other is suggesting a levy of 27.5 percent tariff on all Chinese commodities exported to the United States), Evans demanded that China speed up opening its markets, threatening that the United States was losing patience with China's step in opening the market.

The article was published only one week after the conclusion if Evans' visit to China, so its connotation is really very meaningful. In the opinion of this writer, at least it conveyed two-faceted information: First, Evans actually was dissatisfied with the result of his China visit. Although he believed the news that China's future purchase of US capital goods represents a step in the correct direction, US is aimed at China's economic restructuring, so as to establish a genuine fair competition environment. Second, the United States will intensify its supervision over China's execution of the agreement on its entry into the World Trade Organization (WTO), and continue to create an opinion atmosphere for making use of related WTO agreements to launch a trade war against China, thereby putting still greater pressure on China. The United States will not stop until the development of the Chinese market has reached an environment for fair competition.

Earlier, during his visit to China, Robert Zoellick, US trade negotiation representative, also strongly indicated that the US market is open, but if the United States is wanted to continue to open its markets in the future, then the country should get more opportunities to export to China. In bearing witness to the US Congress, US deputy Trade Representative Josette Shiner also indicated that the Bush administration pays high attention to China expanding the openness of product and service industries to the United States, regarding this as the foundation for establishing sound trade ties. The steps China must adopt to fulfill its commitments to the WTO include: Opening the agricultural market, instituting full liberalization of trading right and sales service; protecting intellectual property rights; lifting the excessive restrictions on financial service institutions; and carrying out fair and transparent standards and stipulations.

In short, from a series of recent talks by US government officials it can be seen that the United States is expanding its discontent with China from the questions of product dumping, the exchange rate of the RMB and the export of trans-genetic soybeans to China's foreign trade system, and lifting China's practice to the height of violation of WTO rules. That will intensify China-US quarrels over bilateral economic and trade relations and increase difficulties in solving Sino-US trade disputes through consultations. Precisely for this reason, Premier Wen Jiabao, in his recent interview with reporters, said that he deeply felt the "heavy responsibilities" in his planned trip to the United States in the near future.

There are the following multi-faceted reasons for change in US strategy of trade with China:

First, the failure of the strategy the United States has been implementing since the beginning of this year to pressurize the revaluation of the RMB, and the difficulty to realize US aim to prevent Chinese products from streaming into the United States. Given this situation, the strategy it set forth for fair trade competition makes it easy not only to win support from personages in various circles in the United States, but also to get the chimes of relevant WTO members, thereby urging China to open its markets more quickly.

Second, the Cancun conference held in September ended without results due to opposition from the developing countries including China, which meant a heavy blow to the US proposal for canceling agricultural subsidy. Through its charge against China for fair trade, the United States spurred China to support US proposals at future multilateral talks.

Third, with the US next presidential election drawing near, the China card will still be an important factor to be taken into consideration by the Bush administration.

Who is to blame for unfair competition?

Although the US side increasingly charges China with the unfairness of China-US trade, in fact, such temporary unfair trade is not China's making, on the contrary, China is constantly making its best efforts for the development of Sino-US trade relations. Regarding this, noted Sinologist Nicholas R. Lardy with the US International Economic Research Institute, while testifying to the International Relation Committee of the House of Representatives, spoke highly of China's efforts, he pointed out:

China's trade surpluses with American and European countries first reflect China's policy of welcome to foreign direct investment. Although China gives trade protection to certain special departments and products in violation of the WTO accession agreement, China's huge trade surpluses with the United States do not show that China is pushing for trade protectionism. It should be said that China is one of the most open markets in the world today, and even the most open market among the economies of fastest growth.

The highest opening of the Chinese market is manifested in the following aspects:

Firstly, the growth rate of China's global import scale in recent years is amazing. China's import value increased from US$53.4 billion in 1990 to US$295 billion in 2002, with the annual growth rate exceeding 15 percent. China's imports grew 40 percent in the first nine months this year, more than two times that in the same period of last year, its imports in the whole year will possibly exceed US$400 billion. China will surpass Japan for the first time to become the world's third largest importer just behind the United States and Germany.

Secondly, the openness of China's economy is manifested in the ratio of China's import to its GDP, i.e., in the fairly high import rate. China's import rate rose from 15 percent in 1990 to around 25 percent in 2002, the figure is expected to reach 30 percent this year, nearly 4 times that of Japan's 8 percent and more than 2 times that of America's 14 percent.

Finally, China's opening degree is also manifested in its relatively low import tariff. Before China formally joined the WTO, the country's average tariff had been cut by around three-fourths, down from the peak value of 55 percent in 1982 to 15 percent in early 2001. At present, China's average tariff is 11.5 percent, and its average tariff on manufactured goods is only 10.3 percent, far lower than the market level of other fast growth countries.

Actually, from the American perspective, unfair trade barriers are not the main reasons for US trade deficits. Daniel T. Griswold, Associate Director with the Center for Trade Policy Studies of Cato Institute, once pointed out in his article that US trade deficits were not closely linked with the trade barriers of foreign countries, for instance, Mexico and Canada almost fully open their markets to the export of US products, however, America suffers trade deficits with the two countries. Brazil sets up many trade barriers to the export of US products, but America has surplus from trade with Brazil. Although the Japanese economy is open much wider today, US trade deficit with Japan is far greater than what it was 30 years ago, The United States is faced with unified barrier measures against its exports to the European Union (EU), however, US trade surplus with the Netherlands is the greatest trade surplus, whereas Germany is the US third largest trade deficit country. Therefore, trade barriers cannot properly explain the cause of US huge trade deficits.

It is thus clear that the US government's charge that the unfair trade competition resulted from the trade barriers set up by China is the main cause of the unbalanced trade between the two countries is untenable. China has every reason to ask Evans: China does not impose many restrictions on US export products, but how does the United States do in this respect?

By People Daily Online

Questions?Comments? Click here

US textile decree to cloud Sino-US trade relations

Commentary: US trading policies must be equitable

China slams AIT head's remarks on Taiwan issue ( 4 Messages)

Internet changes life in China: News focus ( 2 Messages)

2003, the first pageant year in China? ( 4 Messages)

US rushes to embrace strategy of "Iraqification" ( 4 Messages)

Traffic woes to ease with express thoroughfares ( 3 Messages)