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Economist: US stimulus plan may create trade barriers
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08:50, February 16, 2009

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The "buy American" products only clause in the $787-billion US economic stimulus package will create a number of trade barriers and hurt exports powerhouses such as China, economists said yesterday.

"Trade protectionism will rise definitely," Mei Xinyu, a trade expert with the Ministry of Commerce, said.

"The trend will last for some time," he said, referring to the "bell cow" effect of the US stimulus package.

The package, passed late on Friday, proposes to pour tens of billion of dollars into public building projects, imposing conditions such as the use of US-made steel and other products only.

As a major manufacturing powerhouse that supplies bulk goods to the rest of the world, China could be "a victim of such protectionism", Mei said.

The trade barrier comes at a time when concerted efforts are needed to combat the worst economic crisis in more than five decades.

"No one will benefit (from protectionism)," said Feng Jun, a Shanghai-based WTO expert. "It will not work in the age of globalization. Today's world is different from that of the 1930s."

The "buy American" policy "will not work", he said. Instead, it would erect trade barriers in various forms with "short-sighted" governments restricting foreign goods and investments to protect jobs and industries at home.

China has already declared that it will not resort to protectionism in implementing its $586-billion stimulus package. But Mei urged the Chinese government to work under the WTO framework to create an even playing field for domestic players. "We should not wait to be become a victim," he said.

The number of anti-dumping and anti-subsidy investigations into Chinese products has increased. For instance, India has announced 17 "trade remedy" probes into Chinese products since October 2008.

Over the weekend, Group of Seven (G7) finance ministers pledged not to resort to protectionism in their efforts to stimulate their domestic economies to combat the world's worst economic crisis since the Great Depression.

The meeting's host, Italian Finance Minister Giulio Tremonti, said the other ministers "strongly agreed" to reject protectionism.

"It's a concrete danger not only for economies that depend heavily on exports," he said in Rome.

At the G7 Summit, US Treasury Secretary Timothy Geithner assured his counterparts that the $787-billion package would not violate the US' commitment to free trade.

Source: China Daily

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