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US harms self, others with trade protectionism

By Zhou Xiaoyuan (People's Daily Overseas Edition)

16:52, September 05, 2011

Edited and Translated by People's Daily Online

Recently, the U.S. Department of Commerce preliminarily judged that it would impose high tariffs on a part of steel wheel hubs and galvanized steel wires imported from China to offset the subsidies given by the Chinese Government to the exporters. Earlier, the U.S. Department of Commerce also imposed anti-subsidy duties on the drill pipes and wood floor tiles imported from China.

Then, after being silent for a while, the United States waved the trade stick again. According to some analyses, this action taken by the United States closely relates to many factors, including the declining U.S. domestic economy, rising trade protectionism and politician's manipulations. The Chinese government has emphasized many times that China strongly opposes any actions that encourage trade protectionism.

US action suspected to be trade protectionism

According to the preliminary judgment of the U.S. Department of Commerce, the anti-subsidy duty rate on the steel wheel hubs is between 26 percent and 47 percent. And the duty rate is between 22 percent and 49 percent on the galvanized steel wires. Since the Shandong Hualing Hardware and Tools Corporation Limited did not reply to the inquiry for information from the U.S. side, the duty rate on its products is as high as 253 percent.

"Whether the action is reasonable or not depends on the reliability of the evidence found and interpreted by the U.S. Department of Commerce," said Bai Ming, associate director of the Department of International Market Studies under the Chinese Academy of International Trade and Economic Cooperation during the interview with the People's Daily.

He also said that the competitive advantage of China's steel products is mainly the price, and the Untied States and European countries always have such an illusion that the low price means China has provided a subsidy. In fact, China has the largest iron and steel enterprises in the world and the costs of its iron and steel products are actually not high. Even if China does not export them, their prices will not be too high due to the domestic competition. Therefore, it is not a sound and reliable argument that low prices mean China has subsidized its export products.

"The Chinese government has seldom provided subsidies to the domestic steel industry," said He Maochun, director of the Research Center of Economy and Diplomacy at Tsinghua University, adding that only a few low-tech steel enterprises in poor regions have received small amount of subsidies from the Chinese government. Given China's growing trade surplus with the United States, the stringent U.S. antidumping and countervailing duties are obviously part of the country's protectionist policies.

Hurting China-U.S. trade relations

Why does the United States restrict imports of Chinese steel products? Will the new restrictions leave negative effects on China's steel industry?

Song Hong, director of the Department of International Trade at the Chinese Academy of Social Sciences, said in an interview that the United States has imposed high countervailing duties on Chinese steel products at the request of the United Steelworkers Union, an influential organization dedicated to protecting the workers of the U.S. steel industry. The U.S. steel industry has been in decline over the past few decades, and the industry workforce has been shrinking accordingly. The U.S. government's stated purpose for restricting Chinese steel imports is to ease high unemployment in the country.

Bai agrees with Song and believes that after the global financial crisis, the United States must have realized the importance of striking a balance between the virtual economy and real economy. In order to enhance the international competitiveness of U.S. products, U.S. President Barack Obama has set a goal of doubling the country's exports and creating 2 million job opportunities in five years.

But China is a major manufacturing country. The United States is bound to face fiercer competition from China after the United States shifts focus to the real economy. The stringent countervailing duties on Chinese steel products will promote the development of the U.S. steel industry and its automotive industry.

He Maochun also believes that this action made by the United States may lead to redistribution of market shares in the global iron and steel market and negatively affect the China-U.S. bilateral trade relationship.

Trade protectionism will inevitably spur retaliation

Currently, the cases have not been finally adjudicated. The U.S. Department of Commerce is investigating whether the two kinds of products mentioned above are being dumped in the United States or being sold in the U.S. market at prices lower than their normal values. The final adjudication on the anti-subsidy duty rates of the two cases will be made in January 2012 at the latest.

He Maochun believes that the Chinese government should make best use of this opportunity to actively make preparations. The anti-subsidy duty is different from the anti-dumping duty. The anti-subsidy duty is mainly aimed at the governmental action. Therefore, the Chinese government should actively negotiate and discuss it with the U.S. side for its enterprises. If the U.S. side insists, the Chinese government could also launch anti-subsidy or anti-dumping investigations on products of same kinds imported from the United States.

He Maochun predicts that the United States currently is still facing many domestic economic difficulties, such as the debt crisis, sustaining a weak U.S. dollar, a gloomy market and declining employment rate. In a certain period of time, the United States will adopt more trade protection policies, including an anti-subsidy duty and anti-dumping duty under the cover of normal trades’ needs. Abusing the trade protection policy will lead to the emergence of trade protectionism, which will cause escalating reprisals from other countries. Then, the United States will be at an even harder position.


Leave your comment3 comments

  1. Name

Equal Pay for Women at 2011-09-0766.58.203.*
Protectionism or Subsidies are both the same. Protectionism hurts everyone but especially the working man and woman and their family. It only serves to protect a few. If it didn"t the it would not be protectionism. Protectionism mean you and I pay more so that someone else can make more. What we need is more consumer protection(ism).
Equal Pay for Women at 2011-09-0766.58.203.*
Protectionism hurts everyone but especially the working man and woman and their family. It only serves to protect a few. If it didn"t the it would not be protectionism. Protectionism mean you and I pay more so that someone else can make more.
wende at 2011-09-0671.255.91.*
US always holds the hegemonic view that what it says should be the rule for all nations in the world but it can do whatever it wants and there is nothing the other nations can do about it.

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