Does China make US reconsider free trade policy? Cheng Dawei Updated: 2005-07-06 14:53
After experiencing a steel war, auto war and beef war respectively, global
trade war has evolved into a tug of war over textiles in 2005. China assumes a
key role in the ongoing trade war due to its increasing participation in the
exports of textile products.
Chinese producers’ sophisticated ability to manufacture and export textiles
gives rise to every-growing trade friction as well as every-rising vigilance
from their American counterparts. China Daily quoted an article (China’s rise
raises questions about free trade) in an American newspaper on June 16, 2005.
This article adopts the pragmatic American view and argues that the United
States should adjust its policy on free trade in view of China’s rapid rise.
After World WarⅡ,with the support of major developed countries, including the
United States and other economic power across the world , the General Agreement
on Tariffs and Trade(GATT)/the World Trade Organization(WTO) was set up.(WTO
replaced GATT formally on January 1,1995.) The establishment of GATT/ WTO lays a
solid foundation for the present-day world trade system which regards free trade
as its ultimate objective. America is the primary beneficiary of this world
trade system. A study from America shows, the living standards of American
people has been raised by 10% or so. The United States has gained from the
advantages brought by economic globalization, such as less expensive imported
commodities, growing competition and scientific and technological upgrading.
The Untied States has also benefited from Sino-Us trade. China’s trade
surplus with the U.S., which is likely to continue for many years, will not
bring about devastating consequences or exert a damaging impact on US economy.
Foreign-funded enterprises in China, which mainly contribute to China’s
U.S.-trade surplus, have consistently accounted for a big chunk of China’s
export volume, with a proportion of above 50%. Particularly, foreign-owned
companies have paid the lion’s share 80% of the total export volume of China’s
high-tech industries. For example, the export volume of personal computers in
China amounted to 60 billions US dollars in 2004, and China retained its trade
surplus. However,at least 3/4 of the profits of a computer goes to American
businesses which research and develop software, design chip and sale the
complete set of computer. The true story behind China’s trade surplus with the
U.S. is that American businessmen have pocketed much of the earnings and Chinese
manufacturers only have got modest economic returns.
China’s miraculous rise is attributed to globalization, trade liberalization
and the thriving domestic market of the United States. Thanks to unremitting and
dauntless efforts made by Chinese people from all sectors of the society,
China’s economy is developing at a dizzying pace. Compared with other developing
country, China enjoys a huge domestic market and its economy is of a grand
scale. China has emerged as a world factory. The United States keeps up its
guard against China’s fast-paced development with a sense of insecurity. So that
the United States is seeking to hinder china’s rapid development and hold high
the banner of trade protectionism.
Therefore, the question we will study here is whether a retreat to the trade
protectionism is a wise choice for the United States? What are the implications
of such an American approach on Sino-US trade as well as the world trade?
In fact, America has never given up or abrogated the policy of trade
protectionism and free trade has never been virtually realized. The Industrial
revolution broke out in the United States in the early 19th, in an effort to met
the challenges brought by Britain industrial products and fueled the development
of American homegrown industries. The United State raises its tariff constantly.
American average tariff rate has rose progressively to approximately 40% in 1824
from the somewhere between 7.5%--30% in 1816. This proportion has also surged to
45% in 1825, posing another sharp increase. Thanks to the implementation of the
policy of trade protectionism, American industry was far ahead of others within
the global reach in the 80’ of the 18th.
Since China joined the WTO, the United States has adopted a tougher policy of
trade protectionism towards China in a step-by-step fashion. A series of
make-or-break measures have been outlined and adopted successively, for example
The imposition of high duties on imported steel, anti-dumpling cases against
China-made televisions and the imposition of quota restrictions on
China-manufactured textiles. All of above-mentioned issues give full _expression
to the fact that the United States has earnestly implemented a policy of trade
protectionism.
The question we are facing is whether the surging American trade
protectionism will lead the world economy and trade into a blind alley? Compared
with the world of the late twentieth century, today’s world is far from stable
and tranquil. For example, the international financial market is a fragile one,
the WTO negotiations have almost reached a stalemate, multilateralism is
porgressively being replaced by regionalism, competition among the economic
powers in the global market is white-hot and the gap between the rich and the
poor keeps growing day by day. How much the side effects of the rises of trade
protectionism will add to the instability of global economy is still A mystery.
However, we must be aware of the fact that trade war is emerging as an active
factor.
Whether the implementation of the policy of trade protectionism will reduce
the trade deficit of the United States and address the problems on its home
front is still unclear. Trade protectionism is not at all a newly started thing
and maybe not a panacea. The United States has been experienced in imposing
safeguards on Japan-manufactured automobile. As a result, the pressure from the
U.S. has forced Japan to become a heavyweight player in the international arena.
Japan ends up with a world-top automaker.
The author regards free trade, the objective of WTO, as a mirage, and does
not thing that free trade is achievable. However, the liberalization of trade
may be achievable.
The competition between free trade and protectionism never stops and will run
through the entire history of world trade. As China experiences rapid economic
growth it is nature for the United States to adopt a policy of protectionism
towards China.
China should be prepared for the adverse trade environment and the
undesirable condition which is unlikely to take a turn for the better in the
years ahead. Therefore, we ought to learn how to strive to survive under the
every-increasing pressure.
When settling the trade disputes between China and the United States, America
should seek to maintain the stability of world economy and safeguard our win-win
situation. The United States should also be made aware that China will not cave
in the face of American protectionism or be led by the nose. China, a world
factory, will find a way out of the deteriorating trading climate. The United
States desperately needs to have a better understanding of the fact that America
benefits a lot through Sino-US trade. America will lose a low-priced suppiier
base and a vast market, if America impairs and hurts its relations with China.
Dan Ikenson, an US trade policy analyst says, if the United States begins to
impose tariffs and penalties on China, it would have a negative effect on
consumers in the US. "It's just a rash idea that would be ruinous to our
economy," he said, doubting seriously that the tariffs would ever be imposed.
"It's not going to help anybody, it will hurt a lot of people though."
China also has to go through a rethink of the ongoing trade war. China has
paid a costly price for its success in gaining accession to WTO in a
considerably long period of 15 years and has been compelled to open its door to
the outside world accordingly. We have heeded lessons from American policy of
pragmatism that we should put equal emphasis on the implementation of market
opening policIes and self-protection. We ought to create a strategic development
space for the industries with competitive strength and safeguard our own
interests in the course of settling every single trade dispute.
The minister of the Chinese Ministry of Commerce Bo Xilai announced on May
30, 2005, to the public media around the world that China will not make any
concessions to the United States and will squarely address the trade friction
with the United States in textiles. China’s approach will be viewed as an
impressive turning point in the contemporary Chinese history of trade which
featured every-expanding opening. This declaration also is the response given by
China when China faces the changes caused by American reconsideration over free
trade.
The author hopes that the world trade system does not move into an indefinite
period of protectionism . Conversely, the writer makes a wish that the trend of
trade liberalization will be irresistible and the global welfare can be raised
continually.
The author is Cheng Dawei, School of Economics, Renmin
University of China.
The above content represents the view of the author
only. |
|
|
|
|