U.S., China locked in trade disputes

By Ariana Eunjung Cha
Washington Post Foreign Service
Monday, January 4, 2010

BEIJING -- Trade disputes between Beijing and Washington over exports of tires, chickens, steel, nylon, autos, paper and salt are multiplying and further damaging the already tense relationship between the two economic powers.

The Obama administration says it only aims to protect the country's rights, but the Chinese counter that the United States started the whole thing by launching an unprovoked attack.

The current tensions began in September, when the United States imposed a staggering 35 percent import fee on tires from China.

Economically speaking, the tariff was minor; it only applied to a couple of billion dollars in annual imports, less than 1 percent of the total annual trade volume between the two countries. But it infuriated the Chinese, who felt it was a political concession to U.S. labor unions rather than a legitimate punishment for something they did wrong.

The feeling was that "China should not just sit there and do nothing," said Lu Bo, a researcher with the Chinese Academy of International Trade and Economic Cooperation, a think tank under the Chinese Ministry of Commerce.

China fired back at the United States with a full arsenal of its own trade complaints.

As the world begins to emerge from the worst economic crisis since the Great Depression, there is growing concern that a rising tide of tit-for-tat protectionism is slowing the recovery.

Despite world leaders' repeated promises to minimize trade barriers, protectionist measures have spiked, according to a recent study by Global Trade Alert.

At least 130 protectionist measures such as state funds, higher tariffs, immigration restrictions and export subsidies are being planned by governments around the world, the trade analysts found. The World Trade Organization, in a report released in September, noted that many members largely had avoided the protectionist measures that exacerbated previous economic crises, but it still pointed to some "slippage." The WTO estimated that "anti-dumping" disputes (which involve accusations of predatory pricing by selling goods abroad below the price in one's home country or below the cost of production) will reach 437 this year -- more than double from 2008.

The European Union, for instance, may extend duties on leather-capped shoes from Vietnam and China for another 15 months. India banned toy imports from China for six months last year and recently levied duties on Chinese telecom gear. China last month imposed provisional duties on some Russian and U.S. steel products.

A further increase in trade disputes in the next few years is "inevitable," said Michael Pettis, a senior associate at the Carnegie Endowment for International Peace and a professor of finance at Peking University. While global demand is contracting -- export volume is estimated to be down as much as 9 percent for 2009, the biggest drop since World War II, according to the WTO -- every country is trying to "protect their share or increase their share," he explained.

"Policymakers in each of the major countries are quick to blame 'the foreigners' and say that they are only responding to aggressive behavior by others. . . . But every country can't be correct in assuming the problem is someone else," Pettis said.

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