In a retaliatory salvo of the emerging Sino-American trade war, China today announced it will halt further purchases of U.S. cotton, synthetic fibers and soybeans this year and lower imports of other agricultural products.
Today's reprisals, according to U.S. and Chinese officials, are certain to sully the diplomatic atmosphere for Secretary of State George P. Shultz's scheduled goodwill visit Feb. 2.
The move came four days after Washington imposed new ceilings on certain Chinese textile imports following the collapse of negotiations to reach a six-year agreement. The official New China News Agency carried the announcement in a two-paragraph item.
[A State Department spokesman said the United States regrets the Chinese action and hopes that the two countries can settle their differences. Commerce Secretary Malcolm Baldrige said the United States will stand by its policy of limiting imports of Chinese textiles. "Our position is clear," Baldrige said in Washington. "We won't be doing anything as a result of their action."]
The ban's impact on U.S. businesses is likely to be considerably softened by the fact that Chinese imports in all three banned categories had markedly decreased recently.
However, the announcement left unspecified which U.S. farm products would be restricted for import or how great the restrictions would be. The economic repercussions of the restrictions will depend on how tough the Chinese decide to act.
For example, if China decides to impose severe restrictions on such heavily imported U.S. items as wheat, corn, lumber products, logs and fertilizer, the cost to American farm interests could run into the hundreds of millions of dollars in lost sales, according to U.S. economic analysts.
Peking, simply by buying annually only the minimum level of 6 million metric tons of U.S. grain for which it is contractually obligated until 1985--instead of the maximum that it has purchased in recent years--could cause a loss to U.S. farmers of as much as $500 million in sales, the analysts said.
"We are not conducting a trade war with the United States," explained a spokesman for China's Ministry of Foreign Economic Relations and Trade. "It is the United States that is conducting a trade war against us. We are only taking steps to defend ourselves."
The trade imbroglio erupted last Thursday when textile talks in Peking broke down in acrimony after last-ditch efforts to solve the most bitter dispute since bilateral exchanges resumed in 1971.
In the talks, China, which is the fourth-largest foreign textile supplier to the United States, had demanded special status to ease its deficit in overall bilateral trade. That deficit was about $5.3 billion last year. But Washington, under heavy pressure from the depressed textile industry, had sought to trim the growth of imports from China to the same levels of other major suppliers.
On Saturday, two days after the talks broke down, the U.S. side acted to restrict 33 categories of Chinese textiles at 1982 growth levels, which showed a significant 32 percent increase in the first 10 months following even larger gains in the previous two years.
Peking called the move "blackmail" and threatened to "respond strongly" to the unilateral controls.
The result was today's reprisals, which American officials here called unjustified and unexpected. They noted that Peking's response went a step further than the U.S. action by forestalling new purchases in three trade categories while planning to cut imports in other products.
"This is harsh," said one economic analyst. "We expected their reaction to be limited to hot rhetoric, not this kind of retaliation."
Although public attention has been focused on Chinese request for high technology and possible military equipment from the United States, the heart of bilateral trade actually rests in the agricultural sector, where farm products account for 65 percent of U.S. exports.
China, which is America's largest wheat importer and third-largest corn customer, is obligated under a four-year government-to-government agreement to buy at least 6 million metric tons--and as much as 9 million metric tons--of grain annually until the end of 1984.
For the fiscal year ending last Sept. 30, China bought 8.1 million metric tons of grain and 1.1 million metric tons of corn, for combined grain sales totaling $1.38 billion.
"There's a lot of wheat in the world," said a U.S. source. "The Chinese might buy the minimum and not renew the contract" in 1985.
Other business sectors that could be hurt by the Chinese reprisals include the lumber industry, which recorded a 137 percent jump in exports of logs and lumber products in the first 10 months of 1982, with total sales hitting $204 million.
The impact is not expected to be as potentially severe on the three banned items. Cotton products are already being reduced in the domestic market by China with the result that the country drastically cut purchases from $398 million in the first 10 months of 1981 to $176 million in the corresponding period last year.
The second category of imports to be shut out by Peking for this year--soybeans--has played only a minor trade role in recent months. China, which grows its own soybeans, has not bought them from the United States since last May, when annual sales to that point reached a level of $63.2 million, roughly half of its previous year's imports.
Sales of the third banned category--U.S. synthetic fibers--have continued here in recent months. But, with Peking trying to develop its domestic chemical fiber industry, the future of these American exports was clouded even before today's announcement. For the first 10 months of last year, U.S. sales of textile yarns and fabrics plummeted to $124.5 million from their 1981 level of $269.6 million.