China answers trade duties with ‘buy more don't sell less' mantra
Monday, 14 May 2012 | 00:00
When it comes to dealing with the Chinese, it's all about anticipating and negotiating between the ‘carrot and stick' of the market and state.
The US International Trade Commission recently decided to maintain its unusually high anti-dumping duty of 376 per cent on fresh garlic imports from China. Garlic accounts for only 3.4 per cent of Sino-US agricultural trade, but following close on the heels of a series of slap downs, the issue quickly became an emotive one.
As wave upon wave of anti-dumping and countervailing duties by Western nations fall upon Chinese goods and calls for ‘progressive protectionism' in Europe gains ground, Beijing is countering with its own slogan — ‘buy more, but don't sell less.' And to make the steak juicier, China has cut import duties on a wide range of products.
Since 2011, the United States has intensified anti-dumping and anti-subsidy cases against China. In February this year, the US Department of Commerce decided to continue investigation into imports of utility scale wind towers from China, and maintain anti-dumping duties on Chinese silicon metal. It also went on to impose duties on Chinese solar panels, citing unfair government subsidies, thus denting the competitiveness of Chinese companies.
In a major blow, the US set up the Interagency Trade Enforcement Centre to investigate trade practices "in countries like China" and coordinate actions against it. According to Chinese analysts, action by this special trade panel is tantamount to ‘super-protectionism'. A combination of non-tariff barriers, green regulations and intellectual property rights, they say, will be used to bypass established multilateral trade institutions like the WTO and kill competition. A bigger hurdle came on March 5, when the US Senate passed an amendment draft to the Tariff Act of 1930, which could impose controversial countervailing duties on imports from China and Vietnam.
Interim threats to label China a currency manipulator continue to do the rounds along with demands that the yuan exchange rate should appreciate by 20 per cent in the short term. The US is also pushing for launching the Trans-Pacific Partnership, a free trade agreement with eight Pacific-Rim countries, minus China, the largest trading nation in the region.
Between them, China and the United States notched up a two-way trade volume exceeding $400 billion (Dh1.46 trillion) in 2011, with America's trade deficit hitting a record $295 billion last year.
But that's hardly the exception as China has trade surpluses with 75 per cent of its trading partners, resulting in a series of disputes, hostility and protectionist barriers.
China's comparative advantages in manufacturing remain the main reason for its trade surplus but Beijing is now ready to fight perceptions and correct the balance.
The world's largest exporter has decided to change course, rely less on exports to drive the economy and persuade its own people to buy more. The department of foreign trade's main priority this year will be to increase imports of capital goods and consumer items.
It intends to import $10 trillion in goods and services in the five years ending 2015.
As a major sop, it has decided to cut import duties on selected energy products and raw materials as well as consumer goods. Chinese spin doctors are on an overdrive to explain that importing more will lift living standards and ease their disputes with trade partners.
This ‘buy more but not sell less' approach has borne fruit. It helped China narrow its trade surplus by 14.5 per cent in 2011 to $155 billion. Imports reached $1.74 trillion, accounting for nine per cent of the global figure.
This amount is expected to grow about $100 billion annually. With this strategy, can the US or other European nations continue to ‘punish' China while hoping to ride the wagon to their market?
Needless to say, China too protects its markets fiercely by forcing foreign companies to transfer technology and know-how to domestic players through joint ventures.
Once Chinese companies are ready to compete on their own, walls are swiftly built. In the auto sector, giant car makers ran into this wall recently when the government curbed foreign investment in successful joint ventures, citing environmental compulsions. With the Chinese car industry poised for 7.5 per cent to ten per cent annual growth, this comes as a big blow to foreign car giants.
Another ground zero for new Chinese protectionism is retailing, especially the $70 billion-a-year grocery market.
Retail giants Walmart and Carrefour have borne the brunt of various infractions, no doubt egged on by local competitors.
Source: Gulf News