Protectionism hurts everyone
By Miao Yingchun (China Daily)
Updated: 2004-05-27 09:13

The International Trade Commission of the United States decided on May 14 that colour TV sets manufactured in China have caused material harm to US producers.

The decision removes the final hurdle to the US Department of Commerce ruling to impose anti-dumping taxes - between 5.2 to 26.4 per cent - on Chinese-made televisions beginning next month.

This is a move of trade protectionism taken by the United States after China made major concessions at the 15th Sino-US Joint Commission on Commerce and Trade in April. And it has definitely cast a shadow on the prospects of the Sino-US trade.

Since George W. Bush moved into the White House, Washington has stuck to a Keynesian ultra-protectionist policy and strengthened trade protectionism.

The Bush administration has focused much of its attention on promoting bilateral free trade zones.

In May and June of 2003, the United States inked bilateral free trade agreements with Singapore and Chile respectively, which were the most significant free trade agreements since Washington signed the North America Free Trade Agreement with Canada and Mexico in 1994.

The overemphasis on bilateral trade has dragged on its efforts to set up multilateral free trade frameworks, which contributed to the collapse of the World Trade Organization talks held in Cancun, Mexico last September, as well as that on the Free Trade Zone of America (FTAA) in Miami last November.

At the same time, unilateralism is gaining weight in US foreign economic policies. A 30 per cent tariff upon imported iron and steel was announced in March 2002, to be in effect for three years.

In May the same year, the United States also released its 2002 farm bill to dramatically raise agricultural subsidies by 67 per cent over the next six years. The total sum will reach US$190 billion in the next decade.

Such unilateralist moves ignore the interests of other countries in a globalized era and jeopardize the principle of free trade.

The US trade protectionism is mainly a result of failure by the Bush administration to adapt to changing global economic situation.

The European Union (EU), which has a unified trade policy, emerges as a strong trade body; Japan continues to play a strong role in the world economy and the huge markets in China and India as well as the booming East Asian economy make the region an important engine for world economy. The world economy is no longer dominated by the US economy alone and is turning into a multi-polar scenario.

Clinging to the old world economic pattern, the Bush administration remains committed to hardline protectionist policies, which have hindered the development of new world trade and hurt other countries who aspire to free trade principles.

The policy will reverse the benefits of free trade brought to the United States by the economic globalization.

By imposing anti-dumping taxes on Chinese TV sets, the US Government ignores the benefit of a vast number of domestic consumers just to cater to the 3,226 TV industrial workers.

It goes against the latest mutual understanding reached between the two sides.

A strategic consideration behind the anti-dumping tax is that the US Government wants to reduce over-dependence on made-in-China colour TVs.

The US side said colour TV sets imported from China and Malaysia rose 11 fold between 2000 and 2002. The British Broadcasting Corporation estimates Chinese TV sets account for 20 per cent of the US imports.

While these figures are yet to be verified, it is clear the US Government has started to review the balance of market shares.

Some experts thought a fundamental reason for Chinese manufacturers' being targeted for dumping is their over dependence upon low prices to obtain market share.

That misses the most crucial point: China is taken by the United States as a non-market economy.

Since the United States refuses to recognize China as a market economy, it calculates production costs in anti-dumping investigations by adopting statistics from a surrogate country, such as Singapore, whose labour cost is 20 times that of China.

Chinese producers are thus disadvantaged in the anti-dumping charges because it is very difficult to find an alternative market economy whose production costs are as low as China's.

The fact is China is consistently opening up its market and the degree of its opening up has exceeded some countries that are accepted as market economy, such as Russia.

 New Zealand and Singapore have both granted China market economy status. Australia has promised to give China the status and the EU is analyzing China's request for it.

Given all this pressure, the US Department of Commerce said it has scheduled a public hearing on June 3 on whether to designate China as a "market economy" under US anti-dumping laws.

Though it is a positive signal, there is some way for China to travel to reach the standards for a market economy status set by the US Tariff Act of 1930. In the eyes of US experts, China is still under huge changes, which mean it is no longer a planned economy, nor is it a mature market economy.

Obtaining market economy status is China's top priority in its economic and trade relations with foreign countries, no matter how difficult it might be. Otherwise, the non-market economy status could be the country's Achilles heel when developing its foreign trade.

The anti-dumping tax will definitely affect Chinese colour TV manufacturers. On the one hand, it will intensify the competition on domestic market. On the other hand, the manufacturers will have to face higher costs to penetrate smaller markets other than the EU and the United States.

However, the quick response of manufacturers to the anti-dumping investigation is adequate to prove Chinese enterprises are becoming mature in dealing with the frequent international trade conflicts.

Changhong, one of the largest manufacturers, said it will expand exports through its branches in Australia and Indonesia and would open more research and development institutes in the United States, the Middle East, Russia and the Europe to boost the export of high-end products.

Such a strategic adjustment could help ease the pressure from unfair anti-dumping charges in the US market and also serve as important steps in the TV manufacturers' efforts to go global.

Currently, the most realistic way out for Chinese manufacturers is to try to get a good evaluation in the annual review, which is a year from the day when the US Department of Commerce proclaimed the anti-dumping tariff.

The author is a researcher at Wuhan University's College of Political and Public Management.

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