China on Monday asked the World Trade Organization (WTO) to establish an expert panel to investigate U.S. anti-dumping and countervailing duties on Chinese products which may violate WTO trade rules. The U.S. measures at issue "appear to raise a number of WTO concerns," and China "is deeply concerned" about the compatibility of these measures with U.S. obligations in the WTO, the Chinese delegation told a meeting of the WTO's Dispute Settlement Body (DSB).The US has used its right to delay the creation of a panel investigating this case. However, like anyone else, it cannot rebuff Chinese efforts to bring this case to the DSM more than once. Meanwhile, Reuters has a backgrounder on how US-China trade tensions are set to sharpen with Obama becoming US president:
According to the delegation, China has called the United States' attention to its concerns on numerous occasions, but "thus far it has not received any concrete solution from the United States...Therefore, given its systemic concerns, China is compelled to pursue this matter further and to request that the DSB establish a panel ... to examine China's complaints," it said.
The U.S. duties at issue affect such Chinese products as circular welded carbon quality steel pipe, new pneumatic off-the-road tires, light-walled rectangular pipe and tube, and laminated woven sacks. China filed complaints to the WTO about the U.S. measures in September. Consultations between the two sides were held on Nov. 14 according to the WTO dispute settlement process, but the consultations failed to resolve the dispute.
At the DSB meeting on Monday, the United States blocked the establishment of the panel. But the panel would be established automatically if China makes the request again in January. At least half a year is needed for a WTO panel to issue its ruling on a dispute.
I will have more on why a trade war could be a potentially welcome development as the US and China wage a tit-for-tat strategy of faulting each others' trade practices and launching sanctions. Unlike conventional economists who view protectionism as an unambiguous bad or anti-globalization types who view trade as little more than the work of Satan, there is more to it than that. As always, the IPE Zone is less about pleasing either crowd than about forging ahead with fresh thinking on various problematiques. Yes, a trade war may just be the thing to remedy global economic imbalances currently roiling globalization. All we need is an Obama-induced escalation. Watch this space.
Obama, who has pledged to place more pressure on China over its export subsidies and managed currency, stands to inherit a long list of trade disputes that will test already thorny relations with its second-largest trading partner. "The U.S. has set a bad example to other members of the WTO in its anti-subsidy action," said Ren Yifeng, of WTO research group affiliated to China's Commerce Ministry.
Obama's trade dispute task-list is likely to grow, as labor and industry groups push agendas that will place him on a delicate tight-rope -- to be seen to be protecting U.S. jobs while avoiding a potentially disastrous trade war with Beijing. "The new administration will come under unprecedented political pressure from its own base and from a wide range of industries," Chris Padilla, a former under secretary of international trade in the Commerce Department, told Reuters. The pressure would "force it to take decisions early in its new term," said Padilla, who expected a "large increase" in anti-dumping and countervailing cases against China, and demands for new curbs on Chinese imports.
U.S. labor and trade groups will also browbeat the incoming administration to brand China a currency manipulator, potentially opening the door for other steps to pressure Beijing, including a possible complaint to the WTO. China's exchange rate with the United States is a festering complaint of many U.S. manufacturers who say Beijing deliberately undervalues its currency to boost exports. "We are very committed to seeing some strong action on China's currency," said Thea Lee of the AFL-CIO labor group.
Obama, who said that China's yawning trade surplus with the U.S. was "directly related to its manipulation of its currency value," had backed legislation that would designate currency manipulation as a subsidy under U.S. trade remedy laws, noted Gil Kaplan, chairman of the Committee to Support U.S. Trade Laws. "That was important legislation and I hope Obama will push forward some kind of legislative solution on currency manipulation," said Kaplan.
While placing pressure on China to raise the value of its currency, the Bush administration has resisted branding China a currency manipulator. Beijing has allowed the currency to rise 20 percent against the dollar since abandoning a long held peg against the U.S. dollar in July 2005. But the currency has barely moved since the middle of the year amid worries over possible capital outflows.
With Chinese exports unexpectedly falling 2.2 percent in November, the first drop in seven years, Beijing has given short shrift to calls to further devalue the currency. "With shrinking demand in overseas markets, the role of the exchange rate in stimulating exports will be limited -- it is a measure not worth taking," Chinese Commerce Minister Chen Deming told the People's Daily newspaper on Wednesday. Beijing, conversely, has issued a raft of incentives to boost exports in recent months, including raising tax rebates and scrapping export taxes, amid concerns that rising unemployment could spark broad social instability.
As both countries' exporters scramble to compete for a shrinking pool of customers, trade frictions were inevitable, but unlikely to spark a protectionist backlash in China, said Zhang Hanlin, a professor with the University of International Business and Economics in Beijing. Protectionist actions will be our last resort if the U.S. seriously violates regulations and agreements and harms China's interests," said Zhang.