international trade.doc

International Trade Relationships between China and America
----Trade Frictions after China Enter the WTO
It has been reported recently that domestic industries in America had already applied for the anti-dumping and anti-subsidy investigation of China’s steel wheels exported, which will become the first “anti-double” investigation confronted by auto components industries in China if this application passes. If this case succeeds, it will do more harm to our domestic wheel industry. Since in the anti-dumping case of European aluminum wheels in October, 2010, China has already failed and was forced to increase its tax rate from 20.6% to 22.3%.
From this case, we can clearly see that there exist trade frictions between China and America on wheels. Industries in America suspected the price of China’s wheel were relatively low and thus threatened to their own interests. To make the international trade under a fair environment, these industries asked for the investigation.
Not only in this case can we see the China-US trade conflicts, such trade frictions have existed for a long time since China joined the WTO.
Trade frictions after 2001
1) Initial international trade relationship between China and America
Since China entered the World Trade Organization in 2001, America had been a good trade companion and was the largest object to whom China exported its goods and services. On the other hand, America also had a large amount of export products such as coke cola to China. Such kind of mutual transaction internationally makes each part beneficial. According to China’s customs, the trade volume between China and America in 2005 had arrived at 211.6 billion USD.
However, with more communication of two parts on trade, frictions gradually developed and became distinct. They were mainly caused by trade measures like protectionism, anti-dumping, and tariff. For instance, America preferred to carry out protectionism and used it as a way to protect its domestic industries, which may hurt the benefits of China when two parts have some trade transactions.
2) Some cases of trade frictions
Recent years, there have been a lot of trade frictions between China and America, concerning about the intellectual property right, the issue of RMB’s appreciation and so on. Here are two main cases following:
Case A
In Feb.5, 2010, the Chinese government succeeded in the anti-subsidy and anti-dumping investigation of American’s Chicken Products and could legally impose anti-subsidy duties. Before the preliminary determination, evidences like material injury made to Chinese domestic industries and the causal link between dumping and injury had been collected.
As revenge, U.S. Dept. of Commerce demonstrated on Feb.6, it would require for anti-dumping duties for China’s extremely low price of gift box and wrapping ribbon. The highest duties in Chinese mainland would surpass 231% while in Taipei the duty was only 4.54%.
In this case, we couldn’t simply judge which part is right, since each party resumes to the legal way, that is, through the WTO, to prevent their potential losses. Both parts prefer to impose duties on products which hurt their domestic industries. There is no country that is not concern about it own interests. Hence, contradictions on trade are inevitable when imports and exports are strengthened.
Case B.
Protectionism of America has been active after the financial crisis. In September, 2009, the President of U.S., Obama signed the case aiming at China’s exporting tires, which was considered to be the first trade conflict in the era of Obama. On the other hand, China also took action to have “double anti” investigation towards American’s chicken and auto products. Thereafter, in January, 2010, U.S. Dept. of Commerce imposed additional anti-dumping duties of 43 to 289 percent on imports of more than $300m worth of a steel product from China. In March, 132.74%-349% of duties were collected from China on ‘its refractory bricks. Only considering the one year of Obama’s accession, the number of “double anti” investigation towards Chinese products has reached more than 20 pieces, with related capital of more than 7 billion USD. Therefore, policy of American’s trade protectionism is obviously seen, which will lead to more frictions with China in the future.
3) Influences of trade frictions
A. No matter which kind of friction, such as anti-dumping duties, limitation of quotas, all of which will enhance the thresholds of the exporting goods and services to enter international markets, and even lose the trade opportunity with other countries.
B. As to country, there exist both advantages and disadvantages.
On the one hand, frictions like anti-dumping investigation or protectionism may be a good method to protect the domestic industries and decrease the unemployment rates.
On the other hand, these conflicts mentioned above may also result in an increase in domestic price for there are constraint imports with fewer choices.
C. As to the industry, trade frictions can act as an impetus to stimulate management improvement, technology progresses and responsibility conscious enhancement. The reason is that from the frictions like investigation, industries can have a entire inspection of themselves and find out their defects.
4) Reasons causing trade frictions
The reasons are divided into two parts, one is in the charge of America, the other for China.
For America’s part
A. the policy of America’s protectionism
When having trades of export, America is liable to implement the principle of freedom while insists on protectionism on importing trades. China has been the biggest victim for America’s strict limitation of its export. Such protectionism can also been seen in the case B mentioned above.
B. “Non-market Economy Clause” to China carried by America
There have been already many restrictions to control China’s export goods such as through anti-dumping measures. However, the American government is not satisfied and obtained the recognition of China’s “non-market economy” status. Thus, America can gain more benefits when it puts forward anti-dumping investigation.
C. Outstanding intendance of politicalized trade frictions
In order to maintain its interests, America will publicize certain hot topics through media which might enlarge the trade frictions, thus, it can force the other part to take some non-economy measures and reached its objective. This phenomenon results from the root source that the concerning point of world economy has transferred from interests creation to interests distribution.
For China’s part
D. Imbalance of trade
Adjustment of regionally industrial structures in East Asia broke the previous international payment condition, expanding the imbalance of US-China trade rapidly. More Asian countries export labor-needed and re-process products to China, making China in trade deficit while turned to surplus in trade to America. Such trade structure severely influenced the balance of trade.
E. Several problems appeared during the development of economy
It is inevitable to have more frictions when China expands it export volume. Whereas, US-China trade relationship is not equal. On one side, China is largely economically reliable on America. For example, once the quotation of costumes and shoes exported to America decreased, the total exporting sales will shrink sharply. On another side, the quotation of the two parts on economic aggregate is dissymmetrical. For instance, amount of China’s export to America takes up more than 20 percent of the total volume while the corresponding amount of America’s export possesses merely 2 percent.
Meanwhile, with the improvement of the industrial structure, China has been develop it own high-tech industries, which reduces such imports from America and it breaks America’s plan to control China on technology. So trade friction is regarded as another way for America to constrain China.
5) Revolution and implications:
A. Making full use of the DSM of WTO
DSM( Dispute Settlement Mechanism), provides a way for countries to effectively solve disputes on trade without concerning about their weak economy level. As a developing country, China should make the most of it to safeguard its legal rights. Also, China can use the principles of WTO, such as, Non-discrimination, Trade liberalization, and Favorable treatment to developing countries.
B. Building system of technical trade barriers warning and reaction
A positive attitude and a good cooperation of government, communities and enterprises is needed. That is, offering, consulting and service of policy by the government, a thorough acknowledge of the products’ demand and supply, price, productiveness, and technical conditions, also effective collection of information and feedback system by the community, a well done research work on international market information, policies by the enterprises. Besides, we should encourage the friendly environmental industries and put it into the strategy of trade development.
C. Change of economy pattern
China should adjust its previous economy pattern of export-oriented, and erect a global strategy based on domestic demand, assisted by foreign demand. Chinese economy should transfer export to consumption, and deepen the domestic demand on housing, credits, casual services and so on.
D. encouragement of “going out”
With regard to ambitious enterprises, it is advisable to going international and set up factories abroad. This strategy not only improves our industry structure, but also does good to relax the trade friction. For example, setting up factories in countries like Vietnam will help to solve the problem of employment there and strengthen our friendly relationship, what’s more, when we have direct investment in America, we could avoid the trade barriers which will decrease the possibility of friction with USA.
Nowadays, with the rapid development of China’s economy, frequent international trades between China and America are inevitable though America may loss some so-called interests. However, it will resort to the limitation of China’s export. Together with its policy of protectionism, China’s imbalance in trade and some own defects during development, the trade frictions become increasingly fierce and lead to many bad influences mainly. Fortunately, there are still some actions we can take to relax such situation, like turning to DSB, building well formed system and expanding domestic demand.
As to us students, what we can do may have little to do with the mitigation of fierce trade frictions, whereas, we should still keep a good knowledge of what is happening on the world, making it as a way to concern about our country.