June 7, 2005

THE U.S. , EU AND CHINA:  PURSUING 'FAIR AND COMPETITIVE TRADE'

 

KEY FINDINGS

 

**  "Textile disputes between the U.S., Europe and China" have heated up.

**  "Emerging superpower China" wants to be a "soft yet tough" WTO player.

**  The yuan exchange rate is pegged at a fraction of its "real value."

**  U.S., EU and Chinese officials are locked in a "minuet of bitterness."

 

MAJOR THEMES

 

China's 'heated textile issue with Europe and the U.S.' roils on--  Worldwide outlets commented on China's growing "national economic power."  China has become a U.S. and EU "arch-rival on the global stage" fueling a rise of commercial tensions.  All writers cited U.S.-EU-China textile disputes as the proverbial "tip of the iceberg," and the issue most likely to provoke a trade war.  Some papers also noted salient concerns over IPR, "pirated products" and a "red tide of apples."  India's centrist Hindu asserted Chinese apple production "defies the textbook understanding of demand and supply."  It added, "China has flooded the United States market with not only textiles and garments but also apple juice concentrate."

 

The 'WTO's entrance fee': open markets in an 'increasingly difficult trade environment'--  Pro-Beijing papers noted China's accession to the WTO demanded a commitment to open markets, as many writers viewed the EU and U.S. as "rude and unreasonble."  They averred developed nations wanted to take "domestic focus away from their own problems of economic restructuring, which have led to high wages, welfare and decreasing efficiency."  They also saw an opportunity for Beijing to "express its tough attitude towards the textile issue" during Commerce Secretary Gutierrez's early June visit; China's official Xinhua News Agency declared, "China’s commercial diplomacy should merge softness and toughness."  

 

'When will the yuan be revalued?'--  China viewed U.S. and EU calls for currency reform as "interference" while many Euro outlets urged the emerging economic "giant" to act in accord with international economic principles and "shoulder its responsibility."  Japan's liberal Asahi held that China launched "its trade offensive" by "pegging the yuan to the dollar."  Germany's Financial Times Deutschland termed it "clear that the European textile industry runs into problems when a devalued Chinese currency further reduces its already cheap labor costs by a third."  An economic analyst in Beijing countered, "the truth is that China should not move its peg based on unilateral White House pressure.  To do so will not save any American jobs."

 

The EU's Barroso monitors as the U.S.' Gutierrez sweats and China's Bo Xilai resists--  The Beijing News wrote that Commerce Secretary Gutierrez "broke into a sweat" under "relentless questioning" from Tsinghua MBA students over textiles.  Portugal's Radio Service remarked that the executive arm of the President Barroso's 25-nation bloc "monitors statistics on Chinese textile imports from individual member states on a daily basis and will take further action if it feels this is justified."  Hong Kong's independent Ming Pao Daily News published that China's commerce minister Bo Xilai "warned the EU and the U.S. that they should be pragmatic in international trade" after Bo earlier ruled out "any further curbs on its textile trade."

 

Prepared by Media Reaction Branch (202) 203-7888, rmrmail@state.gov

 

EDITOR:  Rupert D. Vaughan

 

EDITOR'S NOTE:  Media Reaction reporting conveys the spectrum of foreign press sentiment.  Posts select commentary to provide a representative picture of local editorial opinion.  Some commentary is taken directly from the Internet.  This report summarizes and interprets foreign editorial opinion and does not necessarily reflect the views of the U.S. Government.  This analysis was based on 39 reports from 12 countries from May 15 to June 7, 2005.  Editorial excerpts are listed by the most recent date.

 

EUROPE

 

GERMANY:  "China Syndrome" 

 

Torsten Rieke editorialized in business daily Handelsblatt of Duesseldorf (6/1):  "The China policy of the U.S. government again arrived where it departed five years ago:  'China is America's strategic competitor.'  President Bush made the headlines with this statement at the beginning of his first term.  But the 9/11 attacks and North Korea's nuclear arms built-up quickly turned the competitor into an ally.  But the United States has come to full circle again and China is again turning into an arch-rival on the global stage.  This up and down is mainly driven by economic conflicts....  In this situation, it is not very useful that relations between the superpower that is dominating today and the emerging superpower have cooled down politically....  The disappointment of the Bush administration at the fact that the Chinese are unwilling to exert political and economic pressure on Pyongyang has lead to a more realistic approach of the Bush administration....  But the loud tones from Washington only indicate the helplessness of the United States with respect to its future treatment of China.  With his China policy, Bush arrived not only verbally at the initial stage of his China policy.  With respect to contents, President Bush has also reached rock bottom.... The verbal offensive against the Middle Kingdom is therefore more than a political, emotional reflex to growing domestic pressure than an expression of a well-conceived new orientation.  This offers a chance and a risk at the same time.  One the one hand, it is still up to President Bush to set his policy towards China on a new foundation.  This includes not only a clear definition of his own interests and a balancing of contradictions with respect o human rights questions.  But the president should also withstand the temptation to make China the scapegoat for economic problems of all kinds.  The most recent policy, however, indicates that Bush will succumb to this temptation and that China turned into the 'punching bag' of his administration long ago."

 

"Strange Dispute Over China's Exports"

 

Business daily Financial Times Deutschland of Hamburg (5/18) editorialized:   "The power with which China enters the world markets can be shocking....  China is apparently so powerful that it can push its industrialized competitors off the market.   The import restrictions some EU countries want to impose could only delay this process.   They will not stop the decline of the European textile industry.  Countries where high wages are paid must specialize in other products....  In the medium and long-term, China's rise on the world market might not be a disadvantage for the industrialized countries.  Incomes and purchase power for western products are increasing in China, which creates jobs, and the consumers in industrialized countries benefit from low textile prices in the U.S. as well as in the EU.  However, the situation in the U.S. and Europe differ concerning the currency development.  While the exchange rate between the dollar and the renminbi remained stable over the last decade, China's currency has lost a third of its value compared with the euro since 2001....  It is clear that the European textile industry runs into problems when a devalued Chinese currency further reduces the already cheap labor costs by a third.  Against this background, it is absurd that Congress exerts pressure on China to allow a revaluation of its currency, while the EU talks about import quotas.  If someone could accuse the Chinese of unfair currency manipulations it would be the Europeans, but not the Americans."   

 

ITALY:  “Rumsfeld Attacks China--‘Too Many Weapons, It’s A Threat’” 

 

Federico Rampini commented from Beijing in left-leaning, influential La Repubblica (6/5):  “After the textiles and the currency, Washington is now opening a new front with China: rearmament.  The U.S. Secretary of Defense Donald Rumsfeld yesterday issued a warning on Beijing’s ascent of military power, accusing it of disrupting strategic balances. The tone he used with China had been unheard for some time....  Behind Rumsfeld’s statements is a controversial report from the Pentagon that adjusted upward the data furnished by the Chinese government on military expenditures.  The Pentagon’s document contains the new ‘Bush doctrine’ toward China, which puts the Asian giant back at the center of American strategic concerns.  This was George Bush’s line back in 2001, when he first took office; but September 11 changed the priorities.  For some time now neo-conservative circles in Washington have maintained that military commitments in Afghanistan and Iraq have distracted attention from what is destined to become America’s true rival.”

 

"Snow Envoy For The Yuan"

 

Mario Platero wrote from New York in leading business daily Il Sole-24 Ore (5/20):  “Perhaps there is something more than a simple long-distance controversy behind negotiations between the U.S. and China on the revaluation of the dollar.  Treasury Secretary John Snow, who was closing one of the most active weeks in long-distance economic-financial-commercial negotiations between Beijing and Washington, yesterday announced a new position in the Administration--the nomination of a special envoy for China....  Olin Wethington, one of his closest aides....  While we wait for something to happen, the minuet between the two countries has reached new levels of bitterness: the U.S. has released a document which attacks China for its currency policy and Wednesday it imposed a tariff barrier on five other textile products.  China has passed a sort of a self-disciplining code.  But in substance, very little will change: the Chinese surplus toward the U.S. will remain high and polemics will continue--at least until two future dates: the July G-8 summit in Scotland, and Bush’s trip to China on the margins of the APEC summit.  China will have to live up to its responsibilities before then.  But it is in everyone’s best interest to proceed with caution.”

 

"EU, Urgent Procedure Against China"

 

Franco Papitto commented from Brussels in left-leaning, influential La Repubblica (5/18):  “China is caught between EU and U.S. crossfire.  On one side are the accusations from U.S. Treasury Secretary that Beijing manipulated the exchange value of the yuan for export advantages, and on the other is Europe’s implementation of measures to protect against textile imports....  As to Washington’s accusations, U.S. Treasury Secretary is threatening to designate China as a currency-manipulating country if it doesn’t change its exchange rate policy.”

 

"The White House Attacks China"

 

Leading business daily Il Sole-24 Ore remarked (5/18):  “The White House is admonishing China: if it doesn’t revaluate the yuan soon, it could impose economic retaliations. The Bush Administration, which last week announced new quotas for Chinese textiles, yesterday criticized Beijing for its hesitancy to decouple from the dollar, which the White House claims provides huge export advantage to Chinese products... Requests for tougher action are increasing in the United States.”

 

"Bush Against 'Made In China'" 

 

Federico Rampini opined from Beijing in left-leaning, influential La Repubblica (5/15):  "Following many threats, the ‘textile war’ against China has actually begun.  But the offensive did not come from where Beijing expected.  George Bush, and not Europe, acted first.  The U.S. President announced that his Administration will re-introduce quotas on Chinese imports of shirts, pants and knitwear....  Bush’s move, which contradicts his commitment toward the liberalization of world trade, will be of help to the European textile lobby...which is pressuring the Brussels Commission for protection against China....  Bush’s decision is also tied to the tug-of-war between Washington and Beijing"

 

BELGIUM:   "Chinese International Responsibility And The Textile Test"

 

EU affairs writer Jim Lannoo editorialized in independent financial daily De Tijd (5/21):  “China’s rapid economic growth and solid competitive position will inevitably lead to an expansion of China’s political and military power.  The United States is already afraid of losing its military superiority in Asia.  That is why it is opposed so strongly to the lifting of Europe’s ban on the export of arms to China.  China’s rise as an economic, political and military superpower will become one of the main challenges of the beginning of this century--much more than just a golden economic opportunity.  China is undeniably becoming a superpower--but the yellow giant should act accordingly and shoulder its responsibility.  It will be a delicate but major challenge for the other superpowers--the United States, Russia, the EU and Japan--to convince China that it must respect international agreements on the environment, fair competition and trade, social standards and the protection of intellectual property.  The textile debate is a first major test to find out to what extent China is prepared to respect international agreements.”

 

CZECH REPUBLIC:  "Who Is In Bigger Decline:  Europe Or America?"

 

Jiri Pehe commented in the business Hospodarske noviny (5/24):  "In the last few years, both sides of the Atlantic are engaged in a strange discussion.  Both in Europe as well as the U.S. there are “radical” articles and books coming out that attempt to prove that the U.S. (or Europe) is in political, social or economic decline.  At the same time explanations are offered as to why one side or the other of the trans-Atlantic civilization is better than the other.  The last round of this intellectual one-upmanship was started several years ago by some American neoconservatives and conservatives (such as Robert Kagan, Richard Perle, Pat Buchanan, Charles Krauthammer and George Will) who criticized the moral, military and institutional weakness of Europe at the time of conflict with international terrorism.  Against these supporters of American hegemony stands a strong group of opponents like the political scientist Charles A. Kupchan and the historian Paul Kennedy who argue that any great power who in its day dominated the world will overestimate its abilities and exhaust itself.  According to them the U.S. is past its prime and will have to return to a multilateral policy.  America will face a powerful competitor in the form of a unified Europe…in the wake of the flood of books that describe the fall of Europe or America and often also predict growing tension in Euro-American relations, the latest book of Timothy G. Ashe, The Free World, is refreshing.  In it the famous Oxford historian argues that the U.S. and Europe are so mutually interconnected at so many different levels, that it makes no sense to place them against each other…Ash also argues strategic necessity.  According to him, Europe and the U.S. have about twenty years to create one economic (and partly political and military) unit because at the current rate of growth of China and India, they will not be able to compete with the Asian superpowers if they remain divided."    

 

PORTUGAL:  "EU's Barroso And Chinese Textiles"

 

Lisbon's domestic Radio Service commented (Internet Version 5/19):  The European Union may adopt more emergency measures to curb Chinese textile imports, in addition to those already put in place earlier this week on two key categories, European Commission President Jose Manuel Barroso noted in Lisbon [the EU] has announced 'certain measures which are important, if it is necessary we will adopt other measures'...  Barroso announced the Chinese government will understand that it is in its own interests to limit its textile exports to the EU because it is creating some distortions in the market....  The EU Commission, the executive arm of the 25-nation bloc monitors statistics on Chinese textile imports from individual member states on a daily basis and will take further action if it feels this is justified....  Brussels earlier this week demanded urgent talks with the Chinese officials on surging imports of T-shirts and flax yarn, which is used to make linen, since the ending of international quotas on the textile trade in January.  The United States has also put pressure on China to rein in its textile exports but earlier Thursday China's commerce minister, Bo Xilai, ruled out any further curbs on its textile trade.  Under WTO rules the EU must carry out formal consultations with China for 90 days before the bloc can launch safeguard measures.  But in the meantime the EU can apply 'interim import growth restrictions' if China does not take steps to rein in its exports. Any extension of the measures would be likely to cover others of nine categories already subject to an EU investigation: pullovers, men's trousers, blouses, stockings and socks, women's overcoats, bras and woven fabrics flax.  China has already raised taxes and lowered export rebates on textile products in an effort to slow growth."

 

SPAIN:    "Textiles Are Tip Of Iceberg"

 

The centrist daily La Vanguardia expressed the view (6/4):  "The commercial friction provoked by Chinese textile exports to the EU and the U.S. is increasing.  But the textile problem is only the tip of the iceberg of the problems that the competition from the emerging Chinese economy's products will cause to the rest of the world's manufacturing industry....  The risk of a commercial war between China and the U.S. and EU, with a return to the protectionism beginning in the textile (sector) and continuing to others, is not the best path. The world must continue making progress on the path of the free trade. For this reason, it is necessary that each country complete a minimum of social and labor rules, while at the same time having a currency that reflects its real value. The core problem is not the 'Chinese way' of production...as much as the lack of its currency's adaptation to its real value. Different studies estimate that the Yuan exchange rate is located, at minimum, at a fifth of its real value. The EU and the U.S. must redouble their pressure on Beijing to correct this situation. That is the path. And it must be achieved with urgency."

 

"China Takes A Step Backwards"

 

Conservative daily ABC expressed the view (5/31):  "The sudden cancellation (of the Chinese textile export tax)...opens the door to the rise of commercial tensions in other products by the biggest protagonists of worldwide trade....  It is in everyone's interest that China join in international trade under the best conditions of freedom and liberalization.  Beijing’s government should be more interested than any other, because, as well as new markets, it will have access to needed and interesting technologies.  But not at any price: not under excessive conditions that move difficult problems to the importers' productive sectors....  In the middle of the controversy, it is good to remember, although it seems obvious, that fair and competitive trade is that which creates and distributes wealth." 

 

ASIA PACIFIC

 

AUSTRALIA:  "Free Trade Suffers Its Quota Of Setbacks"

 

Editorial in the business-oriented Australian Financial Review  read (5/16):  “Global free trade took a step back this weekend when the U.S. reimposed quotas on Chinese textile imports. It took decades of careful negotiation to end the quota-ridden Multi-Fiber Agreement on January 1 - and just four months for Washington to decide it didn't like the consequences....  At one level the reaction is understandable--although, of course, industry restructuring should be one of the hoped-for consequences of trade liberalization. What this signals--as if anyone needed to be reminded-- is that when U.S. domestic politics is affected, Washington's commitment to free trade is compromised....  All of this augurs poorly for the next important meeting of the World Trade Organization, the so-called Doha ministerial meeting in December.  Instead of coming closer together on free trade, WTO members seem to be drifting apart. The anti-protection lobby felt doubly aggrieved this weekend, after Uruguay's candidate for the top job at the WTO, Carlos Perez del Castillo, pulled out of the race, leaving Frenchman Pascal Lamy as the only candidate.  Given France's attitude to protection, some free traders were hanging their heads in despair.”

 

CHINA:   "Trade War Not In Accord With Sino-U.S. Interests"

 

 Zhang Yong commented in the official Communist Party People's Daily (Renmin Ribao) (6/7):  “The trade dispute between the U.S. and China highlights a truth: the side that has gained the most from U.S.-China trade is blaming the side that has gained the least.  Trade protectionism cannot preserve the U.S. textile industry.  The U.S. government actually knows the harm of trade protectionism and in the past the Bush administration has taken steps to facilitate bilateral trade.  Due to pressure from U.S. interest groups, the U.S. government has placed restrictions on Chinese textile products.  Textiles only make up six percent of the overall U.S.-China trade and therefore should not be allowed to influence overall Sino-U.S. trade relations.  The U.S. should adopt a long term perspective and work with China in order to promote the development of bilateral trade.”

 

"The U.S. Wants to Avoid A Trade War"

 

Zhao Jin commented in the Beijing-based newspaper sponsored by the official intellectual publication Guangming Daily and Guangdong Provincial official publication Nanfang Daily The Beijing News (Xin Jing Bao) (6/3):  “Analysts think that it will be difficult for the two sides to reach accord in the near future.  Researcher Mei Xinyu from the Research Institute of the Commerce Ministry said, regarding Secretary Gutierrez’s visit to China, the Chinese government will also express its tough attitude toward the textile issue.  China’s Commerce Minister Bo Xilai’s strong statements at his May 30 press conference reflect the Chinese government’s attitude on the issue.  China must demonstrate its tough stance in order to dissuade other countries from following the U.S.  Bo noted that China could add high tariffs on U.S. products exported to China.  Finally, China will continue to appeal to the WTO.”

 

"The U.S. Commerce Secretary Sweats While Making Excuses"

 

Yang Kairan commented in the Beijing-based newspaper sponsored by official intellectual publication Guangming Daily and Guangdong Provincial official publication Nanfang Daily The Beijing News (Xin Jing Bao) (6/3):   “Under relentless questioning from Tsinghua MBA students on the U.S. imposed restriction on Chinese textiles, Secretary Gutierrez broke into a sweat, broke off a question and hurriedly left the room.   Regarding protection of IPR, the Secretary stated that the issue is not negotiable.  Following the Tsinghua event a Chinese analyst stated that the United States’ unilateral criticism of China’s protection of IPR is not just.  The analyst argued that the U.S. making an issue of IPR protection is actually a trade negotiating tactic.”

 

"Does The U.S. Commerce Secretary Come Only For Improving Relations?"

 

Guo Yonggang commented in the official Communist Youth League China Youth Daily (Zhongguo Qingnianbao) (6/2):  “Analysts believe that textile trade will be an important topic during Secretary Gutierrez’s trip.  They also believe that Gutierrez will press China to revalue the RMB and strengthen efforts to crackdown on pirated products.  Officials from China’s Ministry of Commerce (MOC) said that Gutierrez was not coming just to discuss textiles and pointed out that his trip was arranged months ago.  MOC officials stated that Secretary Gutierrez’s primary goal was to meet with Chinese officials.”

 

"China’s Commercial Diplomacy Should Merge Softness And Toughness"  

 

Zhang Jinjie commented in the official Xinhua News Agency international news publication International Herald Leader (Guoji Xianqu Daobao) (6/2): "The textile trade disputes between China and the U.S. and Europe have attracted the world’s attention.  China’s recent behaviors demonstrate that China has a practical and flexible commercial policy which is soft yet tough.” 

 

"Finger-Pointing Does More Harm Than Good"

 

The official English-language newspaper China Daily reported (5/20):  “The U.S. adoption of unfair textile barriers on Chinese exports just after the phasing out of the 10-year-old quota system dealt a heavy blow to the credibility of the world's largest economy's commitment to free trade.  Its interference in China's foreign exchange reform has posed imminent danger to a world economy largely powered by the sound growth of both economies.  Escalating economic tensions will not solve domestic difficulties in the United States and only undermine global trade growth.”

 

CHINA (HONG KONG, MACAU SARS):    "Staying The Course On The Yuan"

 

Laurence Brahm, political economist and lawyer based in Beijing, wrote in the 'Insight' page in the independent English-language South China Morning Post (6/7):   "Vice-Premier Wu Yi, during her visit to Tokyo, drew the line by saying: 'If the conditions are right, we will conduct reform voluntarily, even without pressure from foreign countries.  If the conditions are not right, we will not carry out the reforms, no matter how much pressure foreign countries exert.  We will abide by market rules.'....  The media, foreign economic think-tanks and even some business circles do not seem to have understood Ms Wu's point.  For China, shifting its currency upwards is not the issue; its objective is to float a convertible currency.  Former premier Zhu Rongji's ambition to achieve this was derailed by the Asian financial crisis.  Thus, the issue is not a peg shift, but the entire process of financial and monetary reforms, which will ultimately make or break the China model.  We are talking of a decade of careful economic engineering and reform.  Why should China's leadership go off course now by doing something surplus to its agenda--just because the White House says it must?...  At the risk of sounding politically incorrect, the truth is that China should not move its peg based on unilateral White House pressure.  To do so will not save any American jobs.  It might cost China a few hundred thousand, but even so, on the massive scale of reform, such a consequence is manageable.  But these points are no longer the core issue.  The question is whether the Bush administration's monetary unilateralism is placing America and China on the threshold of a new cold war.  If so, in the interests of all, it should be averted."

 

"The Possible Outcome Of Textile Disputes"

 

The pro-PRC Chinese-language Macau Daily News remarked in an editorial (6/3):  "Textile disputes between China, the U.S. and Europe are heating up.  EU Trade Commissioner Peter Mandelson suddenly said that he was optimistic about resolving textile disputes through negotiations.  Mandelson's remarks eased China-European trade tensions slightly.  There are still many obstacles, however, and we should not be overly optimistic.  For China and the U.S., U.S. Commerce Secretary Carlos Gutierrez has arrived in Beijing, with U.S. Trade Representative Rob Portman due to arrive soon.  They will meet with Wu Yi, Bo Xilai, and others to see whether they can settle the textile disputes.  The result has yet to be known....  Judging from the present situation, the U.S., Europe and China are all willing to resolve the dispute through negotiations.  The possibility of an immediate trade war is therefore low.  China loves to see the U.S. and Europe sitting down to develop a win-win solution.  If the U.S. or Europe asks for too much, however,  and no agreement can be found, China will be left with two choices.  First, it will take the case to the WTO, though past experience has been that this is not very effective.  Secondly, China may need to resort to a trade war.  Although it is very unlikely that such a lose-lose situation will occur, China must be psychologically prepared."

 

"It's Difficult To Have Fair Trade"

 

The independent Chinese-language Hong Kong Economic Journal noted in an editorial (6/1):  "China has suffered enough from EU and U.S. pressure on its textile exports.  The EU and the U.S. are rude and unreasonable.  It is easy to have an impression that the EU and the U.S. are joining hands to pressure China.  In international trade and in the race for international markets, the roles of friends and enemies are often reversed.  There is no eternal enemy nor ally because the EU and the U.S. are themselves engaged in a dispute over the civil aviation market....  The 'airplane war' between the EU and the U.S. and the joint pressure they are placing on Chinese textile products are two completely different issues.  However, they share some common points: power always comes first in trade disputes, compromise comes later, and reason has no role to play.  Let's take the airplane war as an example.  The EU knew that if it did not provide subsidies to Airbus, it would never be able to catch up with Boeing.  To keep its leading position, the U.S. ignored  domestic anti-trust laws to approve the merging of Boeing with McDonnell-Douglas in the 90s.  The EU has already said that it would invest Euro$17 billion to support the airbus.  The lawsuit of the WTO basically failed to threaten them."

 

"Nothing To Be Gained From A Trade War"

 

The independent English-language South China Morning Post said in its editorial (5/31):  "Now there is the possibility of a trade war.  It is a time for cool heads to prevail.  Those tariffs were raised steeply by the mainland earlier this month in a response to mounting pressure from the U.S. and the EU.  It was a genuine attempt to defuse the simmering trade row by showing a willingness to exercise self-restraint....  Sadly, this gesture did not bring about the intended results.  It was welcomed by the U.S. and EU but not seen as being sufficient to ease their worries.  They continued with their protectionist measures.  The mainland, in response, revoked the tax increases yesterday.  An opportunity has been missed....  The surge quotas imposed by the U.S. run counter to the free-trade principles it so fervently espouses.  There is some hypocrisy involved....  They are preferable to far more extreme measures being proposed by some U.S. lawmakers.  Congress is expected to soon debate a proposed 27.5 per cent tariff on all mainland imports--a provocative move that could lead to a full-scale trade war....  The mainland, U.S. and EU all know there is nothing to be gained from a trade war.  The recent skirmishes should not prevent efforts on all sides to resolve their differences amicably."

 

"Europe, U.S. Hidden Agenda; Trade War Inevitable"

 

The independent Chinese-language Hong Kong Economic Journal said in its editorial (5/31):  "China's scrapping of its self-imposed textile export tariffs is a smart move, at least politically....  We believe that both Europe and the United States have their reasons [for imposing restrictive trade measures] which go beyond the textile issue....  In other words, some things cannot be solved via normal trade negotiation channels.  In Europe, the French veto of the EU constitution yesterday reflected overwhelming protectionism.  Limiting foreign imports is politically correct.  The EU hopes to use trade conflict to pressure Beijing to float the renminbi.  At yesterday's press conference, Chinese Commerce Secretary Bo Xilai cited strong statistics and evidence to prove that the EU and U.S. lack justification for limiting Chinese textile products.  As in a real war, the super power--not justice--prevails.  To appeal to domestic demand, the U.S. and EU won't take China's complaints seriously, regardless of China's reasoning....  The textile conflict is merely smoke.  The real issue here is to force renminbi revaluation.  The EU and U.S. won’t give up without achieving this goal."

 

"China Should Prepare For No Fairness In Trade"

 

The Chinese-language Hong Kong Economic Times editorialized (5/31).  "The World Trade Organization (WTO) should be the independent judge in the game of global trade.  In reality, however, super powers such as the United States often detour to avoid the WTO, imposing unilateral trade limitations on developing countries.  Although China has paid the WTO's entrance fee by opening its market--and is therefore entitled to enjoy WTO protection--it is unlikely that China will receive fair treatment in international trade....  As China's national economic power grows, its export to the world market will inevitably expand.  Therefore, it will certainly encounter more and more trade barriers from other countries.  The current textile conflict is a good opportunity for Beijing to speed up training its own pool of talent in international law, trade, and negotiation to get ready for future trade wars."

 

"Long-term Precautions To Fight Trade Pressure"

 

The independent Chinese-language Ming Pao said in its editorial (5/31):  "Beijing should coordinate with the international business sector, including members of Hong Kong's chambers of commerce, to launch a global campaign to help dispel the international community's misunderstanding of the 'threats' posed by the mainland's economic growth....  Developed countries such as those in the EU and North America have started a trade war with China to take the domestic focus away from their own problems of economic restructuring, which have led to high wages, welfare and decreasing efficiency.  Even Allan Greenspan has admitted that a renminbi revaluation won't reduce the U.S. trade deficit....  China must realize that the current trade row won't disappear in the short term.  Rather, there will be more such episodes as China increases its share of the global market.  China should set up a strong team of experts and work out an overall plan to fight back according to international trade rules regulations.... Another way for China to reduce international suspicion is to further open up its own market according to free-market principles to convince the world that it is a win-win situation for everyone to trade with China."

 

"Trade Conflict Becomes Routine; Better Strategy Needed"

 

The pro-Beijing Chinese-language Wen Wei Po suggested in its editorial (5/31):  "The heated textile issue with Europe and the United States indicates that China will face a long period of frequent trade conflict with other countries.  As trade disputes become routine, China should prepare for an increasingly difficult trade environment, working constantly to improve its tactics and development strategy....  As some Western countries are facing an increasing trend of trade protection, China seems an easy target.  China should rely on its rights as a WTO member to protect its own interests."

 

"Hong Kong Textile Industry Should Prepare For Trade War"

 

The pro-Beijing Hong Kong Commercial Daily had this editorial (5/31):  "The EU and the United States have imposed tougher import restrictions on Chinese textile products for political as well as economic reasons....  To win more votes in the textile industry, some politicians in developed countries have promoted nationalist protectionism.  If China continues to relent in the face of Western pressure, it will set a very bad example for the international business community.  China's action to revoke the export tax on 81 kinds of textile products is therefore only fair and reasonable."

 

"Conditions Are Ripe For Yuan Revaluation"

 

The independent Chinese-language Hong Kong Economic Times noted in an editorial (5/23):  "When will the yuan be revalued?  There is such concern over this issue that speculation abounds.  Judging from Beijing's recent actions, however, and the situation in the international financial market, conditions are becoming ripe for a yuan exchange rate mechanism.  The only things hindering a yuan revaluation are the words and deeds of the U.S. government, which repeatedly pressure China....  U.S. Secretary of the Treasury John Snow submitted a Congressional report last week urging a yuan revaluation within six months.  He recently appointed a special envoy to supervise reform of the Chinese exchange rate.  All these moves have hindered a yuan revaluation because Premier Wen Jiabao clearly stated that China would not yield to foreign pressure.  Thus, the more pressure the U.S. applies, the more unwilling China will be to take action.  The current atmosphere is conducive for China to push measures to reform the exchange rate.  By restraining its words and deeds, the U.S. may be able to usher in an earlier yuan revaluation."

 

"Textile Trade War; Beijing Attacks To Defend"

 

The independent Chinese-language Hong Kong Economic Times commented in an editorial (5/21):  "The U.S. and European governments should understand that regardless of whether China imposes limits or raises export tariffs, these measures will not help the U.S. and European textile industries because wages in the U.S. and Europe are too high.  Although China is being forced to give up part of its market share, its production will only be absorbed by other developing countries.  Even if Beijing's measures are effective at reducing exports, U.S. and European textile industries will still urge their governments to put pressure on China textile products due to future business contraction.  To get at the root of the problem, China should turn to consumers in the U.S. and Europe who benefit the most from Chinese products.  China should communicate that consumers are the biggest victims if Chinese textile products are restricted as they will be forced to pay more to purchase products from other countries of poorer quality.  Politicians are most concerned with securing votes and their political interests.  To prevent favoring only the textile industry, China should bring together the large number of U.S. and European consumers to help prevent their governments from actions harmful to both Chinese exports and the interests of their consumers."

 

"Taking Initiative To Ease Trade Row"

 

The pro-PRC Chinese-language Wen Wei Po wrote (5/21):  "The Chinese government has announced that from June 1, China will raise tariffs on 74 textile products.  This increase is five times higher than previous taxes.  The tariff hike on textile products is a Chinese concession to ease trade frictions.  This move can help stop the rapid growth of textile exports, while at the same time giving Europe and the U.S. a strong message that China has the confidence and capability maintain order in its textile exports.  It is believed that the move will alleviate the pressure on Europe and the U.S. to impose restrictions on Chinese textile products.  The reasons for Europe and the U.S. to pressure Chinese textile products are complicated, however, stemming mainly from internal political pressure.  Textile products are one of the biggest trade items among China, Europe and the U.S.  If a trade war breaks out, textile products will therefore bear the brunt.  China should be prepared for follow-up measures."   

 

"U.S. Will Be Loser When Yuan Revaluation Takes Place"

 

The mass-circulation Chinese-language Apple Daily News remarked in an editorial (5/21):  "Renowned economist Paul Krugman pointed out that the U.S. government was basically ignorant of the disastrous effects of a yuan revaluation on the U.S. economy.  According to his analysis, if the Chinese government really agreed under U.S. pressure to revalue the yuan, China's exports would undoubtedly fall and the competitiveness of U.S. manufacturers would improve. Both are long-term effects, however, that wouldn't be seen immediately.  In the short run, a yuan revaluation would cripple the Chinese government's ability to earn foreign currencies.  It would also hinder the Chinese government's ability to purchase U.S. national bonds....  If China reduces or stops buying U.S. national bonds following a yuan revaluation, the U.S. government may be forced to increase bond interests to attract buyers.  U.S. interest rates will therefore rocket, bursting the property market bubble.  This pillar of support for U.S. economic growth over the past two years may collapse, leading many property owners and companies to bankruptcy.  Krugman believes that the U.S. government does not know the grave consequences of the yuan revaluation, nor are they prepared for any possible fallout."

 

 "Strong Argument On Just Grounds"

 

The independent Chinese-language Ming Pao Daily News editorialized (5/20):  "Sino-U.S. relations and Sino-European relations have become quite mature.  Although there are still differences over trade issues like the renminbi revaluation, there has been no trade war.  Bo Xilai warned the European Union and the U.S. that they should be pragmatic in international trade.  In other words, they should not execute only agreements to their benefit and reject those that are not.  China is not willing to use protectionist measures to manage trade friction with the European Union and the U.S.  Rather, China hopes that all will follow the rules of the game and handle trade friction with an open mind and vision....  A rough trade balance between China and the U.S. and China and the European Union hinges on whether the U.S. and the European Union can truly change their views on China and recognize China's status as a market economy.  The two should also relax restrictions on Chinese exports." 

 

"How Currency Is Valued Affects Chinese Textile Trade"

 

The independent English-language South China Morning Post expressed the view (5/19):  "Speculation about a revaluation of the yuan has reached fever pitch in recent weeks.  The guessing game is not so much about whether the mainland will make such a move--but when....  Pressure from the U.S. and the European Union for Beijing to revalue has, meanwhile, been stepped up.  The U.S. has introduced protectionist measures to curb imports of certain textiles from China.  The EU is considering a similar move.  The U.S. Treasury claimed on Tuesday that the undervalued yuan distorted world markets and warned that it could take action in future if an adjustment were not made.  But contrary to some expectations, it stopped short of accusing China of currency manipulation.  And the call was for the central government to take only an interim step towards a full flotation.  Such a step--a gradual broadening of the trading band for the yuan, for example--would have benefits for the mainland's economy and need not be seen as giving in to pressure from outside China.  The central government has good reason to be cautious about changing the dollar peg system, which has served it well.  It must take the decision in its own time.  But there is clearly a price to pay for allowing the ambiguity to continue for too much longer."

 

"Export Restrictions In Exchange For A Stable Currency Rate"

 

The mass-circulation Chinese-language Apple Daily News remarked in an editorial (5/18):  "The U.S. government announced it would impose new quotas on three categories of Chinese textile imports.  As the Bush administration has always waved the flag of free trade, why did it choose to introduce a protectionist policy by re-imposing textile quotas?  The answer is that the Bush administration hopes to use quotas on China imports in exchange for Congressional support for the Central American Free Trade Agreement (CAFTA), which Congress strongly opposes.  One reason for this opposition is that many Congressmen believe the Sino-U.S. trade imbalance should be at the top of the U.S. trade agenda....  In the face of U.S. pressure, China must make appropriate adjustments to its policy to avoid a U.S.-China trade war.  From this angle, it is not difficult to understand why China--despite having fair grounds to appeal U.S. textile trade restrictions--still plans to restrict its exports.  This may alleviate problems in the bilateral trade relationship.  If China does not take action, it may face strong pressure from the U.S., especially on the yuan exchange rate issue."

 

JAPAN:  "China Should Revaluate Yuan Voluntarily" 

 

The liberal Asahi editorialized (5/22):  "Financial markets are fretting about when China will shift its currency policy and revaluate the yuan, with speculation growing about whether the timetable for this move will be moved up.  Behind this conjecture is a report recently issued by the U.S. Treasury Department to Congress, threatening to label China an 'exchange manipulation state,' if China refuses to change its monetary policy....  By pegging the yuan to the dollar, China has maintained, in effect, a fixed rate system for its currency, while launching its trade offensive. There has been a particularly large flow of textile goods from China into the U.S… Speculation is rife that the revaluation of the yuan may happen around July when major powers convene their summit, or in the fall when U.S. and Chinese leaders are expected to meet on the sidelines of a UNGA session… China should spearhead a meaningful package of currency and capital market deregulation."

 

"Self-Centered U.S. Pressure For Yuan Revaluation" 

 

The liberal Mainichi's editorial writer Ushioda observed (5/22),  "The U.S. has been intensifying pressure upon China for the revaluation of its currency - the yuan. I cannot express outright support for such a move from Washington, which is trying to reduce its snowballing trade deficits with China through exchange manipulation. The problem rests with the U.S., which continues 'under-saving' and over-spending. Of course, China needs to reform the yuan. Beijing has already expressed its intention to revaluate its currency and is studying the timing of doing so.  Any hasty application of pressure on Beijing is not productive." 

 

SOUTH ASIA

 

INDIA:  "China Upsets U.S. Apple Cart"

 

New Delhi-based food and trade policy analyst Devinder Sharma commented in centrist The Hindu (6/2):  “China has flooded the United States market with not only textiles and garments but also apple juice concentrate.  China is now seeking quarantine approvals from the U.S. Department of Agriculture (USDA) for the export of fresh apples. A red tide of apples is therefore expected to sweep America.  Scouting for cover, the U.S. apple industry is now demanding protection for domestic producers.  At the same time, it is planning to find a market for apples in countries such as India.  Asking India to open up for apples in return for mango exports to America, the U.S. is dangling the swap agreement.  Interestingly, China too is trying to convince India to accept the same proposition....  China has clearly upset the U.S. apple cart.  Its turnaround in apple production is a remarkable success story which defies the textbook understanding of demand and supply....  The U.S. apple industry is crying foul.  As usual, it cites lack of social standards and environmental protection among the reasons for stalling further imports.  It is true that at 25 cents an hour, Chinese labor can out-price any U.S. effort to compete in the price war....  By penetrating the American 'apple pie', China has demonstrated that American consumers stand to gain immensely if the huge domestic agricultural subsidies are removed.  Not only fruits, American consumers will also find the prices of other food items falling further....  Meanwhile, the U.S. apple industry is getting into an aggressive marketing mode.  It has urged Congress to provide an additional dols. 200 million for 2006 under the market access program (MAP), the level authorized under the (notorious) Farm Bill 2004....  These export enhancement expenditures are also part of the massive farm subsidies the U.S. doles out every year....  It will now be the turn of the apple growers in Himachal Pradesh and Jammu and Kashmir to be at the receiving end.  With both China and America eyeing the Indian market, the warning bells are loud and clear.”

 

"China's Turn To Press For Free Trade"

 

Centrist The Hindu editorialized (5/19):  “The imposition of quotas by the United States on three categories of textile imports from China raises issues that reach beyond the concerns of its domestic producers.  No doubt, the U.S. textile and garment industries, like many other labor-intensive sectors, have been losing competitiveness vis-a-vis manufacturers in low-wage economies....  Another significant aspect of the American levy is that it represents the price China has had to pay for being a late entrant into the World Trade Organization.  The levy of quotas by the U.S. has been resorted to under the 'market disruption' clauses of a bilateral agreement preceding China's accession to the WTO and signed by Beijing as a condition for American support to the accession.  Beijing may not be able to retaliate even if the U.S. refuses to offer compensation in some other sectors for a loss of market share in textiles; the bilateral agreement, after all, is a derogation from the more balanced rights and obligations available under the WTO's Safeguards Agreement....   It is interesting that U.S. importers and retailers on the one side and Chinese textile manufacturers on the other are deploying, persuasively, all the arguments in favor of free trade and against protectionism that America and other developed countries put forth in a bid to push for open markets everywhere.  However, this falls in a pattern set off by the current phase of globalization.  In consequence, the systemic weaknesses of mature market economies are sought to be overcome mainly by exerting pressure on more and more countries to adopt the market economy system."

 

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