It is too early to celebrate the news that the U.S. Congress could postpone action on legislation to pressure China into raising the value of yuan, for it seems the Senate Finance Committee still plans to address the issue in October and the rising sentiment of protectionism within Congress continues to cloud prospects for healthy Sino-US trade relations and the global economy.
Bush administration officials have warned the legislation could violate World Trade Organization rules and trigger a wave of protectionism around the world.
"Trade protectionism is a double-edged sword. The prosperity of any country is rooted in open economy and free trade, not economic nationalism," says Shang Yanwen, a senior researcher with China's Ministry of Commerce (MOC).
A cursory glance at statistics shows that since 1980 the U.S. has filed more than 120 anti-dumping investigations into Chinese exports, which means, worldwide, one out of every six such investigations targeting China was initiated by the U.S.
For decades, China's thriving economy has been a huge aspect of daily life in many parts of the world, most visibly through the "Made-in-China" label on everything from clothes to automobiles.
According to a survey by Morgan Stanley, since 1997 American consumers have saved 100 billion U.S. dollars each year through buying cheap Chinese products, which has helped the country maintain a moderate level of inflation.
Imports of Chinese products have accelerated the shift of employees from the manufacturing sector to service industries. More than 57 million people in the U.S. are working in jobs related to international trade. People who work with multinational companies earn 20 percent more than those working elsewhere, surveys have shown.
Even the U.S. government acknowledged in its 2007 Economic Report of the President that free trade each year brings back 750 billion U.S. dollars to the country.
A recent petition signed by 1,028 economists to members of the U.S. Congress to persuade them to abandon the protection measures may help refresh memories of the congressmen who objected to, but failed to prevent, the Hawley-Smoot Tariff Act that was passed 77 years ago. The Act is widely believed to have contributed to the Great Depression that followed.
Playing up product safety issues
In July, China's State Food and Drug Administration admitted that it was difficult to be "optimistic" about the country's food safety situation and admitted the foundations of its supervision system were "weak".
The country had suffered a series of embarrassments regarding product safety but the government has now begun to tighten regulations.
It has announced that all major food products produced from September 1 to be exported overseas must carry labels to show they have passed inspections.
Product recall regulations announced last week also require manufacturers to cease production and sales, notify vendors and customers and report to authorities when product defects are found, with fines of up to 50,000 yuan (6,600 U.S. dollars) for failure to do so.
Chinese authorities have also punished relevant companies that were proved to have violated laws and regulations in production and export.
However, there is still vehement criticism coming out of the U.S., much of which appears to be aimed at playing up food safety problems which in turn has caused some importers to shy away from Chinese products.
Experts have said domestic politics lie behind the proposed legislation. But even to satisfy its own needs, the U.S. may have to take another look at the situation. If the U.S. loses the Chinese market, which has ascended to fourth position of all its export destinations, the American people will feel the effects.
China has bought 628 airplanes made by Boeing Co. and will have 3,140 planes from this company by 2025. The country consumed 9.88 million tons of soybeans and 1.71 million tons of cotton imported from the U.S. last year.
U.S. distributors pocketed 60 to 80 billion dollars of net profits through selling imported Chinese products last year. Trade between China and the U.S. contributed about one trillion dollars to the market value of the American stock exchanges.
U.S. companies chalked up a sales volume of 80 billion U.S. dollars with investment in China last year. According to a report by Oxford Economics, by 2010, Sino-U.S. trade will have helped raise the GDP growth rate of the U.S. by 0.7 percent, lower its price level by 0.8 percent and increase its disposable income per household by 1,000 dollars.
Meanwhile, China has become the world's manufacturing base which supplies global consumers with inexpensive goods and the country's own consumer market is enjoying the fastest growth on the planet.
Both countries should be aware that if the first and third largest traders in the world cannot find a way to get on, people all over the world will be affected.
(Xinhua News Agency September 6, 2007)