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Protectionist Policy Won't Cure US' Ills

By Zhu Qiwen


I was wondering how Mr. and Mrs. Tierney would respond to the new tariffs the US Department of Commerce imposed on Chinese bedroom furniture on Friday.


I met the Tierneys, who are from the US, last week at a Fordham China Business Forum hosted by the China Center for Economic Research (CCER) at Peking University.


In the largest anti-dumping case US manufacturers have ever brought against Chinese companies, the Bush administration is charging millions of dollars in preliminary duties on US$1.2 billion worth of wooden bedroom furniture imported from China.


Though scores of major Chinese exporters will escape the brunt of steep tariffs, tens of thousands of Chinese furniture makers, most of them small and private businesses, will be subject to anti-dumping duties of up to nearly 200 percent.


Fierce domestic competition has already forced most Chinese furniture makers to struggle hard for survival. The United States' discriminative anti-dumping duties have practically deprived many of them of access to one of their major overseas markets.


However, they are surely not the only ones who will suffer from the protectionist anti-dumping duties.


The forum at which I met the Tierneys featured extensive dialogues between Chinese scholars and US experts and business leaders on the bilateral trade relations between China and the United States.


I was attracted to this forum by a belief that it was a good chance to improve my understanding of the US perspective in the ongoing dispute over Sino-US trade issues.


To my surprise, when I asked Thomas Tierney for his comments on the June 3 public hearing held by the US Commerce Department on China's request for market economy status, he showed a look of total ignorance.


His wife, Maureen A. Tierney, associate dean of the School of Business at Fordham University, quickly explained to me that her husband was not a trade expert. He is a composer.


"Oh, great. Actually I just want to know your views on China's trade policy, just as individual US consumers," I replied.


This time, they both enthusiastically elaborated on their favor of high quality products with competitive prices, just like other consumers around the world.


It is natural that the couple also noticed that "made-in-China" products have flooded US stores in recent years.


The couple made clear they have no particular disfavor toward imports from China. In fact, they just want to purchase high quality products regardless of their origin.


Nevertheless, when I told them the strong opposition voiced by 10 US industrial and trade union representatives without any single consumer voice at the public hearing, they both showed astonishment.


Maureen Tierney's answer was thought provoking. She said the United States was always engaged in trade wars with some country, for instance, with Japan a decade ago. But such a habit definitely does not justify the United States' wielding the heavy anti-dumping weapon against China.


Thanks to China's rapid rise as a global manufacturing base in recent years, the United States has increasingly resorted to protectionist measures to reduce its enlarging trade deficit with China.


Since 2001, the United States has issued 22 anti-dumping procedures against a wide range of Chinese industries -- far more than any other country.


The underlying causes behind the United States' huge trade deficit with China are the soaring foreign investment that China has absorbed, China's booming processing industries and the United States' strict control on high-tech exports to China, pointed out Hai Wen with CCER.


Multinationals' massive investment in China has substantially enhanced the country's export capacity. Foreign-funded enterprises contribute to more than half of China's exports today.


China's relatively inexpensive and skilled labor force has enabled the country to display superior manufacturing prowess in the processing industries.


And the United States' export control, resulting from its outdated Cold War mentality, has put the country at a disadvantage in the global competition for China's expanding demand for technological imports.


Given their different comparative advantages, China and the United States obviously should focus respectively on doing those things they do best, those things where their superiority is the greatest.


Unfortunately, the latest US anti-dumping case against Chinese furniture makers demonstrates the US government's reluctance to accept the basic economics underpinning free international trade.


Such a protectionist attitude has fuelled US industries to file a slew of anti-dumping suits aimed at Chinese companies.


A key reason why China has stepped up its efforts to obtain market economy status is just because some of its trade partners like the United States have increasingly abused its non-market-economy status in anti-dumping cases.


China's status as a non-market economy allows the US Commerce Department to look at production costs in other high-cost countries when it evaluates whether imports from China are unfairly priced in the US market.


However, protectionism will only be a cure worse than the disease.


Think about what will happen when US consumers like the Tierneys discover that they must pay a higher price for bedroom furniture merely for the sake of some US manufacturers' profitability.


If fickle buyers tighten their spending in the face of higher prices in the market, the US economic recovery can hardly last long.


The author is the commentator of China Daily.


(China Daily June 21, 2004)



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