If you are tired of the sniping from the US about China's rising trade surplus and mercantilist ambitions, you will be depressed to hear that the cat fight between the two rival powers has only just begun.
And if you think it is all about textiles and that the sniping will die down when Europe and the US and China all do a deal on that sector, you are going to be even more depressed.
China's trade surplus has been rising month-by-month for nearly half a year now. On China's own figures, its trade surplus with the world was US$32bn last year. In 2005, it may well end up being almost triple that.
Once, China could say that its trade surplus with the world was quite small and reasonable, even if it was large with the US. And once China could say that its trade surplus was the just a reflection of how Asian trade was now funneled through China as a point-of-last assembly.
But that is no longer true either. The credit crunch China instituted in April last year has flattened imports, while the export engine (mainly owned and driven for foreign investors, mind you) has kept on ticking over.
For all the talk about textiles, the surge in sales overseas this year sparked by the lifting of the decades-old restrictive quota system is only one part of the growing trade surplus.
Most of the biggest gains have come in industrial goods like chemicals and building materials and the like, and increasingly car parts. True, there have been some stunning numbers in textiles. Exports of cotton pants to the US went up by more than 1,000 per cent in January, year-on-year.
The sudden surge in some apparel segments can be easily explained. First, the quotas were tiny to start with, so even reasonably sized shipments are going to amount to a large increase.
Also, because of the way global trade rules work, the more than they get into the US and Europe, and the longer than can stave off a protectionist backlash in those markets, then the greater the new quotas will be – if and when they are imposed.
China has every reason to take its wins in the textile war quietly and to listen to the complaints out of the US and the EU.
China's comparative advantage in textiles means that they will win this battle in the end. China already has 70-80% of the Australian and Japanese markets which have been open for some years. There is no reason they cannot do the same in the US and Europe.
But at a time of a rising trade surplus and controversy over the value of the renminbi, China should not allow textiles to become a smelly little litmus test for all of the other trade tensions now bubbling to the surface. A bit of restraint in the short-term would do China no harm.
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