When China entered the WTO in 2001, Beijing might not have envisioned getting involved in so many trade disputes across such a broad spectrum of products – steel pipes, auto parts, fasteners, tires and chicken. Nor would it have expected so much upside pressure on the country’s currency. Still, wide-ranging disputes aside, a trade war is unlikely.
According to the Ministry of Commerce, as of October, China had been involved in 88 "anti-dumping and countervailing" probes involving 19 countries, covering US$10.3 billion worth of products. Fourteen of these cases – worth US$5.4 billion in trade – were launched by the US, moves that were "tainted with protectionism," according to Yao Jian, the ministry’s spokesman.
Thanks to the series of tit-for-tat retaliations that has characterized US-China relations this year, there are fears that the two sides will edge further down protectionist avenues, sparking a trade war.
According to Elliot Feldman, head of US law firm Baker & Hostetler’s international trade practice, it’s not unusual for trade and industry safeguard actions spike during times of economic difficulty.
"A natural American instinct is to say if things go bad, then blame foreigners. But it turns out that this instinct is universal. So when things go badly, there are more cases – it’s not just protectionism," he said. "All trade disputes begin with politics."
Politics or not, the disputes are real. The WTO has already made several statements to the effect that trade measures similar to the tariffs of up to 35% introduced by the US on Chinese tire imports were, while not immediately labeled protectionist, certainly detrimental to the recovery of the global economy.
But will this really escalate into a trade war, with a race to higher trade barriers and tougher protectionist policies?
Shen Minggao, chief China economist at Citi in Hong Kong, thinks not. He sees the disputes as part of a wider dialogue between China and the US over the renminbi. Policymakers in Washington are keen to boost exports as a means of easing its trade deficit and putting Americans back in work. Should Beijing resume currency appreciation – the yuan has been static against the US dollar for 18 months – the rest of Southeast Asia would likely follow suit, thereby creating a more competitive market for US-made goods.
It is thought that such a move – and comments from China’s central bank suggest that currency appreciation is likely – would help ease the trade tensions, many of which stem from allegations that Chinese goods are unfairly cheap.
"Where there are high levels of imports in a country which is suffering from high unemployment, protectionism will always be high," Shen said. "But if there is some sort of agreement on renminbi appreciation … some of these trade cases will become irrelevant."
