Posted by: Bruce Einhorn on February 4, 2009
Economic ties between China and India are showing the strain of the global crisis. Late last month, New Delhi imposed a six-month ban on the import of Chinese-made toys, in a move clearly designed to protect Indian toymakers from Chinese competition. Now Beijing is preparing to fight back. Today’s China Daily, the official government paper, reports China is threatening to fight a new Indian import ban on Chinese-made toys by taking New Delhi to the WTO. “The ban cannot hold water. The Indian side is doomed to lose in the court if the Chinese government appealed to the WTO Dispute Settlement Body,” the China Daily quoted trade lawyer Fu Donghui, managing director of Allbright Law Firm Beijing, saying.
With the Chinese economy struggling as exports plunge, this isn’t the only instance where Beijing is showing it is ready to play hardball with trade partners. The Chinese are fighting trade moves the Bush administration made in its dying days, for instance. (See this story by BusinessWeek colleague Pete Engardio for the take on U.S.-China trade from Bush’s trade rep, Susan Schwab.) Beijing is also considering fighting at the WTO against a move by the European Union to impose high tariffs on Chinese-made screws.
I’m no trade expert, and I don’t know nearly enough about the details of these cases to make a comment about who is in the right. But it does seem the Chinese government senses a good PR opportunity here to appeal to the feeling shared by many Chinese that the rest of the world - whether it’s the U.S., Europe or India - is out to get them. “Despite calls to resist protectionism, trade barriers and countervailing duties launched by China’s trading partners have been running rampant,” reports the China Daily, which goes on to quote Fu again insisting the country would defend itself: “In the past, the Chinese government always kept silent. But the situation is changing, and resorting to the WTO is a right choice to prevent the trade partners from abusing the WTO regulations.”
This could get ugly, but for now, maybe we should agree with Schwab that China’s use of the WTO is actually a good thing: “The fact that China is fighting the U.S. in the WTO is actually a sign of progress, as far as Schwab sees it,” Pete wrote, “because it means Beijing is starting to respect the value of a rule of law when it comes to trade.”