Who's the Protectionist in China-U.S. Trade Dispute?

Posted by: Bruce Einhorn on September 14, 2009

The Chinese government is trying to have it both ways in its current trade spat with the U.S. Following the news on Friday that the Obama Administration will impose new import tariffs on tires from China, Beijing announced it was launching investigations targeting U.S. poultry and American-made cars. At the same time, the government-run media reported without any apparent irony that the Chinese government was resolutely opposed to trade barriers. “China has always opposed protectionism and has demonstrated this stance with its actions since the outbreak of the global financial crisis,” said the Ministry of Commerce, as reported by the state-controlled Shanghai Daily.

So what does it mean to always oppose protectionism? Apparently it means you are allowed to tell local companies that they need to buy Made-in-China products rather than imports. My colleague Dexter Roberts in July wrote here about Beijing’s Buy Chinese policy. “Chinese officials have informally and sometimes formally made it very clear that Chinese products are to be favored when it comes to the stimulus package.” Consider this report regarding the fast-growing renewable energy industry in China. “A controversial ‘Buy Chinese’ policy could leave overseas manufacturers of wind turbines and other renewable energy technologies locked out of the bidding for new low-carbon projects undertaken as part of China’s $586bn economic stimulus package,” Yvonne Chan wrote on the BusinessGreen.com website in June. “The recently released edict states that ‘government investment projects should buy domestically made products unless [they] cannot be obtained in reasonable commercial conditions in China. As a result, developers of state-backed stimulus projects would have to seek permission from the government before buying foreign goods and services.”

I’m not arguing that the U.S. doesn’t play such games. For instance, when passing Obama’s stimulus plan Congress included Buy American provisions not unlike those the Chinese government has pushed. But really, China as a resolute opponent of protectionism? China, which restricts foreign movies, foreign TV shows, foreign telecom investment, to name just a few of its long-standing policies that protect its local companies from American competition, knows very well how to be protectionist when such policies suit the government’s needs.

Reader Comments

mc

September 14, 2009 7:44 AM

What is the point of this article. No need to be anti-chinese or anti-american.

This sounds like a freshman's incompleted IR assignment.

黄旭

September 14, 2009 8:42 AM

I think two sides need to negotiate in order to benefit both sides

Dale Makkormak

September 14, 2009 11:27 AM

"I'm not arguing that the U.S. doesn't play such games...."

But you are in fact sneakily arguing that the U.S. has the moral high ground, given the fact that you devote one paltry paragraph to the U.S. "Buy American" stipulation in the Obama stimulus. And even that one paragraph is written without any emotion or sense of indignation, whereas the criticism of China is strident, editorial, and eye-rolling in tone.

There is no right or wrong side in a trade war. Whenever capitalism gets into a global pickle, protectionist pressures grow, as politicians without any positive economic solutions to the crisis inevitably try to maintain or build consensus at home by circling the wagons and blaming foreigners for their economic problems. Domestic economic dead ends are reproduced at the international level.

History shows that our one very serious economic crisis - namely, that of the 1930s - did not have an economic solution and inevitably became a political and social crisis as domestic and international tensions rose in the face of economic impasse.

This would be a very dangerous thing to repeat, and good for no one; so, as an American, I feel that I would be doing humanity a disservice by jumping on the anti-China bandwagon. The best thing Americans can do to prevent the development of a dangerous international climate is to oppose protectionist measures at home, not bash China. We should look beyond the fact that China regulates its currency and tries to favor its own industries. Who doesn't do that? Think of the different forms of pressure the U.S. puts on countries to buy American weapons.

The U.S. economy's big problem is that it is becoming unproductive and de-industrializing. The solution isn't to throw up a new Berlin Wall - this time around the U.S., but to start investing in productive industries rather than asset bubbles.

And by the way, if I were Chinese, I'd be pissed off about the fact that most of my country's trade surplus has evaporated in the U.S. bond markets.

As an American,

A Chinese

September 14, 2009 11:40 AM

I don't know much about the rules which set by the WTO to protect the companies in a developing country.But,even the most successful modern companies in China were established no more than 31 years.Anyway, America companies started international trade two hundred years ago. Does it sounds fair, if a beginner fight with a professional boxer without any restricts to the professional boxer?

Henry L.

September 14, 2009 12:00 PM

to the author. This little write-up sounds a little childish. The fact is that you've got 3 big boys in the world today. The US, European Union, and China. Each of the three is fully capable of hitting back regardless of what's right an wrong. This issue is small potato comparing to the fight between Boeing and Airbus. Maybe you should investigate and report on that issue rather than this....but you're pbobably a small minion and not worthy. Instead you're deligated to write "...they are a bigger protectionist then we are....wah wah wah"

Don't whine

September 14, 2009 12:02 PM

Relax Bruce. For being the flag-bearer of Capitalism and free market, US hasn't set a great example. How old are we? 6? Cut China some slack will ya! At least they didn't initiate this "war". Have some Tsingtao.

E Liknes

September 14, 2009 12:18 PM

Sure sounds like the pot calling the kettle "black" in it's relationship with Canada.

CompEng

September 14, 2009 12:46 PM

China is indeed a stout opponent of other countries' protection, much like the US. Their hypocrisy is probably a little greater than that of the US, but really, who's counting?

jcage

September 14, 2009 1:25 PM

"I’m not arguing that the U.S. doesn’t play such games. For instance, when passing Obama’s stimulus plan Congress included Buy American provisions not unlike those the Chinese government has pushed. But really, China as a resolute opponent of protectionism?"

Bruce you forgot to mention that the Congress stopped CNOOC to buy UNOCAL and stopped Huawei to buy 3COM. Lenovo success in buying was the exception rather than the rule! Protectionism on the name of national security is used specially against China for a long period of time. I guess that both side play the same game, do you think?

mike

September 14, 2009 2:20 PM

"I’m not arguing that the U.S. doesn’t play such games ..."

Really, you aren't? Is it because your sarcasm and wit is reserved only for China and the line above is in the final paragraph? Or is it because you are also an objective | professional | honest journalist?

Mr Princeton, you must be right.

JANET

September 14, 2009 4:04 PM

I don't want my children to watch many of the American shows which seem to promote homosexuality as the norm, as if that was "modern" or "acceptable", or even "normal". I therefore can understand China and ANY muslim countries would ban many of the "entertainment" packages from US.

I am support such ban of such cultural decadent material from the USA

Ronny Ko

September 14, 2009 4:19 PM

I disagree with this comment. America is in position of weakness and should consider that it is a net creditor to the Chinese. The Chinese can easily cut America off and see its economy continue t ail for years to come. I have explained fully in my article refuting the authors claims.

http://www.bityard.com/business-finance/America-criticizes-China-for-their-protectionist-policies-Look-Again

Xiang Yu

September 14, 2009 8:58 PM

Buy Chinese policy is a reaction to Buy American policy. Basically we just reacted to US policy. But then again BW is American media, so I'm not surprised to see whose side it took.

Bob

September 15, 2009 1:21 AM

Aren't bank and car manufacturer bailouts protectionist policies? And what about the long term, heavily subsidized American agricultural industries?

Xiang Yu

September 15, 2009 2:14 AM

Also, Chinese media is only reacting to US media bias. We do this to defend China's people from Western influence.

Also, My favorite book is Art of War. Please read it.

88

Paul

September 15, 2009 7:48 AM

The US fires the first shot and instead of meekly submitting, the Chinese now dares to fire back. So what's all the fuss? Why is there such indignation about the Chinese side turning protectionist when it is the US that is starting this trade war?

bob

September 15, 2009 10:30 AM

Kudos to the author for telling it like it is! Don't listen to these critical comments, which likely originate in the Chinese Propaganda Ministry. Or do they still use prison/slave labor for such tasks in China?

GermanSt4r

September 16, 2009 12:54 PM

Americans are so stupid, they can't keep 1 dollar in their countrie for more than 5 minutes.
Keep buying our european products, we are just taking over your countrie :)

vincent

September 16, 2009 2:32 PM

The author sounds like a fifth grader doing a homework.

learn to write

September 25, 2009 1:00 PM

eye on asia is so crappy. i have canceled my subscription to businessweek and have told my friends to do so and i'm writing to the advertisers that this magazine and it's inept writers are crap.

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