In an about turn of U.S. trade policy and friendly international hugs, the Bush administration has decided to raise tariffs on Chinese goods exported to the United States. However, this appears to be a test run to experiment on the ways that such tariffs will affect U.S.-China relations and the market. A protective tariff-an artificial fee placed on international products exported to one’s country in order to protect the domestic market (a very truncated definition)-is being put in place because the Chinese government has been subsidizing their exports. To begin with, the U.S. has decided to put these tariffs on high quality paper. The tariffs will be placed on two Chinese manufacturers at 10.9 percent and 20.4 percent respectively for the privilege of exporting their fancy papyrus to the U.S.
Why high quality, high gloss, movie poster paper? It appears that the first stick that the U.S. has thrown at China is a warning to the Chinese government. Basically, stop tying the yuan to the dollar or we’re going to punish you for it. In today’s New York Times article, many legislators of the new Democratic House and Senate came out in favor of restricting China’s low-price access to the U.S. market.
“This is a long-overdue change in policy,” said Sander M. Levin, a Michigan Democrat who is chairman of the trade subcommittee of the House Ways and Means Committee. He said that lawmakers would nonetheless press for sweeping legislation calling for tougher actions against American trading partners deemed to be engaged in unfair practices. He also said that he would try to enact legislation codifying the new administration policy in case the courts overturn it. [Link]
Recently, this has become a hot button issue. Not only have U.S. policy makers began to keep a wary eye at the behemoth in the East, but the business elite are beginning to consider how China’s affluence will affect them. I mean, c’mon, you can only outsource so many jobs to China before you become completely enveloped by Her folds. At that point, a business can really no longer call itself an American company. Taiwan knows what I’m talking about. Yeah, they do.
China is not pleased about this development and has decided to publicly reprobate the event and may call upon the World Trade Organization (WTO) to review the case.
A spokesman at the Embassy of China, Chu Maoming, said in Washington that China expressed “strong objection” to the Commerce Department announcement, which he said sets a bad precedent that could damage China-United States relations.
“The Chinese side strongly urges the U.S. side to reconsider the decision and reverse it as soon as possible,” he said.
As an individual with an amateur interest in international trade policy and the effects of globalization, I believe that this is the end of an era for China. They’ve gotten pretty far so far pretending that they’re still communists and on that crazy Mao guy. However, Hu Jintao is as much as a communist as Warren Buffett, Jim Walton, or Ingvar Kamprad. They’re all shrewd capitalists who will manipulate the system as much as possible to achieve their own ends. Even if that means undermining the capitalist system. Funny how that works, isn’t it?
It will be interesting in the coming months to see how this “strategic economic dialogue” will pan out. Will the U.S. and China be able to reconcile their economic differences and fiscal irregularities or will both states continue to bicker on peripheral spheres of influence such as Sudan and South East Asia? The same objections to an Asian dragon were raised in the ’80s: Japan. The “Buy American” propaganda was dispersed throughout the states and policy makers preached of the dangers emanating from Japan’s market. However, Japan collapsed on itself and we’re friends again. When it comes to China, the market has expanded too far to collapse back into a pre-Deng Xiaoping era. The U.S. cannot pray for another Asian Financial Crisis (this time, one that actually hurts China’s market) because this is simply a false hope. Should U.S. manufacturers should simply except the inevitable and outsource to China or try to build up the manufacturing sector in our post-industrial, service sector market? I, personally, can’t wait to see what happens.