Trade war: US vs the rest of the world

BEIJING - China and the United States have brought out separate reports blaming each other for raising maximum trade barriers, once again bringing their increasing differences over trade-related issues into sharp focus.

Apart from China, at which its ire is primarily targeted, the US report names dozens of other countries for blocking trade, even as the European Union and Canada have joined hands to slap an extra 15% tariff on a range of US goods in retaliation to the Bush administration's use of anti-dumping duties.

Meanwhile, the 182-page annual foreign market access report released by China's Ministry of Commerce on Thursday claimed that Chinese companies faced more trade and investment barriers in the US than in any other part of the world in the past year. While it devoted 22 pages to the obstacles faced in the US, the European Union received 18 and Japan 14. It is the third report of its kind to be issued by the ministry's Bureau of Fair Trade for Imports and Exports, summing up Chinese firms' trade and investment difficulties in the nation's 22 major trading partners.

Trade remedies, technical standards, quarantine, quality inspection, intellectual property rights, customs procedural requirements, environmental protection and labor standards were among the measures used against Chinese exports and investment, according to the report. While the first edition of the report highlighted 250 trade and investment problems, this edition pointed to 450.

A total of 16 economies initiated 57 anti-dumping and safeguard investigations against Chinese goods last year. These cases involved goods worth US$1.26 billion, the highest in the world. The report alleges that US legislation contains several discriminatory provisions against Chinese products. The US filed six anti-dumping investigations and 12 product-specific investigations involving Chinese exports last year.

The 672-page report released by the office of the US Trade Representative (USTR), on the other hand, reported a "significant increase in bilateral trade friction" and listed the "epidemic" of Chinese fake goods as one of the superpower's most serious headaches. "Epidemic levels of counterfeiting and piracy in China cause serious economic harm to US businesses in virtually every sector of the economy," said the report, which dwelt mostly on China - 58 pages. Detailing the areas where the Chinese have allegedly not lived up to the market-opening promises they made to enter the World Trade Organization (WTO), China, the US report said, was failing to enforce its laws against the rampant theft of American movies, software and other intellectual property.

The "National Trade Estimate Report on Foreign Trade Barriers", which has been prepared annually for 20 years, said the US would pull down these obstacles to its exports. "Eliminating trade barriers so that American workers, farmers and businesses can have increased access overseas for our goods and services is one of USTR's core missions. Consultations, negotiations and litigation are among the tools at our disposal, and we are using them aggressively to make sure that Americans are treated fairly," said acting Trade Representative Peter Allgeier.

The countries and trading areas named in the US barriers report are: Angola, the Arab League, Argentina, Australia, Bahrain, Bolivia, Brazil, Bulgaria, Cameroon, Canada, Chile, China, Colombia, Costa Rica, Ivory Coast, the Dominican Republic, Ecuador, Egypt, El Salvador, the European Union, Ghana, Guatemala, Honduras, Hong Kong, India, Indonesia, Israel, Japan, Kazakhstan, Kenya, South Korea, Kuwait, Malaysia, Mexico, Morocco, New Zealand, Nicaragua, Nigeria, Norway, Oman, Pakistan, Panama, Paraguay, Peru, the Philippines, Qatar, Romania, Russia, Saudi Arabia, Singapore, the Southern African Customs Union, Sri Lanka, Switzerland, Taiwan, Thailand, Turkey, Ukraine, the United Arab Emirates, Uzbekistan, Venezuela and Vietnam.

The US, which registered a record trade deficit of $617 billion last year, ran up a deficit of $162 billion with China, the largest deficit ever with any country. US manufacturers complain that China's most subversive trade practice is its "undervalued" currency that lends Chinese companies a tremendous competitive advantage and promotes exports at the cost of other economies. But the barriers report made no mention of the yuan; trade officials maintained that currency matters were handled by the Treasury Department, not the trade office.

In February itself, Chinese mills doubled textile and apparel shipments to the US. Nearly $1 billion of jeans, sheets, fabric and other textile goods found their way to American shores from China, compared with $424 million a year ago, according to Global Trade Information Services Inc, a Columbia, South Carolina, firm that compiles data from Chinese customs officials. The 125% increase in February follows a 75% rise in January. The February figure is significant as it came about despite plant shutdowns for the big Chinese New Year holiday.

The surge in Chinese exports is mounting domestic pressure on the Bush administration to respond. Soon after the release of the USTR report, House Democrats urged President George W Bush to act against China, along with other countries accused of unfair trade practices. They said the office of the USTR in the four years since Bush took office has brought just a dozen cases to the WTO, compared with more than 10 a year during Bill Clinton's presidency.

Apart from China, the US report slams India and Japan for "excessively protecting" their telecom markets. "We are deeply concerned by the tepid commitment some of our trade partners have shown to competition in the telecommunications sector," said Allgeier. "This is especially true in countries such as China, India and Japan, where national operators are already competing on a global level, but remain protected at home by relatively closed markets ... USTR expects more vigorous oversight by the Indian regulatory body and the government."

Trans-Atlantic war
The US trade barriers report also lambasts the US's biggest trading partner, the EU, for "obstacles" put up by it. America's pet peeve is the state subsidy allegedly extended to European aircraft maker Airbus that has supposedly helped it to overtake US giant Boeing. EU restrictions on US beef, poultry and genetically modified food have also come under attack, so have non-trade barriers such as different safety and customs standards in different EU member states.

But far from being cowed by the scathing criticism, the EU - along with Canada - has announced that they will impose trade sanctions on several American goods in retaliation to a tax system that compensates American manufacturers "hurt" by foreign goods sold "below cost". From May 1, the EU and Canada will raise import duties by 15% on US products ranging from pocket diaries, women's trousers, frozen sweet corn, cigarettes, pigs and oysters.

The retaliation comes in response to the Byrd amendment that allows the US government to pass on the proceeds from import duties to the companies that request these duties as anti-dumping protection. In four such distributions since 2000, the US government has handed $1 billion to American companies. In November, the WTO ruled that the Byrd amendment was unfair and listed seven countries, including Canada, China and Japan, which could impose sanctions in retaliation. This row comes close on the heels of the collapse of negotiations between Europe and the US over subsidies to Airbus and Boeing.

Those 2 are just as bad, but China is the worst with them flooding the market with half price and half quality performance parts.