Posts Tagged ‘intellectual property’

China targets US, EU, Singapore with rubber trade case — “We hope the US will not underestimate China’s resolve.” — Sorghum imports from the US also called for dumping by China

April 19, 2018


© AFP/File | China announces it will impose temporary anti-dumping measures on synthetic rubber imported from the United States, the European Union and Singapore
BEIJING (AFP) – China announced on Thursday it would impose temporary anti-dumping measures on synthetic rubber imported from the United States, the European Union and Singapore.The case could stoke the simmering tit-for-tat trade tiff between Beijing and Washington, with each side having made threats of more duties on billions of dollars worth of goods.

China’s commerce ministry repeated that the two sides were not negotiating on the issue — appearing to contradict US President Donald Trump’s claim last week that the two sides were having “great discussions” on trade.

“The two sides have not conducted any bilateral negotiations on the US’s section 301 investigation or the US’s proposed list of Chinese products to tax,” ministry spokesman Gao Feng told a regular press briefing.

The US section 301 investigation focuses on what Washington describes as Beijing’s intellectual property breaches, including a failure to respect foreign patent holders.

When asked if China had underestimated the Trump administration’s resolve on trade, Gao shot back: “We hope the US will not underestimate China’s resolve.”

He warned that Beijing would fight back against any “erroneous scheme” by the US that would attempt to “contain China’s development and force China to yield”.

“On the surface the US’s actions are targeting China, but actually it is harming itself,” Gao said.

The anti-dumping measures on rubber come after an initial investigation by China’s commerce ministry found evidence the countries were dumping the halo-isobutene-isoprene rubber.

Importers were directed to place deposits with China’s customs department ranging in amount from 26 percent to 66.5 percent of the goods’ cost — to be applied against the imposed tariffs if the ministry finds dumping in its final ruling.

The dumping did “substantial damage” to China’s domestic industry, the commerce ministry said in a statement.

The US and Singapore are China’s main foreign sources of the synthetic rubber, with imports from the two countries respectively totalling $153 million and $115 million last year.

It follows a similar case from Tuesday when China decided to slap provisional anti-dumping duties on imports of US sorghum.


BBC News

China imposes anti-dumping deposits on US sorghum

A sorghum field Elm Flat, TexasImage copyrightGETTY IMAGES
Image captionThe top three sorghum producing states in the US are Kansas, Texas and Colorado

China has announced a hefty anti-dumping move against US sorghum imports, as a multi-billion dollar tit-for-tat trade spat between the two nations continues.

China said US importers would have to pay a temporary 178.6% deposit on the value of their imports from Wednesday.

China initiated its investigation into US sorghum imports in February.

US growers were “deeply disappointed” with the findings and are considering legal action in response.

Sorghum is a grain used primarily to feed livestock, but it is also used to create ethanol, or drinking alcohol.

The US is the world’s leading producer of sorghum, and is the largest supplier of sorghum to China. China uses its sorghum imports to feed its farm animals, and in its spirits industry.

Analysts said the temporary anti-dumping deposit imposed by China, which comes ahead of a possible anti-dumping tariff on the product, was quite high and that some US shipments in the future could be cancelled as a result.

China’s announcement follows months of trade tariffs – and threats of tariffs – imposed by the US and China on each other.

The US claims that China has unfair intellectual property practices, such as those that have allegedly pressurised US companies into sharing technology with Chinese firms when doing business in the country.

US President Donald Trump is primarily using big trade threats aimed at China as a way to make it stop what he calls “illicit trade practices”.

In a move that was expected to appease the US, China said this week it would allow full foreign ownership of car firms by 2022, changing the rules that require global carmakers to work through state-owned partners.

Beijing meanwhile continues to claim that the US is dumping products at cheaper-than-market prices into China, which is hurting Chinese farmers and manufacturers. It also says the US it is unfairly punishing it with tariffs, and has continued to say it is not afraid of a trade war.

Separately, as tensions continue to rage between the two trading giants, the US said this week it was imposing a seven-year ban on US firms selling parts to China’s big phone maker, ZTE.

The United States Trade Representative has said it will review China’s move on US sorghum and will consider taking it to the World Trade Organization.

Behind the sorghum development

Hogs are raised on the farm of Gordon and Jeanine Lockie April 28, 2009 in Elma, IowaImage copyrightGETTY IMAGES
Image captionChinese farmers may suffer in the long run from China’s latest move as they rely on imported sorghum as feedstock for their animals

China’s investigation into its sorghum industry, launched in February, has found that US firms have been selling sorghum into China at below market prices, which is a practice known as dumping.

China has said that the market share of American sorghum jumped from 8% in 2013 to 61% in 2016 and that the price of imported sorghum from the US had edged down from $289.61 per tonne in 2013 to $214.78 per tonne in 2016.

“Due to the flood of cheap imports, Chinese industry has been damaged in terms of production and financial condition,” China’s Ministry of Commerce told reporters in February.

But industry groups in the US said American sorghum was not being dumped in China, and that their sorghum producers and exporters had not caused any injury to China’s sorghum industry.

“[This] decision in China reflects a broader trade fight in which US sorghum farmers are the victim, not the cause,” the US industry group National Sorghum Producers said.

“And US sorghum farmers should not be paying the price for this larger fight.”

Few winners in a trade war

Some analysts have said China’s latest move was in response to controversial tariffs on imported washing machines and solar panels.

Others have said the timing of the investigation was a coincidence and that the new deposit tax was not officially related to any specific measure, but simply about sorghum being dumped into the Chinese market.

“China does seem to have sufficient cause to launch an investigation given [its figures on sorghum imports from the US],” Deborah Elms from the Asian Trade Centre told the BBC.

But she also warned that both sides could be hurt by China’s latest move.

“US farmers will be hurt in the short term, as my understanding is that these crops are largely planted for export to China,” Ms Elms said.

“In the longer run, Chinese farmers may suffer as they rely on these imported products as feedstock for their animals. They can shift to other sources, but this will take time and presumably cost more,” she continued.

“In a trade war, there are often few winners. The winners, in this case, are likely to be producers of alternative feedstock in other countries like Canada or Vietnam.”


How Trump’s Tariffs Are Squeezing His Farmer Support Base — “It’s just kicking us while we are down.”

April 19, 2018

Farmers helped carry President Donald Trump to White House.

But as the former businessman threatens to unleash a global trade war, the same farmers are now forced to come to terms with how up to $150 billion in proposed tariffs on Chinese goods, and subsequent backlash from the Middle Kingdom, could hurt their livelihood.

“Things out here right now are tough already. We are already barely making ends meet,” says Daren Niemeyer, a 49-year-old farmer in Nebraska who voted for Trump in 2016, when asked about his thoughts of the trade war tensions between China and the U.S.. “It’s just kicking us while we are down.”

It’s a tense time for U.S. farmers, who could be in for rocky times as the U.S. and China heat up talks of tariffs. On Tuesday, China’s Commerce Ministry ramped up the trade dispute, saying it would impose a temporary 178.6% anti-dumping duty on U.S. sorghum imports. Those charges, which are also thought to be in retaliation to Trump’s proposed tariffs, are expected to hit on Wednesday.

That’s on top of existing tariff proposals. Among other agricultural goods, Niemeyer grows soybeans and beef cows—two of the 106 U.S. products China said in early April would be subject to a 25% tariff. If those taxes come to pass, Niemeyer thinks China will seek soybeans elsewhere in the world, leading to a glut in supply.

For the Nebraskan farmer, it’s a worrying thought. His income would fall at a time when funds are already tight on the farm. Earlier this year, an all-important piece of machinery used to harvest grain crops on Niemeyer’s farm—the combine—broke. Rather than replacing the combine with an upgrade, Niemeyer downgraded to fit a smaller budget: The broken 2008 model was replaced with a 2005 combine.

Soon, Niemeyer may also have to replace his 21-year-old tractor—but with the threat of a trade war with the country’s biggest soybean customer, “it might need to hold on for at least another few more years,” he said.

For 58-year-old Wanda Patsche, a hog and soybean farmer in Southern Minnesota, the daily uncertainty is troubling.

“I’m just really discouraged by what I hear,” she said, adding that she had been optimistic about the new administration and what it could do for the agriculture sector. “But with the NAFTA thing one day, and then things are going good. And then the next day you wake up, and you hear we’re going to put tariffs on Chinese goods. Oh my goodness. It’s like we’re a ping pong ball.”

Patcsche is still hopeful that the commander-in-chief is doing as many say he must be—negotiating in order to get a better deal on intellectual goods with China. But for now, the trade war talks, alongside Trump’s regular tweets about potentially ramping up proposed tariffs, has made it more difficult for her to operate. Patcsche is now in the process of pricing her soybeans to be harvested later this year and in 2019—but prices continue to fluctuate in part due to trade war fears. So she keeps a constant eye on the market. If she sells her soybeans at the wrong time, she could reap in less than expected.

“We are just being put through a lot of drama to get to that point,” says Patsche. “When you hear that rhetoric. It just gives us a lot of uncertainty. It makes it more stressful.We hope the tariffs are short lived. ”

The products chosen by Bejing were no random choices. It sought to hit where it hurt the most—Trump’s voting bas—in retaliation of a proposed $50 billion worth of tariffs the White House announced in March.

For his part, Trump has argued that the tensions between China and the U.S. won’t devolve into a full blown trade war. Instead, he says he is negotiating better trade terms with China, and pushing Chinese officials to protect foreign companies’ intellectual property rights. The proposed tariffs, he says, are just leverage.

Nevertheless, it’s a source of frustration for farmers who say they are caught in the middle of a fight not about them. While the trade deficit in the U.S. has irritated the U.S. president, farmers point to agriculture as one of the industries where the U.S. has consistently posted a surplus of exports, totaling about $20 billion in 2016, according to the U.S. Department of Agriculture.

That’s not to say the farmers think a trade war is imminent—or that they have lost faith in Trump.

“The tariffs are concerning, but at the same time, I want to look long term. I want to be sustainable 10 to 15 years from now,” said John Canary, a 34-year-old farmer in Indiana.

Certainly, China may turn to other soybean-producing countries such as Brazil, where it is already paying a higher price. But at least in the near term, those countries may not be able to handle the demand—in turn buying from the U.S. producers.

But what is for certain: Such tariffs will be painful for the economy of both China and the U.S.

“The annual loss in U.S. economic well-being would range between $1.7 billion and $3.3 billion,” Wally Tyner, Purdue University Agricultural Economics Professor, noted in a study. “Chinese economic well-being also falls if they impose a tariff, in some cases as much or more than for the U.S. The reason for that is that soybean imports are very important to their domestic economy.”

Moreover, it’s hard to say that the trade war dispute will end quietly or without more uncertainty for the farmers. Chinese President Xi Jinping has been consolidating his power recently, reason to believe the leader will seek to display strength, says Gary Hufbauer of the Peterson Institute for Economics. For farmers, that could mean more of the fear-inducing rhetoric between the two nations that has kept the price of goods such as hogs and soybeans rocky in recent weeks.

When asked whether he would vote for Trump again during the 2020 elections, Niemeyer pauses—and then clarifies that while he voted for Trump, he was not 100% behind the candidate—but thought him better than the alternatives.

“I can’t say one way or the other—we’ll have to look at what the evil looks like, I guess,” he said.

And as for Trump—his report card is being written as he tweets.

“He billed himself he was a great negotiator,” Niemeyer said. “Now, we will see.”

See also:

Across Midwest, Farmers Warn of G.O.P. Losses Over Trump’s Trade Policy


China’s Faux Comparative Advantage

April 16, 2018

The economics textbooks don’t anticipate a state-directed economy that disregards the rule of law.

Container ships at a port in Qingdao, China.
Container ships at a port in Qingdao, China. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

In textbook economics, trade is a win-win: Two countries trade freely based on comparative advantage and share the resulting gains, improving welfare in both countries. America’s trade with China is as far from that model as the Earth is from Mars.

Historically, the U.S. has had a comparative advantage in manufacturing because of its high rates of technological innovation, correspondingly high rates of capital investment and worker productivity, strong protections for intellectual property, and wide availability of low-cost energy. Yet since joining the World Trade Organization in 2001, China has come to dominate traditional manufacturing. By 2015 it accounted for 28% of global production of autos, 41% of ships, more than 50% of refrigerators, more than 60% of televisions, and more than 80% of computers and air conditioners.

As is evident in government documents such as China 2025, China increasingly threatens to dominate the industries of the future: artificial intelligence, autonomous vehicles, blockchain systems, robotics, high-tech ship manufacturing and more. These technologies have profound strategic implications.

In large part because of China’s dominance in manufacturing, the U.S. last year ran a bilateral trade deficit in goods of $375 billion, or more than $1 billion a day. Contrary to the textbook model, whereby currency adjustments help rebalance trade, the U.S. trade deficit with China has been persistent—more than $4 trillion cumulatively since 2002—and growing.

Why is the textbook model failing? The answer is that China’s faux comparative advantage is the result of its state-directed investments, nonmarket economy, and disregard for the rule of law.

The problem’s taproot is Chinese intellectual-property theft and the forced transfer of foreign technology as a condition of accessing China’s market. These illicit practices, including widespread cyberespionage, allow Chinese companies to move rapidly up the innovation curve at much lower cost than their foreign competitors, which must recoup the cost of research and development through higher prices.

Other forms of economic aggression contribute to China’s faux comparative advantage. To protect its market, China erects high tariff barriers—e.g., its auto tariff is 10 times that of the U.S. China has high nontariff barriers, too, including intrusive licensing requirements and foreign-ownership restrictions that keep the playing field tilted in favor of Chinese companies.

To gain global market share, China showers its state-owned and state-financed enterprises with subsidized land and capital, myriad export subsidies, and lucrative tax preferences. To prevent the adjustments predicted by the textbook model of trade, China has historically undervalued its currency.

Most broadly, China’s “going out” strategy involves leveraging sovereign-wealth funds to capture the industries of the future. Three of the world’s 10-largest SWFs are from China, and China Investment Corp. has close to $1 trillion. These funds regularly scour technology-rich communities like Silicon Valley, Boston and Austin, Texas, seeking to purchase the crown jewels of American innovation. Since its founding in 2009, for example, Sinovation has accumulated $1.2 billion in total capital and has invested in almost 300 startups.

While the U.S. welcomes foreign capital, China perverts the investing process by targeting American companies based on strategic and military goals rather than pure economic considerations. Because high-technology acquisitions often generate spillover benefits for the Chinese military, its SWFs are often willing to pay distortive prices, far above what the free market would dictate.

At times the brazenness of China’s economic aggression has been breathtaking. In 2006 China’s State Nuclear Power Technology Corp. signed an $8 billion joint venture that resulted in the transfer by Westinghouse of more than 75,000 construction and technical documents on its signature AP1000 nuclear reactor. Meanwhile, Chinese cyber operatives allegedly were illegally penetrating Westinghouse’s Pennsylvania computers and information systems to acquire technical documents from its extensive R&D efforts.

By 2015 China had broken ground on a plant to construct its cloned Westinghouse reactor, the CAP1400. Today, as Westinghouse has struggled to stay out of bankruptcy, China is constructing reactors in Pakistan and Romania, is scheduled to build them in Argentina, Britain and Iran, and is bidding on projects in Saudi Arabia, South Africa and Turkey.

The biggest threat China’s faux comparative advantage poses is to the global trading system itself. The gains from trade will not accrue to all the partners when one of the largest is engaged in such market-distorting behavior.

It is in the name of fair, reciprocal and ultimately free and prosperous trade that President Trump is standing up to China’s intellectual-property theft and other unfair trade practices. The president has the backs of American workers, farmers and businesses. He deserves the support of a world now being victimized by China’s economic aggression.

Mr. Navarro is assistant to the president for trade and manufacturing policy and director of the White House National Trade Council.

China caught off guard by unpredictable Trump

April 16, 2018

But Chinese leaders are confident they can withstand a Sino-US trade war

Image may contain: 2 people

AP photo

By Tom Mitchell

When Donald Trump escalated trade tension with China this month, Xi Jinping cited a Chinese saying in vowing to defend global trade rules. “When the sky falls, big men must hold it up,” he said in private meetings, according to four people briefed on his remarks.

The Chinese president and his top advisers, including vice-president Wang Qishan and vice-premier Liu He, were initially confident the US and China could bridge their differences through talks, according to people who have recently met them.

“China and the US are like an old married couple, we fight a lot but we still need each other,” Lou Jiwei, a former finance minister, said in a closed-door exchange with an international delegation in late March, according to two people briefed on the meeting.

But China’s view of the US president began to shift after Mr Trump threatened to put tariffs on another $100bn of Chinese imports. The US President had already enraged Chinese officials in March by signing the Taiwan Travel Act, which urges more US exchanges with the self-ruled island that Beijing regards as Chinese territory.

Beijing’s previously sanguine view of Mr Trump was partly due to the fact the US president did not use his first year in office to follow through on some of the pledges he made during the campaign about getting tough with China.

While Chinese officials now realise Mr Trump meant what he said in Beijing in November — that the Sino-US trade relationship was not “fair and reciprocal” and had to be solved — they also believe they can emerge from a trade war relatively unscathed.

“Trump has certainly got [China’s] attention,” said Peter Mandelson, the former EU trade commissioner who this week led a British delegation to China that met Mr Wang. “Chinese officials are confident and sure of their direction. They don’t want a fight [with the US], but if they get one they’re going to give as good as they get.”

China was surprised again on Friday after Mr Trump said he would consider re-joining the Trans-Pacific Partnership trade deal. Chinese officials had seen his move to leave the TPP, which did not include China, on day one in office as a “grand gift”.

“We have our problems with Trump,” said one western diplomat in Beijing. “But he has taught us that when you push back hard against the Chinese, it knocks them off-balance.”

Two senior Chinese officials told the Financial Times that the Taiwan Travel Act and Mr Trump’s additional trade threats limited Mr Xi’s room for manoeuvre in a major speech last week that had been previously billed as a blueprint for aggressive economic reforms. China’s president did not want to give the impression he was yielding to US pressure.

Speaking at the Bo’ao Forum on Hainan island on April 10, Mr Xi only mentioned a few previously unveiled initiatives, rather than any major new initiatives. He then inspected a naval base and presided over the Chinese navy’s largest ever maritime parade. Afterwards, the Chinese military announced it would conduct live-fire exercises in the Taiwan Strait on April 18.

The exercises are partly intended to signal China’s hostility to any attempt by the US to upgrade relations with Taiwan, as has long been advocated by John Bolton, the foreign policy hawk who recently became Mr Trump’s third national security adviser.

Chinese officials said the limited reforms Mr Xi outlined at Bo’ao were not in response to US pressure. They also stressed that bilateral trade talks between Beijing and Washington could not be held under the shadow of Mr Trump’s latest threat.

“The Chinese made it clear that as far as they are concerned, on trade the ball is now back in Trump’s court,” said one person who attended a meeting between Mr Xi and foreign dignitaries at the Bo’ao forum.

In private, Chinese officials say Mr Xi’s iron grip on power will help them weather any trade war with the US, especially with Mr Trump’s mounting political troubles at home. In the same meeting at which Mr Lou likened China and the US to a married couple, other Chinese officials in attendance described Mr Trump as a vulnerable adversary.

“They said that Trump was a gift to China because he is a flawed individual and weak politically,” said one person briefed on the meeting. “It would be much more difficult if China had to deal with a US president with broad support and a strategic vision.”

Follow Tom Mitchell on Twitter: @tmitchpk


(Contains links to previous articles)

Trump, Xi Can Avoid a Trade War Now With a Deal on Trade — “China is not afraid of doing this.”

April 16, 2018

In the trade war with the US, Chinese President Xi Jinping has promised to open markets further. President Donald Trump seems willing to show some leeway, says DW’s Frank Sieren.

© AFP/File / by Heather SCOTT | Trade experts concede that US President Donald Trump’s pressure on China to reform could actually work, especially as it is in Beijing’s own interests to make the reforms

At the 17th annual Boao Forum for Asia just concluded on China’s southeastern resort island of Hainan, Chinese President Xi Jinping declared that “Cold War mentality and zero-sum game thinking” were “outdated.”

Even if his criticism was indirect, it was the first time he had expressed himself in public on US President Donald Trump’s threatened tariffs against China. In a veiled comment evidently directed at Washington, Xi said that there was no place for isolationism in a world that wanted peace and progress. He warned that those who pursued this path would be left on the “garbage heap of history”.

Willingness to compromise

Xi also showed a willingness to compromise, saying that China did not “seek a trade surplus” and would open the market further to imports. He announced that the current 25 percent tariff on auto imports would be cut this year. So it could well be that a compromise can be found before the US’ tariffs even come into effect.

DW Columnist Frank Sieren


DW Columnist Frank Sieren

Trump also struck a milder tone this week. He said that China and the US would maintain their “good relationship” despite the dispute and tweeted that he and Xi Jinping were “good friends”. He also said that he did not “blame China” but those who had run the US in the past, implying that previous presidents were responsible for what he calls a “stupid” trade deal. He would like to find a new deal without angering China too much as he knows that he has no means of enforcing his will.

There might be some wrestling before compromise is found. By saying that the “zero-sum era” was over, Xi Jinping was clearly indicating that the US can no longer set the rules as if it were the only global power. He told the more than 2,000 delegates at the Boao Forum that China had found its own path to modernization.

Trump and Xi both know that their countries are mutually dependent. They know that they have to be conciliatory. Though Trump said that Chinese threats to raise tariffs on US agricultural products to hurt him politically with rural voters would “backfire,” he knows that China is not afraid of doing this.

Agreement still possible

Since the tariffs could only come into force at the end of May at the earliest, there is still time for negotiation and for the situation to deescalate. Trump’s top economic advisor Larry Kudlow has already signaled that there will be “negotiations at some point.” He also said that “there may be tariffs before, maybe not. We shouldn’t panic.”

All tools are being looked into in the current debate between these two global powers. Beijing has examined the potential impact of depreciating its yuan currency as an instrument of pressure. This would make US products in China more expensive without punitive tariffs and Chinese exports cheaper.

In his speech in Hainan, Xi also promised harsher punishment for violators of intellectual property rights, as well as a more balanced trade and better investment conditions for foreign companies in China. He thus set the agenda for the negotiations.

The first phase of the power struggle is over. Both sides know that they will have the upper hand if they sound confident of victory when they make their threats. Now, it’s a question of sitting down and finding a mutual solution together.

Frank Sieren has lived in Beijing for over 20 years.


(Contains links to previous articles)

A More Open China Can Avoid a No-Win Trade war With The U.S.

April 15, 2018

 A trade bust-up promises only losers: American consumers, Trump himself and China’s export-oriented economy. But Xi’s Boao Forum speech offers hope of a mutually beneficial way out


The goal of a war, be it hot or cold, about trade, territory or anything else, is destruction.

And destruction means not only the loss of lives, but the destruction of any assets tangible or intangible, as can be seen in the simmering trade war between the United States and China.

The spectre of a full-blown trade war between the world’s two largest economies threatens the worst disruption to, and destruction of, the global economy in modern times. Basic economics suggests any such conflict will incur losses all around.

Nevertheless, fears that we are indeed headed for such a scenario are growing, fuelled by continuing tit-for-tat threats between the world’s largest traders. Washington and Beijing have each announced US$50 billion worth of punitive tariffs against each other and the US has raised the prospect of a further tariff of US$100 billion on goods.

Has Trump tweeted us back to the cold war?

As there will be no winner in a trade war, the question shifts to who will be the biggest loser.

From an economics perspective, US multinationals and consumers themselves will be the first to be hit by US President Donald Trump’s punitive tariffs.

Most Chinese exports to the US fall into two categories. First up are those concerning US-branded products – supply chains in which US firms are involved, such as consumer electronics (think iPhones and laptops where the brand is American, but the parts involved are Chinese). The second category involves labour intensive consumer goods, such as toys and clothes, which cannot be produced as cheaply in the US. In both these areas, American consumers will pay for Trump’s additional tax.

From a political perspective, Trump will take a big loss as China’s plan to target US soybeans with a reciprocal tariff will hit his support base of farmers, who have already voiced opposition to his plan. Meanwhile, Chinese President Xi Jinping, who has just secured the constitutional right to stay as president indefinitely without term limits, will face no such challenge at home.

However, China’s export-dependent economy has far more to lose from a trade war than America’s more self-sufficient one does. China’s exports to the US account for 19.1 per cent of China’s total exports of goods, while only 8.4 per cent of US exports go to China.

Last year, China exported more than US$505 billion worth of goods to the US while only importing US$130 billion worth of American goods, hitting a record trade deficit of US$375 billion. It is therefore difficult for Beijing to match Trump in threatening more punitive tariffs.

All of Beijing’s options for retaliation are limited because its exports to the US are consumer products for which substitutes can easily be found elsewhere.

Most economists agree that even if China followed through on its threats to sell off its massive stash of US treasury holdings, the move would not have a significant impact on the US economy.

On the other hand, some US exports are crucial to China’s economic and social development and substitutes for them are not always easy to find. Take aircraft as an example, China’s major target for retaliation. The only major alternative Beijing has to buying from the American firm Boeing is to turn to the European company Airbus, but Airbus could not meet the huge demands of China, which requires about 300 planes annually. Furthermore, if an all-out trade war does break out, the European Union will in all probability join hands with the US. Recently, both Japan and the EU joined the US in acting against China in the World Trade Organisation.

Did Trump really need trigger-happy Bolton and Pompeo?

So while Beijing might be able to inflict some pain on US companies and ordinary consumers, China and ordinary Chinese would be guaranteed even more pain without some of America’s best-known brands – such as Microsoft, Intel, Qualcomm to name just a few. Imagine a China without Boeing or Airbus.

It might well be for these reasons that while state media and officials have been talking tough, Xi used a speech at the Boao Forum in Hainan on Tuesday to strike a conciliatory tone in an effort to de-escalate tensions. The strongman leader pledged to take swift and urgent actions to address most of Trump’s complaints, vowing to open the Chinese market further, to reduce tariffs on US imports, to better protect intellectual property and to grant foreign firms in China a level playing field. All these are commitments China made in its admission to the WTO almost two decades ago.

The trade dispute reflects deep differences between China and the free economies. The best solution is for China to accelerate its domestic reform to contain its differences with the US and other free economies, not only in terms of market openness, intellectual property protection and internet security, but also in terms of ideology, values and geopolitics – areas in which China has been diverging from the West in recent years.

A trade war, like any other war, is essentially destructive. The constructive approach, for all involved, is for the US and China to work together to prevent such an occurrence. Xi’s speech at the Boao Forum may be one of the first signs the two countries can be steered towards a mutually beneficial outcome. 

Cary Huang, a senior writer with the South China Morning Post, has been a China affairs columnist since the 1990s

China Would Gain by Resolving Trade Dispute

April 14, 2018

No automatic alt text available.

By Mohamed El-Erian, Bloomberg View
Friday, 13 April 2018 04:44 PM

Almost all economists agree that a full-blown trade war would leave both China and the U.S. worse off. A simple game theory framework shows that international trade is inherently a “cooperative game,” especially when  consumption and production chains are tightly interconnected across borders.

If the game is played uncooperatively, the hoped-for gains for specific activities and segments of the population would pale in comparison to the losses for big majorities in each country. That would be true even if the (few) winners from widespread protectionism tried to compensate the (many) losers.

For that reason alone, many expect China and the U.S. to find a solution that would result in fairer but still-free trade (similar to the hoped-for outcome in the negotiations to modernize the North American Free Trade Agreement between Canada, Mexico and the U.S.). This hope is enhanced by another argument that hasn’t received sufficient attention: By acceding to mounting external demands on intellectual property and excessive trade barriers, China would be accelerating three longer-term transitions that it has willingly embarked on or knows that it will be necessary to undertake.

For years, as it navigates what economists call the “middle-income transition” — one of the hardest phases in economic development — China has been gradually redirecting its growth engines away from exports and toward internal demand. Along the way, it has been moving from inefficient investments by state-owned enterprises toward private consumption. Further trade liberalization would assist this process.

Reducing trade barriers and adhering to widely-accepted intellectual property norms would also be consistent with a second important developmental transition for China: The gradual increase in its willingness to assume greater global responsibilities, consistent with its overall size in the world economy. The hesitation to step up had to do with its sheer size of the country, which attained global systemic importance, economically and financially, at a relatively low level of per-capita income and before joining the ranks of advanced countries.

Finally, China has benefited over several decades from its ability to remain highly focused on long-term goals and successfully run out the clock on various short-term issues that have arisen in domestic and international economic interactions. Yet, with overall durable success both at home and abroad, China is increasingly being pressed to deal with what it would typically regard (and dismiss) as tactical issues rather than simply waiting them out. The spike in trade tensions with the U.S. is one example.

Rather than avoid negotiation, it is in China’s short- and longer-term interest to sit down for talks with the U.S., preferably behind closed doors. And it should expect to do the same with Europe, which would highlight the advantages of supplementing bilateral discussions with more effective multilateralism.

A successful, orderly outcome would benefit a global system that is now under considerable stress, if not at risk of gradually fragmenting, due in part to a neglect of marginalized and alienated segments of the population, as well as insufficient reciprocity. It would also help China’s tricky middle-income transition, as well as provide the country with an important platform to pursue its legitimate demands for more equal representation and voice in multilateral institutions — an enhanced status that Europe, in particular, has been slow in granting.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. He was chairman of the president’s Global Development Council, CEO and president of Harvard Management Company, managing director at Salomon Smith Barney and deputy director of the IMF. His books include “The Only Game in Town” and “When Markets Collide.”


China’s Economy Isn’t Opening — It’s Closing… new ides, interaction and competition is discouraged…

April 14, 2018

By Christoper Balding

An advanced economy requires ideas, interaction, and competition – all things that Beijing is shutting down and turning away from

South China Morning Post

President Xi Jinping’s speech to business leaders at the Boao Forum, in which he announced the further opening up of the Chinese economy, seems to have calmed markets’ fears of a potential trade war with the United States.

His speech at the forum, which is often referred to as “Asia’s Davos”, follows his widely lauded address to the World Economic Forum (the “real” Davos) in 2017, when Xi with the support of Chinese state media encouraged the world to see China as the new global defender of openness. But away from media events with global CEOs, the reality of Chinese openness appears radically different.

Despite the rhetoric, China remains a closed economy. A February IMF study on measures of trade and investment openness found that China was not only more closed than the average developed economy, but more closed than the average emerging market economy.

Trump versus China: is this the dawn of a second cold war?

These are realities foreigners deal with every day. Though agreeing to let Visa and Mastercard enter China as part of its World Trade Organisation membership, China has delayed doing so seemingly infinitely. After losing a WTO case to the Obama administration in 2012 and telling US President Donald Trump they would be allowed to operate in China, the world is still waiting for Beijing to approve their entry.

Beijing has agreed to let Visa and Mastercard into China – but has delayed doing so. Photo: AP

Even the so-called investment negatives list that tells foreigners where they can invest, while shrinking moderately last year, remains sizeable. If not required to have a majority Chinese partner, foreigners remain restricted or prohibited across a wide range of industries, most of which have no national security implications. For a country selling itself as the new leader of openness, there is no indication it is willing to let foreigners in. FDI flows have increased this decade by an average annual rate of just 3.1 per cent compared with 9.2 per cent the previous decade.

Just this week it was announced that all scientific data generated in China would need to be vetted by the government before it could be published. If Beijing is seeking to attract high-quality research and development investment while demanding to control scientific data generated in China, it may want to rethink its openness mantra.

The logo for Beijing ByteDance’s Jinri Toutiao (Today’s Headlines) mobile app at the company’s headquarters in Beijing. Photo: Bloomberg

The closing of China is apparent in mundane ways with even domestic firms who want to be compliant. Toutiao – which aggregates news and videos from hundreds of media outlets – was shut down by censors for a few days this week. CEO Zhang Yiming said he would permanently shut down humour content app Neihan Duanzi. This came despite Toutiao already employing 6,000 censors and planning to hire 4,000 more. The so-called openness being touted at the Boao Forum seems far from the reality of business in China.

While Beijing may complain about American protectionism, Chinese regulators have done more to shut down Chinese investment abroad. Beijing’s words ring hollow regarding foreign intervention when it blocks most proposed outward investments by Chinese investors.

A nasty US-China fight is inevitable. But it needn’t be terminal

What makes this closing of the Chinese economy so unnecessary is its competitiveness. China has produced innovative tech giants at the cutting edge of technology. From robotics to consumer goods, China does not need the protectionism Beijing wants to hobble the economy with.

The closing of the Chinese mind is harmful for the evolution of the Chinese economy and China as a rising power. To be an advanced economy, it requires ideas, interaction, and competition – all things that China is shutting down and turning away from. 

Christopher Balding has lived in China for nine years and has worked as a professor at Peking University Shenzhen Graduate School

Trump’s hard line on trade with China is jarring but could get results, experts say

April 14, 2018
© AFP/File / by Heather SCOTT | Trade experts concede that US President Donald Trump’s pressure on China to reform could actually work, especially as it is in Beijing’s own interests to make the reforms
WASHINGTON (UNITED STATES) (AFP) – President Donald Trump’s hard line on trade with China has fueled fears of an economically-damaging trade war, while his swings from threat to praise have generated uncertainty among businesses.But trade experts concede the pressure on China to reform could actually work, especially as it is in Beijing’s own interests to make the reforms the US is demanding.

Trump’s Twitter feed maps his lurches from tough talk to optimism and back again, a pattern that has left businesses alternately alarmed and relieved.

China “must end unfair trade, take down barriers,” Trump tweeted April 7.

That was followed on April 8 by this tweet:

“President Xi (Jinping) and I will always be friends, no matter what happens with our dispute on trade.”

Just Thursday, Trump ordered his top aides to look at reentering the 11-nation Trans-Pacific Partnership, from which he withdrew right after taking office, generating a wave of optimism.

But that was quickly quelled when, in a late night tweet, he said he would only rejoin if the US received a “substantially better” deal that the one his predecessor Barack Obama negotiated.

The main source of concern is the escalating tensions with China after Trump last month imposed steep tariffs on steel and aluminum imports, and then then hit Beijing with punitive duties in retaliation for massive theft of US intellectual property.

China struck back, targeting US farmers and pork producers, and an angry Trump then upped the ante and threaten duties on another $100 billion in imports — which have yet to be imposed.

The magnitude of the dispute — if the threats are carried out — would hit consumers and businesses alike.

“The business community worries about escalation of trade tensions, this idea of tit-for-tat that has characterized the past couple of weeks has been troubling,” said Jake Colvin, vice president of the National Foreign Trade Council, a pro-trade business group.

The dispute “creates uncertainty and confusion for the business community,” he told AFP, noting that some firms could be hit by a “double whammy” of higher costs for inputs from China, and higher prices for the goods they export to the country.

– Worse before it gets better –

While businesses share the concern about China’s behavior “the question that we wrestle with is how to make things better and not worse.”

And still to come are tightened restrictions on Chinese investment in sensitive US sectors, due in about a month from the US Treasury Department.

Some Chinese executives already have said they are pausing investments in the US given the confusion, and concerns about the new restrictions.

Robert Manning, a US-China analyst at the Atlantic Council, calls Trump’s view of global trade “nutty,” but acknowledges that his tough talk may be working.

Early this week Xi delivered a major speech in which he promised to reduce import tariffs on US autos and loosen restrictions on investment from US companies, which frequently are required to enter joint ventures as a minority owner in exchange for access to the Chinese market.

Trump quickly thanked Xi for his “kind words” and pledged, “We will make great progress together!”

While some analysts, including the US-China Business Council, cautioned that Xi had made similar promises before and never delivered, Manning said Trump was justified in celebrating.

“If you read carefully the speech Xi gave, you have to give Trump a fair amount of credit. At least at level of rhetoric he checked every box on things Trump has been pushing for,” he told AFP.

“Nonetheless, it’s going to be worse before it gets better,” Manning cautioned.

– What’s the end game? –

While Trump has been impulsive and “ham-fisted,” he said “there are a lot of straws in the wind that could evolve into serious negotiation.

“The madman theory works sometimes, especially when it’s not a theory.”

China is nervous, and at the same time their own companies, like Alibaba and Tencent, are pushing for reforms because they want to be able to invest in the United States, Manning said.

But economists and trade experts are especially concerned that Trump and his aides consistently focus on the US trade deficit with China, which totals over $375 billion.

The trade balance is “not a good way to measure the health of a trade relationship,” Colvin said.

Instead, he argues, Washington should work with allies in Europe and Japan to pressure China to change its policies.

“What’s the end game here? It is important to press the question what are we really trying to achieve and is the current trajectory effective,” Colvin said.

“The goal should not be a temporary reduction of trade deficit with China.”

by Heather SCOTT

Trump Misunderstood Xi Jinping: Beijing Not Making Any Concessions — Chinese Policy is “Made in China 2025”

April 12, 2018


No automatic alt text available.

In a speech Tuesday, Chinese President Xi Jinping said the world’s second-largest economy would open itself further and reduce import tariffs on products like automobiles, and those comments were seen by some as China blinking in the ongoing trade standoff with the United States. President Donald Trump took to his Twitter account to thank Xi for the latter’s “kind words on tariffs and automobile barriers.”

Donald J. Trump


Very thankful for President Xi of China’s kind words on tariffs and automobile barriers…also, his enlightenment on intellectual property and technology transfers. We will make great progress together!

But Trump appears to have misread the situation completely, a fact highlighted Thursday by Gao Feng, a spokesman for China’s Ministry of Commerce, who reiterated the Asian country was prepared and unhesitating to retaliate if the U.S. decided to escalate the trade war with China. Gao also stressed that nothing in Xi’s Tuesday speech was meant to be a concession to the U.S., and that China already had a retaliation plan in place, which would be put into action if needed.

Xi’s announcement of the strategy to open up the Chinese economy was completely independent of the current trade situation with the U.S., and would be carried out irrespective of the relations between the two countries, Gao clarified. He also added that U.S. actions so far were unilateral and typical trade protectionism, and that any allegations of forced transfer of intellectual property were without any basis.

Earlier in the week, an editorial from the People’s Daily newspaper was posted by China’s commerce ministry on its own website. The strong pro-China piece urged the “U.S. not to play with fire by starting trade war” and was posted on the ministry’s website Monday. The opinion piece specifically referred to soybean, aircraft and automobile industries that would suffer in the U.S, due to tit-for-tat tariffs already imposed or being considered by China.

Donald Trump, Xi JinpingU.S. President Donald Trump and Chinese President Xi Jinping (right) shake hands prior to a meeting on the sidelines of the G20 Summit in Hamburg, Germany, July 8, 2017. Photo: Reuters

Chinese media has been writing a lot about the possible repercussions on the U.S. economy, if the trade friction between the countries escalates into a trade war. An article in the Global Times said over 900,000 U.S. jobs were supported by exports to China in 2015, and all those jobs would be threatened if China defended its interests, which it would if Trump escalated the ongoing crisis.

The same article also mentioned other specific examples, such as the reduction of Chinese direct investment in the U.S. to $29 billion in 2017, from $46 billion in 2016, and a statement by Alibaba founder Jack Ma, who said Monday his promise to create one million jobs in the U.S. would be “null and void if bilateral trade relations deteriorate.”

This is hardly the first time since Trump imposed the new tariffs on China that Beijing has said it would not be shy of engaging in a trade war if its interests were threatened.

U.S. exports to China in 2018 are expected to be in the range of $170 billion, making the Asian country one of the top three export markets for U.S.-produced goods. The U.S. exported goods worth $130.3 billion to China in 2017, according to government data, and imported goods worth $505.5 billion, creating a net deficit of $375.2 billion in China’s favor.

Based on their exports to China, the states that will be worst-affected by a trade war are Washington, California and Texas, which have the highest amount of trade with the Asian powerhouse, in terms of export adding up to about $51 billion. Analysis by David Asienzo, data scientist at consumer research group ValuePenguin, showed six of the 10 states potentially most affected by a trade war (Texas, Louisiana, South Carolina, Ohio, Michigan, and Alabama) voted for Trump in the 2016 presidential election.


International Business Times

Includes video:

See also:

China Denies Xi Blinked on Trade