Posts Tagged ‘World Trade Organization’

First warning signs appear for UK’s resilient economy

March 27, 2017

AFP

© AFP / by Patrice NOVOTNY | London’s financial centre, The City, will face headwinds if Britain leaves the EU without a negotiated deal
LONDON (AFP) –  Britain’s economy has for months defied the cataclysmic predictions made by campaigners for staying in the EU ahead of last year’s referendum but its smooth run shows signs of hitting the skids.

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As Britain begins the delicate process of extracting itself from the European Union, headwinds are expected for the economy even though the forecast financial storm has so far failed to materialise.

The first nine months since the Brexit vote have been deftly handled by Prime Minister Theresa May, aided by the Bank of England’s injections of liquidity into the banking system and unflagging consumer confidence.

The economy grew by a wholly respectable 1.8 percent in 2016 and could expand by 2.0 percent this year, according to the latest forecasts.

But economists say the positive results are due to the fact that nothing concrete has happened on the Brexit front since the referendum on June 23.

The real question is what will happen over the two years of likely fraught negotiations ahead.

– Top of the rollercoaster –

“Right now, it feels like we’re just reaching the top of the Article 50 rollercoaster,” said Paul Drechsler, head of the Confederation of British Industry, the country’s main big business lobby.

“Any minute now… we’ll suddenly drop into the twists and turns of negotiations,” he said.

Drechsler said the worst outcome would be if London and Brussels were to hammer out a divorce without a new trade deal in place that would allow businesses on both sides to prepare for the hefty cost of Britain leaving the European single market.

May, who has said she will take Britain out of the single market in order to be able to reduce immigration, has said she is ready to implement Brexit without a deal if the conditions put forward by EU negotiators are too demanding.

Businesses are warning against such an outcome and say that it would hit two key sectors particularly hard — the powerful financial sector and a car industry that is currently in full bloom.

By way of example, if Britain is forced to fall back on World Trade Organization rules for trading with the EU after it leaves, British car exports would face a 10-percent tariff at the EU border.

Any announcement by carmakers about their activities in Britain is already making the government jumpy, be that investment by Nissan in Sunderland in northeast England, job cuts by Ford in Wales or PSA’s takeover of Vauxhall factories.

British employers have also been pushing hard for EU nationals to be allowed to continue coming in.

The immigrant labour force, particularly from Eastern Europe, has greatly helped the economy in recent years but constituted a key argument for the Brexit campaign and helped explain the vote outcome.

Sectors that depend on low-skilled workers such as retail, catering and construction have already suffered from a slowdown in arrivals seen since the vote, the Chartered Institute of Personnel and Development said in a study published last month.

– ‘Gas in the tank’ –

Businesses are also questioning whether to invest over the next two years, since there will be uncertainty until the end of the negotiations.

“UK demand for funding from both businesses and households has been softening somewhat at the beginning of this year, which we believe is the first sign of the gradual slowing of the economy that we expect for 2017,” said Boris Glass, senior economist at S&P Global Ratings.

Consumers are also beginning to feel the effect of a sharp rise in prices due to more expensive imports — a consequence of the devaluation of the pound on currency markets caused by the Brexit vote.

With Britain facing turbulence, finance minister Philip Hammond presented a cautious budget last week that he hopes will give him enough spending power to act quickly if the economy starts to sputter.

Hammond said that “as we embark on the journey that we will be taking over the next couple of years, we are confident that we have got enough gas in the tank to see us through that journey”.

by Patrice NOVOTNY

Vietnam seeks South Korean support in South China Sea

March 20, 2017

Reuters

South Korean Foreign Minister Yun Byung-Se is welcomed by Vietnam’s Deputy Prime Minister Pham Binh Minh in Hanoi, Vietnam March 20, 2017. REUTERS/Kham

Vietnam’s Prime Minister sought support for the nation’s stance in the South China Sea when he met South Korea’s foreign minister in Hanoi on Monday.

Vietnam is the country most openly at odds with China over the waterway since the Philippines pulled back from confrontation under President Rodrigo Duterte.

“The Prime Minister proposed that South Korea continue its support over the position of Vietnam and Southeast Asia on the South China Sea issue and to help the country improve its law enforcement at the sea”, the government said in a statement on its website after the meeting between Prime Minister Nguyen Xuan Phuc and South Korea’s Foreign Minister Yun Byung-se.

The statement did not say whether South Korea backed Vietnam’s position on the South China Sea.

Yun did affirm his country’s willingness to promote ties despite instability in South Korea after the ousting of President Park Geun-hye over a graft scandal.

South Korea is Vietnam’s biggest foreign investor thanks to companies like Samsung.

South Korea and China are currently in dispute over deployment of the U.S. anti-missile defense system. South Korea on Monday has complained to the World Trade Organization about Chinese retaliation against its companies over the deployment.

Last week, Vietnam demanded China stop sending cruise ships to the area in response to one of Beijing’s latest moves to bolster its claims to the strategic waterway.

China claims 90 percent of the potentially energy-rich South China Sea. Brunei, Malaysia, the Philippines, Vietnam and Taiwan lay claim to parts of the route, through which about $5 trillion of trade passes each year.

(Reporting by My Pham; Editing by Julia Glover)

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Divisions on Trade Dominate G-20 Global Summit

March 20, 2017

Mnuchin persuades fellow finance chiefs to drop disavowal of protectionism from G-20 communiqué, but concerns remain about conflicts

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Updated March 19, 2017 7:58 p.m. ET

BADEN-BADEN, Germany—World finance chiefs struggled during a weekend of tense talks to find common ground on boosting trade in a global economy that is finally showing faint signs of momentum.

U.S. Treasury Secretary Steven Mnuchin, rejecting a concerted effort by rivals here, got finance officials to drop a disavowal of protectionism from a closely watched policy statement issued by the Group of 20 industrialized and developing nations.

For Washington, the watered-down language that emerged in their communiqué ensures the U.S. can still use sanctions or other policy tools to punish trade partners and thwart economic policies the Trump administration believes to be unfair.

Despite the pressure Mr. Mnuchin faced, Washington showed it still holds significant sway as the world’s consumer of last resort: The G-20 adopted a pledge to promote fairness as it pursued economic growth.

G-20 officials warned the U.S. risks starting a tit-for-tat trade war if it acts too aggressively, but Mr. Mnuchin said Washington wants to avoid trade wars while seeking to rebalance off-kilter economic relationships.

German Chancellor Angela Merkel and Japanese Prime Minister Shinzo Abe greeted each other at the opening of the CeBIT trade fair in Hannover, Germany, on March 19.Photo: Peter Steffen/Zuma Press

German Chancellor Angela Merkel, who chairs the G-20 this year, signaled her frustration with global tensions over trade on Sunday, two days after a meeting with U.S. President Donald Trump, which at times appeared strained. Mr. Trump said after that meeting that he supported free and fair trade, but talks on a trans-Atlantic deal between the U.S. and European Union appear stalled.

“In times when we have to fight with many people about free trade, open borders, democratic values, it’s a good sign that Germany and Japan don’t fight,” she said after a meeting with Japanese Prime Minister Shinzo Abe in Hannover, Germany.

Without mentioning the U.S. or Mr. Trump, her remarks seemed to be directed that way. “We want free, open markets.… We don’t want to build up any barriers,” Ms. Merkel said.

Mr. Trump has made trade a centerpiece of his economic agenda—vowing to win better treatment from rivals including Germany, China and Mexico.

“The United States has been treated very, very unfairly by many countries over the years,” Mr. Trump said in Washington on Friday before meeting with Ms. Merkel. “That’s going to stop.”

But the president hasn’t made it clear how hard he will push to win better trade terms or what tactics he will employ, leaving U.S. trade partners uncertain and at times frustrated.

Mr. Trump has vowed to rewrite the North American Free Trade Agreement and has threatened different measures—including tariffs on U.S. imports and punishment for U.S. companies that outsource jobs—to improve the U.S. trade position.

Saturday’s G-20 statement dropped an earlier commitment to “resist all forms of protectionism,” wording that appeared in a similar communiqué forged by finance officials in Chengdu, China, last July.

Most other G-20 officials pressed Mr. Mnuchin at the meeting to preserve that reference, but failed, a senior G-20 official said.

“It was not the best communiqué that was ever produced by the G-20, certainly,” the EU’s economics commissioner, Pierre Moscovici, said in an interview.

Although the G-20’s commitments aren’t binding, the promises made member countries lend the group power through diplomatic peer pressure. Past U.S. administrations believe, for example, the G-20 was effective in prodding China to appreciate its exchange rate and nudging the European Union to build a better financial firewall against sovereign-debt risks.

At a press conference on Saturday, Mr. Mnuchin said earlier language on protectionism “was not necessarily relevant from my standpoint.” He also said some global trade agreements weren’t being enforced, and that the new administration would be aggressive in doing so.

Cross-border trade terms can be beneficial to both the U.S. and other nations, Trump’s economic envoy said. “We can do that in a way that‘s good for the American worker, good for our companies and that’s good for our counterparties,” he said.

German Finance Minister Wolfgang Schäuble, who hosted the Baden-Baden gathering, had hoped Mr. Trump’s top economic envoy would offer a vision of U.S. trade policy that tempered the most aggressive threats by the president and White House officials, including unilateral tariffs and other punitive sanctions against trade partners.

But the G-20 treasury chiefs reached an impasse.

Mr. Schäuble said at a press conference that Mr. Mnuchin appeared to have no mandate to negotiate any new or creative commitments on trade.

“Sometimes you have to limit yourself at such a meeting to not asking too much of one partner. You can’t ask too much of him anyway because he would then simply not agree to it,” Mr. Schäuble said.

In failing to secure a written agreement from the U.S. that would repeat past G-20 vows to reject protectionism in all its forms, many officials said they were departing confused about where the Trump administration will ultimately land on trade policy.

The Treasury secretary advanced his boss’s view, promoting “free and fair trade.”

Mr. Moscovici, a former French finance minister, described Mr. Mnuchin as “a man who wants constructive engagement,” who came to Europe “in listening mode.” He said the meeting wasn’t confrontational, and that it was a time “to try to identify with the new administration.”

Still, Mr. Moscovici regretted the absence of a clearer mention of fighting protectionism or climate change, and pledged that the EU would push back against measures that undermined open and functioning markets.

At the meeting, Brazil Finance Minister Henrique Meirelles told the G-20 about his country’s own experience with protectionism, as the country has just experienced its worst recession on record.

“We had adopted during the last years some protectionist measures for some sectors of the economy and the net result was not positive,” Mr. Meirelles said in an interview. “At the end of the day, the products became more expensive and Brazil…became less competitive. In Brazil, we are moving toward a more open trade policy.”

China was among the most vocal advocates for preserving the protectionist language, even though the country’s industries, cross-border cash flows and exchange rate are still tightly managed by the Communist Party.

“China is positioning itself as an advocate for a free and open economy,” said former top U.S. Treasury diplomat Nathan Sheets. “But in order for that to be credible, China would have to complement it with true steps to open up and liberalize its economy.”

G-20 officials said they see both a new U.S. administration struggling to get up and running and competing power centers with different views on trade.

“Nobody knows what the endgame is,” a senior G-20 official said. “Either the meeting is several months too early or it’s perfect timing,” giving the G-20 an opportunity to help temper U.S. policy before it is cemented.

Investors are still confused, for example, about the administration’s dollar policy, having been given different signals from Mr. Trump and his lieutenants.

Asked who markets should heed, Mr. Mnuchin said: “They should listen to the president first and listen to me as well.”

Evidence that it may just be too soon for the U.S. to offer the G-20 anything substantive on trade, financial regulation, tax overhauls and other policies, Mr. Mnuchin relied on senior civil servants to conduct much of the detailed negotiations at the meeting. The secretary’s international diplomats have only recently been nominated and still must go through a lengthy confirmation process.

If trade czar Peter Navarro and Steve Bannon, a top Trump adviser and self-described economic nationalist, have their way, many officials fear the White House could trigger a trade war. The administration has advocated applying unilateral actions that eschew a rules-based multilateral order, including submission to the World Trade Organization’s authority.

Others in the administration, including Mr. Mnuchin and Gary Cohn, director of the National Economic Council, hold a more internationalist view of the world. If they prevail in guiding administration policy, many G-20 officials see fiery campaign rhetoric being tamed in the coming months.

Mr. Schäuble said all G-20 delegations had agreed on opposing protectionism, but that it wasn’t always clear what they meant.

Some countries are worried that failure to temper aggressive trade policy could not only trigger a round of retaliatory tariffs and a rise in other trade barriers that would damage global growth, but it also could exacerbate geopolitical tensions.

Last week, for example, U.S. Secretary of State Rex Tillerson raised the option of a pre-emptive strike against North Korea because Pyongyang’s nuclear-missile program poses a growing threat to U.S. ally South Korea.

China traditionally is able to strong-arm Pyongyang into cooling hostilities. But if U.S.-China trade tensions escalate, Beijing may in the future be less cooperative in playing that role, some analysts warn, raising the risk of a dangerous regional conflict.

The U.S. delegation found a rare ally in Japan, which came to Mr. Mnuchin’s defense, saying talks over American protectionism were overblown.

“I feel that many of those talks are exaggerated and made up,” Finance Minister Taro Aso said, adding that a summit meeting held earlier this year between Messrs. Trump and Abe involved “no discussions whatsoever that smacked of protectionism.”

Still, the International Monetary Fund is worried.

“We should collectively avoid self-inflicted injuries,” IMF Managing Director Christine Lagarde warned the group. Global cooperation can boost world growth, she said, but “the wrong ones could stop the new momentum in its tracks.”

—Andrea Thomas, Todd Buell and Takashi Nakamichi
contributed to this article.

Write to Ian Talley at ian.talley@wsj.com, Tom Fairless at tom.fairless@wsj.com and Andrea Thomas at andrea.thomas@wsj.com

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Republicans Pose Growing Challenge to Trump’s Trade Agenda

March 12, 2017

GOP lawmakers warn that imposing tariffs may result in stiff retaliation

Following Donald Trump’s warnings that the North American Free Trade Agreement would be renegotiated and Mexico would have to pay for a new border wall, a Mexican lawmaker introduced legislation favoring Latin American products over American-exported corn.

Following Donald Trump’s warnings that the North American Free Trade Agreement would be renegotiated and Mexico would have to pay for a new border wall, a Mexican lawmaker introduced legislation favoring Latin American products over American-exported corn.PHOTO: DANIEL ACKER/BLOOMBERG NEWS
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March 12, 2017 12:52 p.m. ET

WASHINGTON—Republican lawmakers are showing increasing resistance to President Donald Trump’s trade agenda, worried that his plans could hurt exports from their states and undermine longstanding U.S. alliances.

The concerns indicate that the biggest threat to Mr. Trump’s trade policy—which emphasizes new bilateral deals and a tougher stance against countries blamed for violating trade rules—is coming from his own party. The opposition from Republicans, who control both chambers of Congress, stands to complicate Mr. Trump’s efforts to overhaul the North American Free Trade Agreement, or Nafta, and tackle alleged trade violations in China.

“We want to support him on all those things; we’re not there yet,” said Sen. Jim Inhofe (R., Okla.), whose state depends on aerospace and agricultural exports.

While many Democrats in Congress are interested in working with the Trump administration, Republicans who have long backed free trade—many of them close to business groups—are warning that imposing tariffs could lead to retaliation against U.S. goods. Lawmakers from farm states are upset that Mr. Trump in January pulled out of the unratified Trans-Pacific Partnership, or TPP, the 12-nation trade agreement that Barack Obama negotiated.

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“I’m more concerned about what they might do renegotiating existing agreements than what they do bilaterally with countries they don’t have agreements with,” said Sen. Chuck Grassley (R., Iowa), a member of the committee that oversees trade. “We know what we have, and I guess I don’t think it’s as bad as what the president thinks it is,” he said, citing Nafta, which opened markets for farm exports.

Mr. Trump rode a wave of economic discontent to the White House, threatening to undo traditional U.S. trade policy and challenging the orthodoxy of Republican lawmakers who have long backed freer trade.

Since then, few members of the president’s party—or allied big business groups—have challenged him openly on the issue. Many are eager to cooperate with the White House on high-priority goals they share—notably overhauling Mr. Obama’s health-care law, and cutting corporate taxes—and don’t want to offend the new administration during fractious debates over those polices, congressional aides say.

But as the administration’s trade agenda moves forward on several fronts, lawmakers are voicing their reservations. Those concerns are expected to be on display this week as the Senate Finance Committee grills Robert Lighthizer, Mr. Trump’s nominee for U.S. Trade Representative.

“My concern is that they’re making it too difficult to enter into trade agreements,” said Sen. Cory Gardner (R., Colo.). “I’m concerned that when we remove ourselves from the playing field of multilateral opportunities, our trading partners will look elsewhere for leadership—and that leadership can come from countries that don’t follow the same norms and values that we do,” he added, alluding to China’s attempts to fill the void in Asia following the U.S. withdrawal from the TPP.

Mr. Trump recently sent to Congress a trade policy agenda that backs an aggressive reliance on rarely used U.S. law to punish trading partners and questions the authority of the Geneva-based World Trade Organization as an arbitrator of international disputes. House Republicans who oversee trade issues fired back a strong statement backing the WTO and existing U.S. agreements.

Also, House Speaker Paul Ryan (R., Wis.) in December raised objections to legislation that would require the use of American-made steel in U.S. water infrastructure projects.

Mr. Trump’s pledge to renegotiate Nafta is expected to provide an early test of congressional support for his policies. U.S. lawmakers took note when a Mexican lawmaker introduced legislation favoring Latin American products over American-exported corn, a key winner in Nafta. That move followed warnings from Mr. Trump that Nafta would be renegotiated and Mexico would have to pay for a new border wall.

“I have been worried because other countries have pushed back: ‘You want us to build a wall, well we’re not going to take your corn,’” said Sen. Joni Ernst, an Iowa Republican. “If we’re talking about renegotiating Nafta, we actually stand to lose ground in agriculture—so we would really have to work that very, very carefully.”

If Mr. Trump follows through on threats to raise tariffs “it could cause some dire economic consequences,” said Utah Republican Sen. Mike Lee. “I hear about it constantly when I talk to people throughout my state.” Mr. Lee, who has long backed a greater role for Congress, this year introduced a bill that would strip the president of powers to impose tariffs without congressional approval.

Congress has grown more polarized on trade in recent years, with Democrats allied with labor unions critical of Nafta and other deals.

Sen. Sherrod Brown (D., Ohio), who began working with Mr. Trump and his advisers a few days after the November election, says he is concerned congressional Republicans may get in the way.

“I’m worried that it’s going to be an ongoing fight between the president and his promises on the one hand, and Republican leadership, who are usually in the tank with companies,” Mr. Brown said.

Others say they are waiting to see just what measures the Trump trade team will actually implement, and who will prevail among his diverse group of advisers who range from hard-liners advocating a sharp turn, to finance leaders steeped in the advantages of globalization.

“Honestly there has been some inconsistency,” said Sen. John Cornyn (R., Texas), a member of the Senate Republican leadership as well as the committee overseeing trade. “Some of the rhetoric has been a little jarring, but what really counts is what they do.”

Write to William Mauldin at william.mauldin@wsj.com and Jacob M. Schlesinger at jacob.schlesinger@wsj.com

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China says trade war will only bring “pain” — Trump administration stepping back from World Trade Organization rules

March 11, 2017

AFP

© AFP/File | Containers on a ship in Qingdao, eastern China’s Shandong province
BEIJING (AFP) – China on Saturday warned the US against launching a trade war, saying that both countries would suffer if US President Donald Trump follows through on his threats.

The billionaire politician has repeatedly accused China of using unfair trade policies to steal jobs from the US, threatening to retaliate with massive tariffs unless Beijing changes tack.

“A trade war is not in the interest of the two countries and the two peoples,” China’s Minister of Commerce Zhong Shan told reporters on the sidelines of the country’s annual political gathering in Beijing.

“It’s fair to say trade war will only cause pain without gains.”

He said that US exports to China have increased by an average of about 11 percent per year over the last decade, while Chinese exports have only increased by 6.6 percent over the same period, noting that the Asian giant is also a major importer of American goods like soybeans, cars and Boeing airplanes.

“This clearly shows that China and America are very important to each other,” he added.

On Thursday, Zhong’s American counterpart Wilbur Ross said that the trade conflict with China and other countries has already been on for decades, but the US is just now beginning to fight back.

China is the world’s biggest trader in goods. It accounts for about $350 billion of the US trade deficit, about half the total.

The warning was the second time this week that China has railed against a possible trade war, amid growing indications that the Trump administration is serious about pursuing a protectionist agenda.

Last week the United States Trade Representative sent a letter to Congress saying that Americans are not directly subject to rulings by the World Trade Organization, which Washington joined when it was founded in 1995.

The assertion provoked a warning from China’s commerce ministry that attempts to ignore the organisation?s rules could lead to “a repetition of the trade war of the 1930s.”

South Korea actively considering filing complaint against China with the World Trade Organization — Latest instance of suspected discrimination from China

March 7, 2017

Reuters

By Daewoung Kim and Hyunjoo Jin | SEOUL

South Korea will consider filing a complaint against China to the World Trade Organization over what it described as trade retaliation for the deployment of a U.S. anti-missile system outside of Seoul, the ruling party said on Tuesday.

South Korea in July decided to install the Terminal High Altitude Area Defense (THAAD) system in response to missile threat from North Korea, despite China objecting that THAAD’s radar can penetrate its territory.

South Korean companies in China have since reported cyber attacks, store closures and fines, while state-controlled media has called for a boycott of South Korean goods and services.

“We will actively consider whether China’s action is in violation of the South Korea-China free trade deal, while stepping up efforts to minimize damage on South Korean industries,” Lee Hyun-jae, chairman of the Liberty Korea Party’s policy committee, said after meeting senior government officials.

Chinese foreign ministry spokesman Geng Shuang, when asked about the matter on Tuesday, reiterated China’s stance that law-abiding foreign companies are welcome and will be protected.

In the latest instance of suspected discrimination, China has rejected applications from airlines including Jeju Air Co Ltd (089590.KS) to add charter flights between the two countries this month, Yonhap News Agency reported on Tuesday.

This adds to similar rejections for January and February. No reasons have been given for any of the rejections.

A Jeju Air spokesman confirmed the March rejection when contacted by Reuters. Chinese foreign ministry spokesman Geng said in a briefing he was not aware of the charter flight issue.

The rejections would be the second blow in a matter of days for South Korean travel companies, after the Chinese government last week ordered tour operators in China to stop selling trips to South Korea.

Lee said on Tuesday the Seoul government had since agreed to provide 50 billion won ($43.3 million) worth of “special loans” for tourism firms experiencing difficulties due to the order.

Chinese authorities have also closed retail stores belonging to Lotte Group following inspections. The number of closures had reached 39, and one store has received a fine, a Lotte Mart spokesman said on Tuesday.

(Reporting by Daewoung Kim and Hyunjoo Jin; Additional reporting by Joyce Lee in SEOUL and Ben Blanchard in BEIJING; Editing by Paul Tait and Christopher Cushing)

US files WTO complaint against China over grain import restrictions

December 15, 2016

AFP

© Getty Images North America/AFP/File | The US Trade Representative said it filed a dispute at the World Trade Organization charging China for violating commitments by limiting imports of American rice, wheat and corn.

WASHINGTON (AFP) – The US government on Wednesday announced it was taking aim against illegal Chinese restrictions on imports of American grain, as well as price supports China provides for domestic farmers.In what it says is the 15th challenge against China, and the second involving agriculture this year, the US Trade Representative said it filed a dispute in the World Trade Organization charging China has violated its commitments by limiting imports of American rice, wheat and corn.

Image may contain: 1 person, nature and outdoor

American rice farmer

USTR said it also is taking the next step in the complaint filed in September that China provides $100 billion in excess price support for local farmers. It requested the WTO establish a panel to rule on the case, after consultations failed to resolve the matter.

The cases add further fuel to the US argument that China has not yet graduated to the status of a market economy, something Beijing insists should have been automatic as of December 11, 15 years after it joined the global trade body.

That status would make it harder for Washington to impose tariffs on Chinese goods at the request of US companies.

USTR said in a statement that China’s quota system for rice, wheat and corn is “opaque and unpredictable” and limits imports. The Agriculture Department estimates China would have imported as much as $3.5 billion of additional crops last year alone if the so-called tariff-rate quotas were properly used.

“Although China has become a significant market for our grain exports, we could be doing much better than we are today,” USTR Michael Froman said in a statement.

“When China joined the WTO, it committed to implementing an agriculture regime that would facilitate market access consistent with international obligations. However, China has frustrated exporters through generous price support and unjustified market restrictions.”

Trump packs trade team with veterans of steel wars with China

December 10, 2016

Reuters

By David Lawder | WASHINGTON

President-elect Donald Trump is stacking his trade transition team with veterans of the U.S. steel industry’s battles with China, signaling a potentially more aggressive approach to U.S. complaints of unfair Chinese subsidies for its exports and barriers to imports.

Led by Wilbur Ross, a billionaire steel investor and Trump’s nominee for commerce secretary, Dan DiMicco, the former CEO of steelmaker Nucor Corp, and three veteran steel trade lawyers, the team is expected to help shift the U.S. trade focus more heavily toward enforcement actions aimed at bringing down a chronic U.S. trade deficit, Washington trade experts said.

Based on their past efforts, this could include more challenges to China’s trade practices through the World Trade Organization and more U.S. government-initiated anti-dumping and anti-subsidy cases against a wider range of Chinese products. The latter would be argued before the U.S. International Trade Commission – a forum where the steel industry has had considerable success.

Ross, DiMicco and other leaders of Big Steel have been on the front-line in U.S. trade battles against the world’s export superpower.

Hit by a flood of cheap imports from China and other countries, the U.S. steel industry has brought 16 new cases in the past three years, seeking punitive duties from the Commerce Department to combat below-cost dumping and unfair subsidies that slashed prices of various steel products to historic lows last year, causing layoffs at U.S. steel mills. (See graphic tmsnrt.rs/2gUFGAf)

Some of these cases have resulted in massive penalties against Chinese imports, including duties of more than 500 percent on Chinese cold-rolled steel used in autos and appliances.

Lawyers Robert Lighthizer and Jeffrey Gerrish have represented United States Steel and Stephen Vaughn has represented AK Steel in these cases. The three are also part of Trump’s trade team.

Lighthizer, Gerrish, Vaughn, Ross and DiMicco either declined to comment for this story or did not respond to Reuters’ requests for interviews.

Trade experts familiar with their views and their history of confrontation with China, however, say they will not be afraid to push the limits of what is legal under World Trade Organization rules in defense of U.S. trade interests.

Lighthizer, who along with DiMicco is considered a strong candidate to be the new U.S. Trade Representative, is known for his work during the Reagan administration pressuring Japan into voluntary export restraints.

PUSHING WTO LIMITS

“Bob Lighthizer is very smart, very strategic and totally fearless,” said a Washington attorney who has worked with him for three decades and asked not to be named because Trump’s USTR selection process was still under way. “If he’s in charge you can expect him to use every tool available to create leverage to get China and anyone else to stop the cheating. He is no fan of the WTO.”

Lighthizer told a congressional panel in 2010 that the WTO’s dispute resolution system was ineffective and that the United States “should consider aggressive interpretations of WTO provisions that might help us deal with Chinese mercantilism.”

Such tactics could include imposing temporary import quotas and surcharges and factoring in the effect of currency manipulation into U.S. anti-dumping duties, he said.

Ross, who advised Trump’s presidential campaign on economic issues, has signaled he will use access to the lucrative U.S. consumer market as leverage to negotiate better trade terms. The United States is China’s biggest export market.

During his presidential campaign, Trump vowed to levy a punitive 45-percent tariff on Chinese goods and label Beijing a currency manipulator. It is not clear though whether he will follow through on those threats once he takes office.

Ross told CNN last week that Trump will not be “willy nilly slapping a 45 percent tariff on everything,” but will maintain the threat of tariffs as part of negotiations.

In an emailed statement to Reuters, Ross said he would divest “all holdings and board seats that pose conflicts” but declined to answer other questions on his plans for Trump’s trade policy and engagement with China.

The personal blog of DiMicco, meanwhile, gives some indication of how he would approach China if he was named head of USTR. He has accused China of waging a “mercantilist trade war” on the United States for two decades, through currency manipulation, unfair subsidies and intellectual property theft.

On the issue of currency manipulation, many economists disagree, saying Beijing is no longer keeping its yuan artificially undervalued to make its exports cheap, citing the hundreds of billions of dollars in reserves it has spent to prop up the yuan’s value this year.

A key question for Trump’s trade team is how far they can push China to change its trade practices without provoking a trade war that will hurt both countries.

“If what they plan to do is get a little scratchier with China on enforcement within the existing WTO rules, that’s OK,” said Scott Miller, a China trade expert at the Center for Strategic and International Studies in Washington. “But if they go outside those guardrails, it will be unpleasant because that will draw retaliation.”

He Weiwen, vice president at the Center for China and Globalization, a government-affiliated think-tank in Beijing, said any punitive action against China by the Trump administration would invite a retaliatory response.

“We will certainly respond in the same way,” he said, adding that Washington and Beijing “should find good solutions that are acceptable to both and not go to extremes. It will hurt both.”

Chinese state media have warned that any new tariffs imposed by Trump would lead to retaliation against Boeing aircraft, Apple iPhones and U.S. corn and soybeans.

(Additional reporting by Michael Martina in Beijing; Editing by David Chance and Ross Colvin)

Here’s Why Donald Trump Is Right About China

December 9, 2016

 

By Fortune

DECEMBER 8, 2016, 10:24 AM EST

Chinese imports are killing American innovation

Once upon a time, it was de rigeur for U.S. politicians to boast of the prowess of the American worker. Donald Trump, in his policies at least, seems to be putting an end to that.

“We need not shrink from the challenge of the global economy,” then-President Bill Clinton said in his 1997 State of the Union Speech, when free trade was a much more popular idea than it is today. “After all, we have the best workers and the best products. In a truly open market, we can out-compete anyone, anywhere on Earth.”

President-elect Donald Trump speaks to supporters during a rally, Thursday, Dec. 8, 2016, in Des Moines, Iowa. (AP Photo, Charlie Neibergall)

Today, this kind of American exceptionalism is harder to justify. Many politicians have given up on it altogether. Trump gave a hint at the different approach they’d be taking to international economic competition when he met with executives of the heating and cooling firm Carrier. “I don’t want them moving out of the country without consequences,” Trump told the New York Times. Mike Pence added, contra Clinton, that “The free market has been sorting it out and America’s been losing.”

A Republican Vice President arguing that the White House should interfere with the workings of the free market in order to protect American workers would have been unthinkable just five years ago. But there is increasing evidence that global trade doesn’t work the way that free market fundamentalists have always believed.

In a new working paper published on Monday by the National Bureau of Economic Research, economists David Autor, David Dorn, Gordon Hanson, Pian Shu, and Gary Pisano come to the same conclusion. The paper finds that competition with Chinese exporters have had deleterious effects on American innovation. To do so, the authors looked at how import competition affects innovation in the United States by studying the effect of increased import competition on American manufacturing firms’ R&D spending and issuance of patents. “Our results suggest that the China trade shock reduces firm profitability in U.S. manufacturing, leading firms to contract operations along multiple margins of activity, including innovation.”

This is counter to the popular belief that while specific American workers may be harmed by free trade encouraging low-skilled jobs to move abroad, the American economy would benefit overall by increased competition because competition leads to more innovation and lower prices for consumers.

But this economics-101 conception of the global economy has long since stopped working for the American people, and the political class is finally catching on. Last month, the Pew Research Center published two sets of polling results that show that the plurality of Americans believe that “U.S. involvement in the global economy is a bad thing because it lowers wages and costs jobs in the U.S.” However, when scholars in international relations at major Universities were asked the same question, 9-in-10 said that it was a good thing because “it provides the U.S. with new markets and opportunities for growth.”

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This likely shows the disconnect between the theoretical foundations of how international trade works and the practical and anecdotal effects of what average people see everyday. In theory, international trade makes everyone richer as countries shift production to goods and services they can produce most efficiently. But this increased wealth is of little consequence to average folks if it captured by the lucky few.

One of the more perceptive observations of the Donald Trump campaign was that the political and academic class in the United States had overlooked these effects, while many Americans have not.

Source: http://fortune.com/2016/12/08/trump-china/

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China Faces Off Against World on Open Global Markets

December 9, 2016

Anniversary of China’s accession to World Trade Organization highlights global rift over Beijing’s economic policy

Donald Trump returned to Iowa triumphant Thursday, rallying in Des Moines not as an unconventional presidential candidate, but as the president-elect of the United States.

Trump drew a crowd of perhaps 6,000 supporters to Hy-Vee Hall for his thank-you tour rally, reveling in his 9-point Iowa victory and sharing the stage with Gov. Terry Branstad, his newly named ambassador to China.

“I’m here today for one main reason – to say thank you to the great, great people of Iowa!” Trump said as he took the stage. “You went out and pounded — and I mean pounded — the pavement. You organized your fellow citizens and propelled us to victories at the grassroots and every other level. We have a movement the likes of which this world has never seen before.”

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Dec. 9, 2016 5:32 a.m. ET

China’s 15-year anniversary as a member of the World Trade Organization on Sunday threatens to trigger a clash with growing forces in the West that cast Beijing as an abuser of open global markets.

The anniversary marks Beijing’s eligibility for “market-economy status,” which would remove many risks of punishment when Chinese companies are accused of selling products below cost. But the issue is bringing to the fore mounting global frustration over China’s state-led economic policy.

Since joining the WTO on Dec. 11, 2001, China has leveraged the open markets the organization fosters to lift millions of people from poverty and catapult itself to become the world’s No. 2 economy. But Beijing’s critics say it has gamed the system by curbing access to its markets and marshaling massive state resources to compete against foreign companies.

“China wanted the advantages without meeting its obligations, and trade won’t work when it’s a one-way street like that,” said Rep. Sander Levin, the top Democrat on the House committee that overseas trade. “They went in with full knowledge and essentially began thumbing their nose.” Mr. Levin voted for legislation tied to China’s WTO accession but has since become a vocal critic of Beijing’s compliance.

Changing China’s market-economy status is dependent on individual countries declaring that they are changing the way they handle antidumping and other trade cases—something the Obama administration isn’t ready to do.

“It is a conversation that we are engaged in, but it is not ripe for us to change our protocols,” said Commerce Secretary Penny Pritzker said last month after talks with Chinese officials.

President-elect Donald Trump has threatened to declare China a currency manipulator and slap big tariffs on its hundreds of billions of dollars in annual exports, although some of his aides have played down those warnings as laying the ground for future negotiations. “They haven’t played by the rules, and they know it’s time they’re going to start,” Mr. Trump said at an Iowa rally on Thursday, naming “massive theft of intellectual property” and “product dumping.”

Mr. Trump’s comments and choice of advisers—including steel executives—suggest his administration will step up trade enforcement against China through the WTO as well as in antidumping and subsidy cases within the U.S., trade lawyers say. Trump representatives didn’t comment on the issue.

ENLARGE

The European Commission, the EU’s executive arm, also isn’t ready to declare China a market economy. In November, the commission proposed a new formula to calculate antidumping duties.

In cases where it determines markets are distorted by state intervention, the commission would eliminate the concept of nonmarket economies and instead allow for high tariffs to be imposed on imports deemed to be priced below international-market levels.

“We are not declaring China a market economy status but we are reforming the system so as to make it country-neutral,” Cecilia Malmström, the EU’s trade chief said Wednesday.

Japan said this week it continued to view China as a non-market economy.

Beijing bridles at being a lightning rod for global angst over trade and unemployment and on Thursday renewed vows to take WTO countermeasures if it doesn’t receive market status.

“We are playing by the rules and you need to keep your promise,” Xue Rongjiu, a trade adviser to the State Council, China’s cabinet, said this month. “It’s unfair to blame China for your problems, which have resulted from bad management and operations.”

Economists say China generally abides by WTO rules, a system largely designed to address the movement of goods across borders, making it difficult to deny Beijing market-economy status over the long term.

But the rules are ill-equipped to handle China’s massive state companies, investment inequity, intellectual property issues, limited transparency and restricted access to new economic sectors like services, internet and the cloud, critics say.

“The WTO seems like a single-stroke engine in a jet-engine age,” said James McGregor,former chairman of the American Chamber of Commerce in China. “China has played into our open system with great skill.”

Free-trade advocates focus on Chinese state-owned entities, which are granted such benefits as preferential funding, free land, protected domestic markets and limited pressure to turn a profit, saying the system fuels debt and inefficiency that distorts global markets. President Xi Jinping has vowed to maintain the central economic role for state-owned firms.

Zak Fardi, founder of U.S. solar panel maker 1SolTech Inc., said China’s system victimized him. The Dallas-based company prospered until late 2011 when Chinese state-subsidized panels began flooding the U.S. market, he said. The Chinese sold panels at 40% below his production cost and offered customers multimillion-dollar lines of credit he was unable to match.

Panel makers petitioned for help, leading to punitive U.S. and European duties on imports of Chinese solar cells even as Chinese manufacturers denied competing unfairly. But by then the damage was done. Not only did Mr. Fardi’s business fail but dozens of Chinese solar makers did too after the subsidies sparked a competitive glut. “They kicked our butts,” Mr. Fardi said. “It was definitely dumping. It seemed very well organized.”

Shipping containers at a port in Qingdao in eastern China's Shandong province.
Shipping containers at a port in Qingdao in eastern China’s Shandong province. PHOTO: CHINATOPIX/ASSOCIATED PRESS
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Aside from solar panels, China has used an array of state financing, subsidies and price cutting to secure globally dominant positions in disc drives and personal computers, saidDirkThomas, principal in Hong Kong-based Summit Partners, a tech advisory firm. Beijing is now setting its sights on mobile phones and semiconductors, he said. “It’s the same game over and over again,” said Mr. Thomas, who helps Chinese technology companies acquire assets overseas.

Beijing’s industrial policies are driving discontent to new levels, especially over excess Chinese production of steel, aluminum and other products. In the first half of 2016, 17 countries and regions launched 65 trade investigations against Chinese products, a two-thirds increase year-over-year, according to Chinese data. Beijing has pledged to cut 150 million tons of steel production by 2020, but industry analysts say that would reduce only about a third of China’s 30% excess capacity.

A new source of concern to foreign companies is the “Made in China 2025” blueprints released last year that call for indigenous development and import substitution in many strategic industries where Western companies have an edge, including semiconductors.

“The global system of trade is under siege and has been challenged by the biggest new kid on the block, China, not playing by the rules,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “China points at growing protectionism of the West, but they only have themselves to blame.”

Calls also are rising to tighten curbs on Chinese technology investments in the U.S. in response to investment bans Beijing has imposed, often on national security grounds.

“With [China’s] expansive definition, national security could be your local ballet school,” said Claire Reade, a former U.S. Trade Representative negotiator and now a trade lawyer.

This month, President Barack Obama blocked on national security grounds the proposed acquisition by a Chinese company, Fujian Grand Chip Investment Fund, of German chip maker Aixtron SE, which has operations in California.

In response, a Chinese Foreign Ministry spokesman said this week that Beijing hopes Washington will “cease making groundless accusations” against Chinese companies.

Write to Mark Magnier at mark.magnier@wsj.com and William Mauldin at william.mauldin@wsj.com

http://www.wsj.com/articles/china-faces-off-against-world-on-trade-1481279521

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