China: The Right Time for Action, the Right Action

By March 30, 2007Trade

Friday was a big day in the history of U.S.-Chinese trade relationships, as much for what it represents as for the action itself. The Administration, acting through the U.S. Department of Commerce (release here), decided it would apply U.S. countervailing duty law to China’s exports of coated paper products, the first time that the law has been used in relation to non-market economies.

The action is a measured yet forceful response to unfair Chinese trade policies, that is, subsidies to a favored industry. As NAM President John Engler said in a release:

“Many manufacturers tell me that Chinese products sell for less than the cost of the raw materials in the product, meaning that they are likely being subsidized. Until today there was no remedy, since Commerce would not offset subsidies in non-market economies like China. Now we are beginning to level that playing field.

The action also reflects the historic development of China away from the rigid command economy, ruled by Communist terror, to a mixed economy with certain, however limited spheres of individual automony. By acceding to the WTO in 2001, China joined the international trading order, accepting a legal structure that provides a process for resolving disputes. A disagreement over trading practices doesn’t have to blow up into a full-scale trade war; legislative retaliation becomes a last resort, instead of the first. Secretary Gutierrez stated the case well:

“China’s economy has developed to the point that we can add another trade remedy tool, such as the countervailing duty law. The China of today is not the China of years ago. Just as China has evolved, so has the range of our tools to make sure Americans are treated fairly. By acting on the petition filed last October, the United States today is demonstrating its continued commitment to leveling the playing field for American manufacturers, workers and farmers.”

The announcement Friday represents a shift in U.S. policy first established in 1984, when Commerce determined not to apply U.S. countervailing duty laws to non-market economies. The NAM sought this change, submitting comments to Commerce on Jan. 12. And the NAM certainly applauds the specific action and will support the effort as it moves through the official process. Engler:

“This case expands the Administration’s efforts to address China’s distortions of trade and to move in the direction of a more sustainable and mutually-beneficial trade relationship. However, it is a preliminary decision, as the case must now go to the International Trade Commission for a determination of injury to the U.S. industry. We hope for a quick response from the ITC that will result in effective action against subsidies.”

Investor’s Business Daily story here. Forbes‘ story here.

According to China Daily, the Chinese government is not happy with the decision. The English translation does not sound too extreme, though.