US Policy Shifts To Tariffs (On Paper, And In Practice)

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The debate in the US on China trade policy seems to have moved away from what the New York Times describes as Secretary Paulson’s “quiet diplomacy” (see “Threats Don’t Work”) to what one might call aggressive action:

    “The Bush administration, in a major escalation of trade pressure on China, said Friday that it would reverse more than 20 years of U.S. policy and impose potentially steep tariffs on Chinese manufactured goods on the grounds that China is illegally subsidizing some of its exports.

    The action, announced by Commerce Secretary Carlos Gutierrez, signaled a tougher approach to China at a time when the administration’s campaign of quiet diplomacy by Treasury Secretary Henry Paulson Jr. has produced few results.”

The move comes on the back of a continuing US deficit with China, which stood at US$232.5 billion in 2006, and which may or may not have anything to do with the value of the RMB – but which certainly has a lot to do with US firms manufacturing in China, and US-bound production shifting to China from other countries in Asia (see more here). It is said to have been driven by analysis of subsidies received by Chinese producers. Interestingly it was reported that earlier this month that, as part of the dialogue with the US and others, China ended export credit subsidies from the central bank to some large exporters. Too little, too late, it seems.

According to reports, the move will initially (subject to review in October) affect imports of glossy paper from two Chinese suppliers, but could extend to other products and companies if and when other actions are bought by the Department of Commerce. Steel, textiles, and other products are in the firing line.

The Chinese responded with a “strong objection” and noted that US-China relations could be damaged as a result of the move, which may also be challenged in WTO and federal court. But it is not only the Chinese who are complaining. Some US companies (and probably not a few US consumers) have opposed the moves. The Chicago Tribune notes:

    “U.S. companies such as General Motors Corp., which import goods from China, opposed levying countervailing duties, arguing it would mean duties would be applied twice on many Chinese products — once for dumping and once for subsidies. Any advantage a company in China gets from a subsidy is already offset by steeper anti-dumping duties levied against non-market economies, they argue.”

This is clearly a highly politicized issue in the US, but the implications may be economic and widespread if it escalates. It will be interesting to see where this particular paper trail leads. More protectionism perhaps?

*Update 1/4/07: For some very interesting analysis of the political ingredients to this case, and details of theoriginal complaint, follow this link to Stan Abrams’ China Hearsay blog.

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4 Responses to “US Policy Shifts To Tariffs (On Paper, And In Practice)”

  1. Archive » Trade Surplus: Still Rising| China Business Blog Says:

    […] themes/pod88/images/menu_5_on.gif’,1)”> « US Policy Shifts To Tariffs (On Paper, And In Practice) April 2, 2007 T […]

  2. jys390 Says:

    Excellent note on the double-hit that these tariffs will have (anti-dumping AND countervailing). One issue I addressed in my blog, which NO other media surprisingly has covered, is the effect of the Byrd Amendment, which was already lambasted for its double-dipping tendencies. Now, we have QUADRUPLE dipping. American manufacturers, please start your engines.

    Hmmm…. maybe I’ll start a “manufacturing” company in an obsolete industry, producing 10 items a year… then slap a lawsuit against China to the USITC… oh baby…. :)

  3. Archive » Trading Blows. Not Technology.| China Business Blog Says:

    […] s on sales of US movies, music and books) have been filed at the WTO, adding to the recent move towards use of tariffs, and ongoing pressure to appreciate the RMB. The Chinese reaction t […]

  4. Archive » Will Protectionism Fly?| China Business Blog Says:

    […] ; Barron added.” Of course, it is not just China that has protectionist tendencies. The US and EU have a lot of domestic political pressure to combat Chinese imports (while the foreign […]

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