Saturday, January 7, 2012

China, protectionism and globalisation

China recently has alleged protectionism from  the Western world. While China has been alleged to harbour protectionist tendencies inspite of its WTO obligations, this piece in the China Daily gives a different picture:

''Chinese exporters are likely to encounter more trade barriers in 2012 as trade protectionism resurges globally against the backdrop of a volatile recovery, the Ministry ofCommerce (MOC) said Wednesday.
Trade protectionism in developed nations has far exceeded the level seen at the beginning of2009, following the onset of the global financial crisis in 2008, the MOC's Bureau of Fair Trade for Imports and Exports said.
In developing economiessome industries that are traditionally inclined toward tradeprotectionism have begun to ask for government intervention to restrict foreign capital and productsan official with the bureau said on condition of anonymity.
"Trade restrictions will increase further in 2012," the official said.
The statement came after MOC data showed that China suffered rising trade friction last year.The country faced 67 trade investigations in 2011, involving $5.9 billion.
Both the number of the investigations and value involved were at high levelsthe official said,adding that most cases touched upon the country's steel industryas well as mechanical and electrical products.
As the country's industry and export structures become upgradedthe products involved in thedisputes are changing from labor-intensive sectors to high-tech sectorsthe official said.
In 2011, the United States launched 16 probes into alleged intellectual property rightsinfringements by Chinese companies.
"Some high-end manufacturing and strategically-emerging industries have gradually become ahot spot for foreign trade disputes," the official said.
According to the officialtrade protection measures have come in various formsSome countries have blocked imports from China by exercising safety and environmental standards,while some have imposed complex customs and authentication procedures."
Well, there are always two sides of the coin . See this letter of a U.S.Senator on trade policy. Sounds familiar? 

"To the Editor:
Factory Jobs Gain, but Wages Retreat” (“Working for Less” series, Business Day, Dec. 30) tells us just about everything we need to know about the collapse of the middle class and the greed of the top 1 percent.
During the Congressional debates over the North American Free Trade Agreement, permanent normal trade relations with China and other “free trade” agreements, corporate America and its representatives told us how beneficial these deals would be for the American worker.
Some of us never believed those arguments. Now the results are in. We have not only lost millions of well-paying manufacturing jobs as a result of unfettered free trade, but the race to the bottom with China and other low-wage countries has also resulted in drastic pay cuts throughout what remains of our manufacturing sector.
A union job in manufacturing used to be a blue-collar ticket to a middle-class life and the gold standard for working-class jobs throughout the country. All that is disappearing as American wages in manufacturing are becoming “competitive” with China and other low-wage countries.
The time is now to rethink our disastrous trade policies. The time is now to prevent the pauperization of America’s working class.
U.S. Senator from Vermont
Burlington, Vt., Dec. 30, 2011"
Coming back to "protectionist" China, Dani Rodrik had this to say in an interview,

"Take China. Obviously without globalisation China wouldn’t have been able to grow as rapidly as it did. But China is not a simple story of letting globalisation work its magic. They, in fact, have opened up very gradually, very carefully and always after having established strengths in their domestic economy. It was on the basis of their domestic industrialisation that they progressively opened up to international trade and when they opened up to trade it was very partial too. It wasn’t ‘Let all the tariffs come down!’ It was through special economic zones, so only in parts of the country. They protected their state-owned enterprises so there wouldn’t be large-scale unemployment. They made sure foreign investors would transfer technology to their domestic counterparts. They entered the WTO relatively late, only after they had already become a manufacturing powerhouse. With respect to international finance, to this day they have capital controls, they prevent free inflow of capital and they’re intervening heavily to make sure that they have a very competitive currency – which effectively subsidises their exports and their manufacturing industry.

So China has had a combination of highly interventionist domestic policies to diversify and develop its industries alongside a policy of export-orientation and taking advantage of globalisation. This combination has been key. Other countries that have tried to take advantage of globalisation simply by lowering their barriers to trade and letting their capital flow freely such as the Latin American countries since the 1990s have actually done relatively poorly."

Creative globalisation at its best?

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