Thursday, August 9, 2012

View from China on protectionism

China's association with the WTO has been mixed and a lot of literature on its development in the multilateral trading system exists. I have extensively blogged about China and the multilateral trading system here, here, here, here and here. Critics of China often argue that while China has made use of the multilateral trading system to its advantage and its stake in international trade has substantially increased, it still employs many protectionist measures that hinder free trade. Its use of subsidies and State capitalism also comes in for close scrutiny. 

While the fact whether China violates WTO rules is not an issue I am addressing in this piece as that would depend on the specific measures, I was drawn to an article in a Chinese daily that depicted the "Chinese" view on protectionism and free trade. Referring to the Chinese Premier's remarks urging countries to keep bilateral and regional trade open and inclusive and safeguard the multilateral trade system at the recently concluded G-20 Summit at Mexico, the paper said:
"China has become the biggest victim of international trade frictions for 17 consecutive years, view given by the Chinese government and echoed by the Global Trade Alert, an independent think-tank on global trade. China has also come under repeated attacks on the issues of intellectual property rights and renminbi exchange rates.

The phantom of protectionism looms even larger this year, as the trade remedy investigations into Chinese goods increased 80 percent in the first three months compared to last year.

For the highly-integrated global economy, nations should bear in mind the "all in the same boat" psyche in this time of crisis. But instead, major western economies have resorted to protectionist measures to impair free trade -- giving the lame excuse of opposing inequality.

No doubt the prolonged sluggishness in the US and European economies and their high unemployment rates have brought about intense domestic pressure, notably in an election year for many countries. However, this should not be the rationale for raising trade barriers.


However, China's moves have been harassed by protectionism. The latest example was the US government's anti-subsidy and anti-dumping probes into made-in-China solar panels, the first clean energy case that received trade remedy investigations.

As the architect of the current trade rules, the United States and EU enjoy abundant benefits while developing nations are relatively disadvantageously placed. They should be treated fairly and should not fall into victim of faulty rules."
This is perhaps the Chinese viewpoint. To paraphrase:

1. China contributes a lot to the global economy and is a huge market for US and EU exports. These exports haven't declined over the years thus indicating that China has not adopted a protectionist tendency. 

2.China has been the subject of increased protectionism by the developed world, especially with respect to anti-dumping and countervailing measures.

3.China is the victim rather than a perpetrator of protectionist measures. the developed countries are actually protectionist.

The truth may be somewhere in the middle. There is ofcourse no mention in the above report of the active role of the State in development, the level of transparency of policies both within and outside the country as well as legal reforms in consonance with the Chinese Accession Protocol. Leila Choukroune has extensively written about this issue. Countries often take a high moral ground when criticising protectionist measures of other countries but follow exactly the same steps when in a similar situation. Is this the norm? Are declarations of abjuring protectionism and furthering the path of freer multilateral trade mere statements of intent rather than actual action? It is simpler to proclaim being non-protectionist than being one I guess. That applies equally to countries across the spectrum.

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