Unit5TextITheComingTradeWars.docx

Unit5TextITheComingTradeWars.docx

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Unit5TextITheComingTradeWars

Warm-up

ØThefollowingnewshasmadeheadlinesinanumberofmajornewspapersrecently.

13March,2012--TheUS,JapanandtheEuropeanUnionhavefiledacaseagainstChinaattheWorldTradeOrganization,challengingitsrestrictionsonrareearthexports.USPresidentBarackObamaaccusedChinaofbreakingagreedtraderules.Theyarguethatbylimitingexports,China,whichproducesmorethan95%oftheworld'srareearthmetals,haspushedupprices.Beijinghassetquotasforexportsofrareearths,whicharecriticaltothemanufactureofhigh-techproductsfromhybridcarstoflat-screenTVs.

BeijinghasdeniedtheallegationsintheWTOcase,sayingthatitenforcedthequotastoensuretherewasnoenvironmentaldamagecausedduetoexcessivemining.China'sIndustryMinister,MiaoWei,toldstatemediaagencyXinhuathatthecountrywas"activelypreparingtodefendourselves"againsttheWTOcomplaintsanddeniedthequotasweretradeprotectionism.ChineseforeignministryspokesmanLiuWeiminsaid:

"WethinkthepolicyisinlinewithWTOrules.Exportshavebeenstable.Chinawillcontinuetoexport,andwillmanagerareearthsbasedonWTOrules."

ØWhatkindoforganizationisWTO?

Whatkindofroledoesitplayinsettlingdisputesininternationaltrade?

TheWorldTradeOrganizationisaninternationalorganizationdesignedtosuperviseandliberalizeinternationaltrade.TheorganizationofficiallycommencedonJanuary1,1995undertheMarrakechAgreement,replacingtheGeneralAgreementonTariffsandTrade（GATT）,whichcommencedin1947.

TheWTO’sprocedureforresolvingtradequarrelsundertheDisputeSettlementUnderstandingisvitalforenforcingtherulesandthereforeforensuringthattradeflowssmoothly.

ØNametherecentcasesoftradeconflictsthatyouknow,andfindoutthemajorcomplaints.

In2009,WashingtonexpandedsanctionsagainstEuropeanfoodproductsinretaliationforEurope'sboycottagainsthormone-treatedAmericanbeef.

Afterthe2008financialcrisis,U.S,governmentinitiatedabailoutplanofGMandChryslertotheexclusionofforeignfirms.Asaresponse,E.U.accusedU.S.ofviolatingtheso-called"nationaltreatment"clausesintradeagreements,andputWashingtononnoticethatitwillpursuelegaltraderemediesifthefinalbailoutpackagewasdiscriminatory.

ØInanarticleentitled“TheDangersofTurningInward”,JeffreyE.Garten,theauthorof“TheComingTradeWars”（TextI）,alarmsusofthedangerofeconomicprotectionism,whichistobedifferentiatedfrom“ordinaryprotectionism”?

Ordinaryprotectionismsuchastariffsandquotaswouldbeoneaspectofthisproblem,butitwon'tbetheworstofitbecauseaweboftreatiesandtheenforcementcapabilities执法能力oftheWTOwillconstrainthemostegregious过分的behavior.Economicnationalismismoreinsidious暗中为害的becauseitisbroader,moresubtleandsubjecttofewerlegalconstraints.Itisaframeofmindthatcastsdoubtontheveryassumptionthatweliveinasingleinternationalmarket,andthatrelativelyopenbordersareavirtue.

Itisbasedonacalculationthatdespiteallthetalkabouteconomicinterdependence,nationscangoitalone,andcouldbebetteroffindoingso.Trueeconomicnationalistswantabovealltoprotectcapitalandjobsintheirowncountries.Theyseeglobalcommercenotasawin-winpropositionbutasacontestinwhichthereisavictorandaloser.Theyarethusnotfocusedoninternationalagreementstoopentheworldeconomy;tothecontrary,theyareusuallyfiguringouthowtoavoidinternationalcommercialobligations.

ØDespitetheincreasingpaceofglobalization,recentyearswitnessedareversetrendofprotectionismininternationaltrade.

Forinstance:

In2009,E.U.reintroducedexportsubsidiesonbutterandcheeseandleviedtariffsonAmericanexportsofbiodieselfuel.Indiaraisedtariffsonsteelproducts.BrazilandArgentinapressedforahigherexternaltariffonimportsintoMercosur.

In2010,USAfiled2casesinWorldTradeOrganizationagainstChinaoverElectricalSteelandCreditCardpaymentproviders.USAallegedthatChinahadunfairlyputdutiesonUSmadeSteelandwaslockingoutMastercardandVisafromthecreditcardprocessingmarketinChina.

Themuch-publicized"BuyAmerica"provisionoftheU.S.stimuluspackagerestrictedpurchasesofconstruction-relatedgoodstomanyU.S.manufacturers.

OnOctober11th2011,America’sSenatepassedtheCurrencyExchangeRateOversightReformAct,whichwouldallowany“fundamentallymisaligned”currencytobelabelledasubsidysubjecttocountervailingduties.Inotherwords,steeptariffswouldbeimposedonimportsfromnationswithundervaluedcurrencies.ItwasaprovisionaimedsquarelyatChina'syuan.

ØWhataretheregularprotectionistmeasures?

Tariffs,importquotas,anti-dumpinglegislation,subsidy,currencymanipulation,discriminatorygovernmentprocurement歧视性政府采购,stimulusandbailout,administrativebarriers行政壁垒（restrictiveimportrulesconcerningsuchissuesasfoodsafetyandenvironmentalstandard）,etc.

ØHowdoesprotectionismjustifyitself?

Protectionistpolicyjustifiesitselfbyclaimingtoprotectnationaleconomyanddomesticmarket,toretainjobs,toprotectandsupportinfantindustries.

Often,proponentsofprotectionismsaythatfreetradeisfineintheory,butitdoesnotapplyintherealworld.Moderntradetheoryassumesperfectlycompetitivemarketswhosecharacteristicsdonotreflectreal-worldmarketconditions.Moreover,eventhoughprotectionistsmayconcedethateconomiclossesoccurwithtariffsandotherrestrictions,theyoftenarguethatnoneconomicbenefitssuchasnationalsecuritymorethanoffsettheeconomiclosses.

ØWhatarethenegativeconsequencesofprotectionism?

Sabotagefreetrade,losejobsinthelongrundespiteshort-termgain,ortoquoteAlanGreenspan,protectionismwillonlyleadto“anatrophyofourcompetitiveability....Iftheprotectionistrouteisfollowed,newer,moreefficientindustrieswillhavelessscopetoexpand,andoveralloutputandeconomicwelfarewillsuffer”.

TheComingTradeWars

Themassiveintrusionofgovernmentintonationaleconomicscouldsparkdisastrousprotectionism.

JeffreyE.Garten

【1】It’shardtofindatopeconomicofficial,economistorglobalbusinessleaderwhodoesn’trecognizetoday’sheighteneddangersofprotectionism.Butitisequallydifficulttoidentifyanyhigh-poweredeffortstoactivelywardofftheprospectofhighertariffs,quotasortrade-blockingregulations.Itisasiftalkingaboutthethreatisseenasenoughtodeteragiganticrollbackofglobalcommerce.Butrhetoricwillnotpreventatradewar,whichisnow,Ibelieve,morelikelythanithasbeenatanytimesincetheearly1970s,whencurrencieswerenolongerfixedtothevalueofgoldandbegantofloatagainstoneanother.

【2】Ahalf-centuryofsteadytradeliberalizationwasinjeopardyevenbeforethecurrentfinancialandeconomicmeltdown.PriortotheimplosionofBearStearns,theU.S.CongresshadtakenawayalmostallofPresidentBush’strade-negotiatingauthority,feelingthattheU.S.wasnolongergainingenoughfromnewtradeagreements,whilejobswerebeinglostandwagesundercut.Wellbefore“subprime”enteredthepopularlexicon,theDoharoundoftradenegotiationshadcollapsed,asrichandpoornationsfoughtovercontentiousissueslikeagriculture.TheriseofChinaandIndiahasraiseddeepconcernsoverimportpenetration,notjustintheU.S.andEuropebutalsoinemergingmarketslikeMexico.Forafewyearsnow,prominenteconomistswereraisingwarningflagsthatsupportforfreetradewasbeingerodedbytheperceptionthattradewascontributingtoever-greaterincomeinequalities.

【3】Now,however,thecollapseoftheglobalbankingsystem,adeepeningglobalrecessionandthemassiveintrusionofgovernmentsintonationaleconomies–atrendthatcan’thelpbutpoliticizeeconomicpolicydecisions–havealladdedfueltothefire.Unemploymentisgrowing,withmorethan70,000layoffsannouncedintheU.S.andEuropelastMondayalone,andglobaltradevolumeisnowdecreasing–bymorethan2percent,accordingtotheWorldBank–forthefirsttimeinaquartercentury.Containershipssitidleinports–demandisdown50percentyearonyear.America’sownexportsdeclined6percentlastyear,China’s9percentandJapan’sashocking35percent.Tradefinancing,theessentiallubricantoftheentirecommercialsystem,hasdriedup.Slowgrowthhasmeantmassiveindustrialovercapacityinheavyindustriessuchassteel,automobilesandelectronics,andwithglobalmanufacturingdroppingatanannualrateof20percent,thesituationwillgetmuchworse.Tobesure,wehaveyettoseeamajoroutbreakofprotectionism.Unlikecrisesinfinance,tradeproblemsareslowtoemerge,butoncethemomentumbegins,thetrendtakesyearstoreverse.

【4】Meanwhile,therearestrawsinthewind.Inthefirsthalfof2008,antidumpinginvestigationsaroundtheworldwereupatleast30percent.InDecember,WashingtonexpandedexistingsanctionsagainstselectedEUfoodproductsinretaliationforEurope’sboycottofAmericanhormone-treatedbeef,anolddisputetobesure,butonethatisbeingescalated.BrazilandArgentinaareexertingpressureonmembersofMercosur,theSouthAmericantradeblock,toraisethegroup’sexternaltariff.AndbecausetheWTO’spermissiblelimitsontariffslevelareoftenmuchhigherthantheactualtariffsthatcountrieshaveimposedinrecentyears,itisalltoopossiblethatgovernmentswillnowraisetariffsandstillbewithintheirlegallimits–ablowtotrade,whateverthelawsays.JustlastDecember,aftertheG20calledonmemberstoresistprot