The Chinese minister of trade Bo Xilai was in Paris yesterday. Most likely this is simply a happy coincidence, but the timing couldn’t have been better. The issue of Chinese textile imports has become one of the issues in the French referendum, and minister Bo was conveniently available to make all the right gestures:
“We want to soften the shockwave that there could be from the rise in Chinese textile exports,” Bo told a news conference after talks with French trade minister Francois Loos…”It is a temporary phenomenon and this phenomenon will weaken or disappear”.
The EU, as is by now well known, has recently been asked by France (along with a number of other member states: Spain, Italy, Greece) to take emergency measures to limit textile imports from China. EU Trade Commissioner Peter Mandelson has so far offered a sympathetic ear but to date has taken no concrete steps.
Back in China they have appointed a vice minister of commerce as international trade negotiatior. The apointee, Gao Hucheng, is reported to be a fluent French speaker.
So what is all the fuss about? Well some years 10 ago, when the ground rules were established for China’s entry into the World Trade Organisation, it was also agreed that starting from January of this year quotas on Chinese textile imports would also be lifted by the EU and the US. I mention the fact that this was several years ago since this detail is important. The textile industry and the respective governments in the various affected countries have had some time to prepare for this eventuality.
Certainly some of the numbers being bandied about for the increase in imports are striking (eg here in Spain the textile industry is talking about 500% increases in some items like jumpers and trousers) but what is not clear is how much of this is a real increase and how much a redirection of imports which were previously shipped through Singapore and Hong Kong to get round the quotas, and which now come direct.
In this sense Bo Xilai is undoubtedy right: the dramatic increase is certainly a temporary problem and things will certainly settle down later.
Of course the anti-China lobby wax long and loud about all the imperfections and inadequacy of the Chinese political and economic system, and many of the things said are not without foundation. However the question of trade ‘irregularities’ is a case of ‘let he who is without blemish throw the first stone’. As the Economists point out in an article that is well worth reading EU and US politicians have a tendency to treat China as a market or a non-market economy as best suits the argument.
Equally China recently put in an order for 30 planes from airbus including 5 of the new A380s. It should not escape our notice that at the same time as this purchase is being agreed the EU and the US are in a furious row about alleged subsidies and tax breaks for Airbus and Boeing respectively.
Let’s be clear here, I am not saying that there is no case to be made about unfair competition in the case of Chinese textile exports, I’m just saying that they are not alone in trying to use the rules to suit their purposes. I am also saying that administrations in Washington and Brussels, whilst genuflecting in the direction of the political gallery, will undoubtedly continue to move forward with increased trade with China, and will attempt by every means to resolve any specific points of tension by talking. There is simply too much at stake. As I indicated yesterday growth in the global economy is today supported by two pillars: the US consumer and economic development in China. Kick away either of these pillars too abruptly and the consequences would be decidedly unpleasant for all.
It is for this reason that, for all the talk, I personally don’t anticipate any sudden and dramatic rise in protectionist measures in the near future. Growing protectionism would undoubtedly risk economic crisis. Of course were a crisis to come for other reasons, then there might be every reason to expect protectionism as a response.
Postcript: after writing this I have seen that the FT today is carrying interviews with WTO leadership frontrunners France’s own Pascal Lamy and Carlos P?rez del Castillo from Uruguay. Both are equally explicit in condemning the ‘textile scare’. Amongst the reasons for this will be their awareness of the importance of trying to make some progress this year on the ‘Doha round’ of trade negotiations and the importance of some successes in this direction for all of us. Clearly getting bogged down in this problem would do nothing to bring a Doha agreement any nearer.
In separate interviews, Pascal Lamy of France and Carlos P?rez del Castillo of Uruguay said western nations could not complain that they were facing a crisis when they had been given 10 years to prepare for the worldwide lifting of quotas, which, since January, has allowed China to boost its clothing exports. The French government has been leading calls for Brussels to act to restrict Chinese imports, but Mr Lamy, a former EU trade commissioner, said: ?It is not the law of the jungle and the WTO rules were clearly set.?
?Why are some politicians now not recognising that fact?? he asked. ?I can see two explanations: either their memory is too short or they know that perfectly well and pretend to be surprised, which is frankly a sign of hypocrisy.
?This idea that everybody is now taken by surprise and this is the fault of Brussels is clearly not the right reflex.?Mr P?rez del Castillo also said he was against imposing export restrictions rather than adjusting to China’s improved efficiency.
Source: Financial Times