Here Comes the First ‘Issue’

The Chinese, as is often the case, are showing that they have an uncanny knack for putting their finger exactly on the sore spot:

Beijing on Sunday criticised the European Union’s plans to restrict imports of textile products amid heightened controversy surrounding the threat Chinese clothing exports pose to the world’s manufacturers.”

“A spokesman for the Ministry of Commerce, Chong Quan, said that the EU’s efforts to limit importsof some clothing products from China were rash and unfair…..It is an inaccurate assessment and an incorrect decision,? said Mr Chong of the EU’s latest move. ?It not only sends the wrong signal of trade protectionism to the European industry, but also seriously harms the rights that Chinese enterprises are allowed to enjoy in the global textile trade.?

Really I would say that the timing of this response from China is very much to the point. The EU has now to ‘interpret’ yesterday’s vote and answer. Do Europeans want more protectionism, or should we press ahead with a new and improved Doha round (including the reform of agricultural subsidies, which of course, will not be popular in France). After giving the Bush administration the runaround on currency reform over the last six months, it appears Beijing may now be about to give the EU a little more attention. The really interesting detail will be to see the response. I think this is what might give financial markets a first hint of where we are going.

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About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

9 thoughts on “Here Comes the First ‘Issue’

  1. Updating via comments: Bloomberg are reporting that the Chinese administration have decided to scrap the textile export tarrifs – they only announced them on 20 May. This seems to be a hardening of the line – sensing weakness in your opponents camp – all round.

    I have come to the conclusion that the Chinese – who are probably thinking geo-politically – will effectively tell the US to put up and shut up on the currency issue. ie all the fuss is probably having the effect that the float will come later rather than sooner. And they are also effectively telling Alan Greenspan and George Bush that if they don’t like things the way they are then they can raise interest rates sharply in the US – to choke off consumption – and accept the ‘electoral odium’ that will involve. (Note the Chinese have been pretty active in Uzbekistan since the shootings, they are also interested in oil and gas).

    Now they can see that there are divisions in Europe to exploit. And as I say, this is just the first example.

    Please note: I am *not* anti Chinese, just trying to think through all the ramifications of what is happening.

    http://quote.bloomberg.com/apps/news?pid=10000006&sid=aQb1PLqD_UJA&refer=home

    “This is a strong gesture from China to the U.S. and EU,” said Long Guoqiang, a senior trade researcher at the State Council Development and Research Center in Beijing.The decision comes three days before U.S. Commerce Secretary Carlos Gutierrez arrives in Beijing for talks on trade issues including textiles. China, the world’s largest clothing exporter, has accused the U.S. and EU of abusing trade protection measures by imposing limits on its textile exports and has said it may complain to the World Trade Organization.

  2. “Please note: I am *not* anti Chinese,”
    An ex-prime minister of Australia once said that one can guess the end of a sentence if it starts with “I’m not a racist, but..”.

  3. “I’m not a racist, but..”.

    Yep, I see your point, but in my case I am genuinely happy that the Chinese are having economic success, and I expect them to defend their corner as best they can. Which is why, with all the confusion we had yesterday, we in the EU are going to have problems: we’re not clear what our objectives are.

  4. One of the reason of the low cost of Chinese product is that they pay less taxes, if I’m not wrong. Would it not be good in order to equalize development around the country to set taxes to product that go out, as long as they don’t cancel competitivity? After all the endprice in Spain of textiles had gone up all the while the importation from China were growing, who get the difference?

    DSW

  5. The Chinese are practically asking for the French to become even more protectionist, and for them to drag the EU along with them. Bad timing on their part, frankly.

  6. ok

    They want to play, now we must stop with the ridiculous open free-market (there is too much heterogeneity between european countries and china) and use “european preferences” to protect our industry (mostly we sell them planes and other stuff at lost)

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