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On U.S.-China Trade Conflicts

On U.S.-China Trade Conflicts.

The Drunk Man’s Mind Is Not on Textiles

[Editor’s note: This is a translation from an article published on, a website of the Chinese government official news agency, on June 2, 2005]

After China announced the removal of export duties for 81 types of textiles, European Union reacted strongly. On May 30, European Union Executive Committee expressed firm opposition to massive imports of Chinese textiles. On May 31, European Union delegation to China stated that they hoped China would voluntarily limit its export within 15 days. Otherwise European Union may unilaterally impose limits on imports from China.

It appears that a textile trade war between China and the United States/Europe is inevitable. China will not fear a trade war if it is indeed inevitable. In order to reduce conflicts caused by integration of the textile industry, China has twice voluntarily raised duties on textile exports. China has fulfilled its responsibilities as a sovereign state. However, the United States and Europe have disregarded China’s efforts. Instead they view China’s efforts as a sign of weakness and hopes China will accept "the treaty signed under coercion." Therefore, we must have the courage to "come face to face with adversaries" as we have no other choice.

On one hand, we must be prepared for the worst, which is to fight a trade war with the United States and Europe. On the other hand, we need to clarify why they would throw away their idealism of free trade when it comes to China textiles. This would help us observe clearheaded the international trade and understand China situation.
The author believes we can look at it at two different levels. On the textiles issue, the United States and Europe myopically view China as the shortsighted "scapegoat." The global elimination of textile trade quota has been proposed over 10 years ago. The U.S./European manufacturers and governments should have foreseen the changes in global textile market and taken appropriate measures. However, many U.S./European manufacturers and governments have ignored this issue. This is reflected in their last-minute cancellation of trade quota. In other words, the failure on the part of U.S./European governments and manufacturers to take appropriate measures is the major cause of unemployment in their textiles industries. Yet they put the blame on the massive influx of low-priced quality Chinese merchandise, misdirecting the workers’ dissatisfaction with manufacturers and governments toward China textiles. The United States and Europe have been exercising this "scapegoat" technique for the past two centuries and with much success.

However, there is another unspoken reason for the United States/Europe insisting on trade quota for China textiles, which is to delay the rise of China. The U.S./Europe governments are well aware that the rise of China is inevitable. With this in mind, the best strategy would be to slow down the process of China rising so as to reap as much benefits as possible. The textile industry simply happens to be a breakthrough that the United States/Europe finds may delay China rising to power.
Yet another breach is the issue of Chinese currency exchange rate. Although the textile industry is a dying industry in the West, it is an important industry for China. Textile exports account for 16 percent of total exports. More importantly, the Chinese textile industry is a labor-intensive industry, directly employing 19 million workers. Taking into consideration workers of related professions, the industry affects the interests of more than 100 million employees. The quota imposed by the United States on seven classifications of textiles has already cost China US$ 2 billion of exports and 160,000 jobs. European Union quota will also affect more than US$ 300 million of exports and a corresponding number of jobs.

Providing jobs for the huge population will continue to be one of the most important tasks facing China for a long time. The textile industry is a major channel for redirecting rural labor. Therefore imposing quotas on China textiles is in fact no different from stirring up social conflicts.

In this regard, the United States/Europe are indeed quite "forward-looking." In order to get China into the United States/Europe controlled international free trade system, they have proposed harsher conditions for China joining the World Trade Organization: (1) China is not considered a free economy for anti-dumping law; (2) There are special safeguard provisions for China exports; (3) China’s promise will be examined each year for 15 years after China joins the WTO.

Therefore, in order to guard against the rise of China and its influence on the present international trade system and international power balance, the United States and Europe have taken deliberate measures. Only with this broad background can we understand the United States/European unusual measures that are "harmful to others yet not beneficial to themselves." In an opportunistic market the best strategy for dealing with big clubs is to strike back with big clubs. Of course, this strategy is based on self-confidence.

U.S. Administration and Congress Act Together to Create Trade Friction and Pressure China

[Editor’s note: This is a translation from an article published on, a website of the Chinese government official news agency, on June 5, 2005]

Recently the U.S. government made several moves in trade relations with China, causing frictions between China and the United States and concerns among the international community. These activities also cast a shadow on the bilateral relationship between the two countries. First, the U.S. Senate passed a legislative amendment about Chinese RMB exchange rate, demanding that Chinese RMB appreciate or the United States will impose 7.5 percent import duty on all Chinese imports. Then the House of Representatives passed a "Chinese Currency Bill" which asks the Bush Administration to investigate and determine if the Chinese government "manipulated the exchange rate." Also, the Commerce Department announced special restriction on seven textile imports. Using trade as a stick, the Bush Administration and the Congress are acting together to attack China.
It’s clear to seasoned observers that the ever-increasing trade imbalance between China and the United States is the result of the difference in economic systems. The root cause is not China. Even a huge appreciation of RMB will not solve the problem. In addition, the bilateral trade is mutually beneficial; large amount of "Made-in-China" in the U.S. market brings benefits the U.S. consumers. The trade has brought business opportunities to importers and retailers. It also helps to curb inflation. Further the U.S. government’s behavior hurts its image: the United States that has always advocated free trade is now promoting protectionism. Can we say that the United States is applying double standards on international trade? Also, RMB exchange rate is China’s internal affair. The United States has gone too far trying to tell what China should do. In fact, it’s a mistake to assume that the U.S. government and its think tanks are too naïve to know all these. But why did the U.S. government insist on pushing the wrong buttons? The United States did this on purpose to serve a hidden agenda. They are talking about trade issues, but thinking something else. In fact, the United States is playing a poker game using trade as one of the cards.

The sequence of the performance by the Administration/Congress was that the Congress came on stage and acted first, followed by the Bush Administration. From this, the White House was probably making the move in response to the pressure from the Congress. On one hand, the U.S. foreign policy making was always influenced by the power struggles between the While House and the Congress. The Congress has now gained an upper hand and the White House is playing defense. It is because a second term president will always have the lame duck problem. On the other hand, the episode reflected some Congress members’ dissatisfaction with the China-U.S. trade relations. These members want to express the views of the interests of the groups they represent—the mid-term election is only a year away. To these Congress members, votes are their political lifeline. Interestingly, many members of the Congress abandoned their partisan fights and came together. The Democrats represent the union; they claim that they will defend workers’ interests. The Republicans are loudly supporting the businesses. They came from different backgrounds, but now have reached the same conclusion. They formed an alliance against China.

One might ask, aren’t these members of Congress "seasoned observers" as we mentioned earlier? Objectively, some Congress members are indeed not that clear about the issue; they tend to focus on issues related to their home districts; they don’t know much about international issues and foreign affairs; they tend to not care either. So when they are asked to make a decision on international affairs, they became biased and failed to see the big picture. On the other hand, many members of Congress are indeed "seasoned observers" who know all the facts and understand the consequences. They took their position for their own interests and joined the crowd to cheer each other. In addition, some Congress members are very conservative. They hold on to their cold war ideology and their views on China are based on stereotypes. They just don’t like China no matter what. These people have many sticks ready at their disposal, such as human rights, democracy, military buildups, trade, and etc. People of this group are few in number and isolated. Usually they don’t dare to lead an assault without popular support, lest they tarnish their images and lose votes. Right now, they are more than happy to join the "Anti-China" crowd, wagging the stick of trade to make noises. There are yet others who were influenced by the traditional power politics. They don’t want to see the rise of China. In their thinking, a stronger China would be strategic competitor of the United States. They would do anything to curb China’s development and delay China’s eventual rise. Trade disputes are one important weapon to hit the target.
Actually, some Congress members and the Administration, especially those in the White House inner circle, shared the last two kinds of ideology. Right now, the new and old conservatives who are major influence to Bush Administration somehow share the "Contain China" mentality based on different motivations. The new conservatives want to promote democracy. They just cannot tolerate a China under Communist Party walking on a socialist road. The old conservatives base their policy on geo-political consideration. They believe that China after rising to the power will challenge the superpower status of the United States, even endangering U.S.’s national security. These two policies came to the same conclusion: Contain China’s development. They never forget about "containing" China while working on the overall bilateral cooperation. When they see China’s rapid economic development and its rising comprehensive strength, they have a sickening worry. But to their dismay, the global anti-terrorism campaign is not over, the United States cannot afford to "offend" China. Therefore, they resort to play some sneaky tricks that would not jeopardize the overall China U.S. cooperation. For example, they pressure EU from selling weapons to China, and have added Taiwan’s security as a common "strategic goal" in the U.S.-Japan alliance and etc. Now when the Congress is looking for excuses to blame China, the new and old conservatives are ready to go along. On one hand, they can defend themselves when explaining to China. On the other hand, they can also get back to the American people and the international community. They can innocently say: we have to do it because of the high pressure from Congress. The White House and Congress are supposed to be opponents. But in reality, they are more like friends who complement each other like actors playing different roles in the drama. In the old days, when the U.S. Congress passed the "Taiwan Relations Act," President Carter signed it right away—he never considered to veto. The truth was the Congress and the White House shared the same view all along except out of diplomatic consideration, it was better for the Congress to lead. Similarly, the current frictions in trade relations are just another such act in a drama.

U.S. Commerce Secretary Was Sweating Buckets While Questioned by Qinghua University Students on The Textile Export Quotas

[Editor’s note: This is a translation from an article published on, a website of the Chinese government official news agency, on June 3, 2005]

On the first day of his visit to China, U.S. Commerce Secretary Gutierrez was under "waves of bombardments" by students on the "issues of textile trade between China and U.S." at Tsinghua University. He was constantly wiping off sweat and finally left the conference hastily amid the questions.
Gutierrez gave a speech at Tsinghua University yesterday in the afternoon and discussed with 60 Tsinghua students. Although his acts paid much respect for Tsinghua students, students apparently took advantage of him and peppered him, the guest from far away, with questions. Gutierrez started to wipe off sweat after 15 minutes. He did it again after 30 minutes and again after 45 minutes. One hour into the discussion at around 4 pm, he broke students’ questioning and ended the trip to Tsinghua in a hurry.

Compared to his hard-line position toward China prior to the China visit, Gutierrez’s attitude has become much soft while making the speech. He emphasized that the U.S. government hoped to continuously improve trade relations with China. Since China is playing a more prominent role in the world, the United States hoped to solve the problem of the textile dispute between China and the United States through negotiations.

He also said, however, the quota on the import and export of textile products after one’s market opened is well regulated in the world trade rules and the measure that the United States adopted to comply with those rules. Now it is necessary for both countries to have a common understanding of the rules. Accordingly, the main purpose for his trip to China was to explain these rules to officials from China’s Ministry of Commerce. But maybe he "forgot" that, in accordance with WTO rules, the United States should carry on a 90 days negotiation with China after its investigation of special safeguards on China’s textile products. However, it was less than half a month from its launching the investigation to imposing the quota.

China’s Ministry of Commerce did not respond to Gutierrez’s statement yesterday. Earlier China’s Ministry of Commerce strongly protested against the quota unreasonably imposed by the United States and requested the United States to correct its mistake as soon as possible.

Gutierrez Took a Hard Line-Issues of Intellectual Property Rights Are Non-Negotiable

Yesterday morning, while giving a speech to the Chinese American Chamber of Commerce, Gutierrez emphasized that the issues of intellectual property rights could not be solved by negotiations and Chinese government has to adopt effective measures to protect intellectual property rights.

He stated as the result of piracy activities in China United States has lost tens of billions of U.S. dollars. Chinese government must promulgate tough measures to crack down on the piracy and counterfeit. Gutierrez added the United States refused to put both issues of textile products and intellectual property on the same negotiating table. China and the United States may discuss the dispute of textile product, but the intellectual property issue is non-negotiable. Since the former is the problem of contract, but the latter is a crime, which cannot be treated as the same.
As to Gutierrez’s opinion above, Xu Guowen, Director of An Pu Da Intellectual Property Representative Company in Beijing, commented: "The issue of intellectual property is a worldwide problem, which should not be as emotional as what Americans have criticized. China has paid attention to the issue of intellectual property. Recently, Chinese government has taken a lot of efforts to protect intellectual property. Along with the further globalization of economy, the problems with intellectual property will increase because enterprises in each country apply patents in their own countries and bring the patents to other countries, which often times would cause conflicts. Therefore, to unilaterally blame Chinese enterprises is obviously not fair. The American government always takes the intellectual property as an issue, which in fact is a kind of tactic. Its purpose is to increase its advantages in the trade negotiation."