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Ranabir Ray Choudhury

Whether the differences between the world's biggest and fifth biggest trading nation will affect the thawing Sino-American trade ties in the immediate future is still uncertain, but the fact remains that it could lead to hiccups on the international trade front which, among other things, can scupper for some more time the efforts to get the stalled WTO negotiations moving.

ALTHOUGH conventional wisdom has it that the current trade problems between Washington and Beijing will not get out of control, the summoning for the second time in two days of the US Ambassador by the Chinese authorities to complain about the US decision to slap quotas on select Chinese textile exports is indication enough that the dispute is rather serious.

Whether it will adversely affect in the immediate future the thawing Sino-American trade ties is still uncertain, but the fact remains that the differences between the world's biggest and fifth biggest trading nation could lead to hiccups on the international trade front which, among other things, could scupper for some more time the efforts to get the stalled WTO negotiations moving.

In fact, even before the fire resulting from the US textile import restrictions can be doused, a second US measure has been taken which cannot be music to Beijing's ears.

On Friday, the US International Trade Commission decided to allow anti-dumping duties on Chinese iron pipe-fittings after studying the subject for a year.

The specific case at issue was that two small US firms — Ward Manufacturing of Blossburg, Pennsylvania, and Anvil International, Inc., of Portsmouth, New Hampshire — had complained that their operations were being hurt by China's sales of pipe-fittings at below-market prices.

In particular, it was claimed that at retail prices 50 per cent lower than US-produced beds, dressers and nightstands, Chinese exports had grown to an estimated $1.2 billion this year against about $400 million in 2000.

To take one example, the head of Bassett Furniture Industries said his company's sales to retailer J. C. Penney had fallen to an estimated $4 million this year from $26 million in 2000 "because of cheap Chinese imports".

There is, of course, hardly any comparison between Chinese pipe-fittings exports to the US and textiles and apparel exports — while the former totals just about $20 million in a year, the latter is worth around $11 billion. Even so, the timing of the ITC award could turn out to be more than just another pinprick, especially for Beijing which, on the surface at least, is in no mood to let Washington off the hook for the new restrictions slapped on its textile products exports.

In fact, even on the lowly furniture front, a battle royal appears to be looming on the horizon.

Last Friday, ITC investigators were reportedly probing China's rapidly growing shipments of wooden bedroom furniture, US manufacturers claiming that unless stiff anti-dumping duties were imposed on them their business would suffer grievously.

According to reports, a preliminary finding of the ITC on whether US companies are being harmed by Chinese furniture exports is expected to be made public in the second half of December, "around the time the Commerce Department makes a preliminary decision on possible anti-dumping duties against China" on the issue of pipe-fittings.

To revert to the textiles export dispute, the action that sparked it off came on November 16 when the US Administration invoked the special "safeguard" clauses in its trade agreements with China to impose quotas that would have the effect of sharply reducing that country's rapidly growing exports of knit fabrics and a handful of other products.

Admittedly, this is a step which will affect only a "sliver" of China's exports to the US, but the point of concern is that there is a concerted move among US textile interests to widen the scope of the import duties to cover nearly all of the roughly $11 billion worth of imports of Chinese clothing and fabric items.

As Auggie Tantillo, the Washington coordinator for the American Manufacturing Trade Action Coalition, has declared: "We have 12 months between now and when our elected officials go and face the people.

"If we are going to get relief, we're going to have to get it in the next 12 months". US textile companies say that they have been forced to cut 316,000 jobs over the past three years for which they put the major share of the blame on the invasion of cheap Chinese imports.

The silver lining is that the step-up in Chinese textile product imports has helped the US consumer who, though forming a strictly non-commercial lobby, cannot be taken for granted by the US establishment.

Not surprisingly, reports suggest that the US Administration has "staunchly opposed Congressional proposals to impose sweeping new tariffs on Chinese imports, in part because they have brought lower prices to consumers and in part because trade restrictions have a chilling effect on investor confidence". In fact, according to a report in The New York Times, news of the decision to impose tariffs on Chinese textile imports sent the dollar to a near-record low against the euro and down vis-à-vis the yen as well.

The Administration's stand is that the Chinese producers have not broken any rules. Instead, it has invoked "safeguard" provisions which Beijing agreed to as a condition for admission to the WTO in 2001. Among other things, these allow the US to limit the growth of Chinese textile imports to 7.5 per cent a year if the imports are found to be "disruptive" to US producers.

The categories of goods targeted by the import duties have all grown by much more than the permissible limit, in fact by double-digit multiples.

Shifting to a larger canvas — that is, one where the ongoing textile dispute forms a small part — in recent weeks, the US authorities have been discussing with their Chinese counterparts at the official level aspects of their trade relations which Washington feels need corrective action on the part of Beijing.

In late October, the US Commerce Secretary, Mr Don Evans, was in Beijing holding talks with the senior leadership on how to prevent a slide in trade ties between the two countries. Among other things, Mr Evans made it clear that Chinese trade practices were "creating an unfair advantage that is undercutting American workers".

One specific charge is that the Chinese currency was being deliberately undervalued in an attempt to boost Chinese exports to the US. In fact, US officials, manufacturers and some members of the Congress have seen the undervalued Chinese currency as the main reason behind the record US trade deficit last year ($103 billion) in trade with China, and also for the growing unemployment in the US (a trend which appears to have been stemmed now).

Mr Evans' visit closely follows one by the US Trade Representative, Mr Robert Zoellick, who too has warned Beijing that its access to US markets depended on "fair" two-way trade. Since the rules of fair international trade have been laid down by GATT 1994 and other multilateral agreements, it has been argued that instead of taking unilateral remedial action (an example being the import duties slapped on textile imports), Washington should take the matter to the WTO, specially now that China is a member of that body.

There is no doubt that Beijing will prefer such action in place of "cowboy" measures like unilateral punitive import tariffs which, everyone agrees, have the effect of taking back the international trade framework to the twenties and thirties of the last century, the denouement of which was the establishment of the Bretton Woods agencies like the IMF and the World Bank, not to speak of the drawing up of GATT itself in 1948.

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