U.S. President Barack Obama recently announced the creation of a Trade Enforcement Unit responsible for investigating unfair trade practices in his 2012 State of the Union address. Trade friction between China and the United States has intensified greatly in recent years, leading to frequent trade disputes.
Although trade relations between the worlds two largest economies have been tense since the time of the Bush administration, the United States had not created a trade enforcement agency directed at China until recently. What is the purpose of Obama’s creation of this Trade Enforcement Unit?
Mei Xinyu, an associate research fellow with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said that trade protectionism and re-industrialization are the two basic principles of Obamas re-election campaign this year. The creation of the Trade Enforcement Unit is obviously in line with the principle of protectionism.
In fact, both the trade protection and re-industrialization policies are aimed at increasing the United States domestic employments. The high salary and superior working environment of many U.S. industries have increased the cost and damaged the international competitiveness of these U.S. industries. Since China is rising, China is being regarded as a “scapegoat” by some U.S. politicians and this newly-risen “scapegoat” has turned into the target of the United States trade protectionism.
The United States targets China because of Chinas competitiveness
Gong Baihua, a professor from the School of Law under the Fudan University and the business director of the Shanghai WTO Affairs Consultation Center, said as Chinas total foreign trade volume is increasing, Chinas export enterprises will meet more trade barriers in the future.
In addition to traditional anti-dumping and anti-subsidy measures and the Transitional Products Specific Safeguard Mechanism and Special Safeguard Measures against China, the trade barriers faced by China will also diversify. For example, the accusation for infringing intellectual property rights, harsh technical standard, strict labor standard and picky environmental protection standard will all affect Chinas export enterprises.
Mei explained the reason for the increase of the trade disputes between China and the United States from a different angle. China has been the number one victim of global trade remedy policies for more than 20 years. In a sense, it actually means Chinas achievements are being recognized that the trade barriers against China are increasing. The United States targets China because of Chinas high competitiveness
Mei said the United States’ large capacity to import and a huge sales market gives it the right to speak. However, the U.S. sales is shrinking, while China’s increased capacity to import and huge domestic market are gradually transforming into the voice of China in international trade.
He believes that for a small country, losing one lawsuit in international trade could mean a deathblow to an industry; yet for a big country, an industry will not be easily brought down with one or two trade rulings.
Mei said that the U.S. trade protection virtually has a “screening” effect for Chinese enterprises: those winning over in the trade war have greater potential and more capable managers, and the investors should invest more in such enterprises. Compared with the careful protection of industries by the U.S. trade unions and industry associations, China’s industry associations also urgently need reforming.