Increasing friction between China and the US

Source: Asia Times: Multinationals fear US-China trade wars

International trade between China and the US has been upset recently by Chinese product recalls in the US. China and the US have been retaliating against each other by rejecting the other country’s goods and filing complaints against each other with the World Trade Organization. For example, since 2006, the US has filed four complaints against China with the WTO. In September, China initiated its first complaint in five years against the US with the WTO. Furthermore, in response to the Chinese product recalls in the US, China has rejected US-made product shipments for quality deficiencies, citing bacterial infections in food products and high levels of toxicity in children’s products.

The US Congress is now getting involved. Senators Clinton and Obama are co-sponsoring legislation that would levy punitive duties on Chinese goods. However, large multinational companies, such as Boeing, Citigroup, Microsoft, and General Motors, are worried about such legislation, believing that “imposing unfair barriers to trade in the name of currency valuation or product safety is not a solution to the underlying concerns.” These companies want Congress to reject protectionist legislation against China. US Treasury Secretary Henry Paulson also agrees, fearing unilateral action aimed at another nation may have large repercussions on the US’s economic well-being.

Trade barriers can greatly affect the economy. One report states that about 30% of a sample of 2,500 Chinese exporters suffered economic losses. The companies lost $35.9 billion, in contrast to $28.8 billion in 2005.

Discussion Questions:
1. Is product safety an expected by-product of economic globalization and therefore a manageable concern through between-country trade agreements, or is it a means for some countries, like China, to take advantage of weak trade oversight?
2. Is legislation the best way to control trade issues between countries?