China-US trade war unlikely

By Ding Qingfen (China Daily)
Updated: 2009-11-14 10:53

US Commerce Secretary Gary Locke (left) and China's Vice-Premier Wang Qishan shake hands before a delegation leaders meeting in Hangzhou on Oct 29. [Agencies]

Although trade friction between China and the United States will likely rise in the months ahead as the economic recovery of the US remains in limbo, there is little possibility that the two countries will become embroiled in a full-blown trade war, analysts said.

Since US President Barack Obama issued a special duty on tire imports from China in September, the first and largest, such maneuver of his administration, trade conflicts between two of the world's most important economies have sharpened and have spread to other areas, particularly in recent days.

On Nov 4, the US requested that the World Trade Organization (WTO) establish a dispute settlement panel to rule on China's restraints on exports of raw materials, which the Chinese government insists is consistent with WTO rules.

That same day, the US Commerce Department slapped preliminary anti-dumping duties on Chinese steel pipe worth $2.6 billion. The move came after preliminary anti-subsidy duties were put on the pipe, which is used in oil and gas lines, in September.

On Nov 5 the US International Trade Commission approved another two probes of imports from China: glossy magazine-quality paper and certain salts.

The new levies were approved about one week ahead of Obama's trip to Asia. The trip includes a four-day visit to China, starting Sunday. China is regarded as one of his most important destinations during the trip.

"As the unemployment rate is expected to remain high next year, the US will initiate more trade protectionist cases or/and measures against China," said He Weiwen, a senior expert on WTO and China-US trade relations.

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"China, undoubtedly, is and will remain the major target of the US, and scapegoat of the low recruitment rate and sluggish economy, although the nation should not have been so," said He.

Despite news that the US economy has posted positive growth during the third quarter of this year, the world's largest economy is still hamstrung by high unemployment.

According to the US Department of Labor, the country's unemployment rate surged to 10.2 percent in October, the highest since 1983 and much higher than had been expected. Most economists predict the job situation will remain grim through 2010. Even Obama has conceded that more Americans will lose their jobs, even as the worst may be over for the economy as a whole.

Obama is under great pressure from labor unions, particularly the United Steelworkers, the prime initiator of the recent trade remedy cases against China, including the special guarantee tire case and the steel pipe duties.

"Unions have given Obama nice support during the presidential election, and therefore are winning his promise of returning the favor," said Zhang Yuqing, a panelist on the WTO Dispute Settlement Body.

The healthcare reform package Obama has been pushing forward to expand medical treatment to most Americans also needs the support of unions, Zhang added.

The US House of Representatives recently narrowly endorsed healthcare reform legislation, the largest in decades. The Senate, however, has shown signs of balking at the $1 trillion bill.

No trade war

However few believe a trade war of any kind will break out.

"There is neither sign nor reason that China and the US will turn the conflicts into a war. It's not good for either party," He said.

It is estimated that trade remedy cases, as of late last year, only account for 5 percent of the China-US trade by volume.

"They are a minimal part of bilateral trade and happened in a special period. Cases will decrease when the US economy turns good," he said.

Most observers believe the US will not launch additional trade remedy cases for fear of antagonizing China.

Obama said recently that the US sees China as a vital partner and competitor, but the two countries must address economic imbalances or risk enormous strains on their relationship.

And US Secretary of Commerce Gary Locke also said during the China-US Joint Commission on Commerce and Trade held in Hangzhou in late October that both countries should avoid trade protectionist measures against each other. Both would be losers if trade conflicts escalate into a trade war.

Experts suggested that China actively resort to the WTO rules for protecting industries from being hurt by the US and launch trade remedy investigations of its own against the US.

After the extra tire duties were enacted, China announced it would launch investigations into two categories of imports from the US - of broiled chicken and certain types of automobiles.

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