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Tires drive wedge between China, U.S.
A dealer sits behind tires displayed at a tire shop in Beijing, China.
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Editor's Note: The original script has been edited to make clear the meaning of Professor Zhu Layne's comment on trade-war talk between China and the United States, "If you break my house, I'm going to break your house." She was describing the tone of the public dialogue. She does not advocate protectionist measures.
TEXT OF STORY
Kai Ryssdal: Anytime the White House releases information at 9:15 on a Friday night, it's a pretty safe bet they'd just as soon nobody noticed. Unfortunately for the Obama administration, no such luck. The White House said Friday it's raising import duties on Chinese tires: 35 percent for the first of three years worth of higher tarrifs.
Them's fighting words in the world of international trade. And Marketplace's Scott Tong reports from Shanghai, the Chinese government was working overtime on its response this weekend.
SCOTT TONG: China calls the U.S. tariffs "grave protectionism." And in addition to challenging Washington at the WTO, it's exploring duties against American goods.
But it's not just what Beijing is saying and doing, it's the speed of the reaction. The news from Washington came late Friday night; Beijing responded Sunday.
Lester Ross is with the law firm Wilmer Hale in Beijing.
LESTER Ross: It says it was well prepared well in advance. And intended to deliver a very strong message. Because Chinese bureaucracies, like those elsewhere in the world, generally don't operate on the weekend.
In apparent retaliation, Beijing singled out the U.S. auto sector, which is highly visible. And American poultry, which is highly lucrative.
Chinese restaurants pay big money for fresh chicken feet shipped in from the States. And then there's the business of China holding a trillion dollars of American debt.
Wu Xinbo is with Fudan University in Shanghai.
Wu Xinbo: So, if you want China to cooperate on a financial front, not a good time to launch a possible trade war with China.
Wu says Beijing has to talk tough. China fears other American industries, like textile makers, could also go to Washington and ask for trade protection.
But not everyone thinks China wants an actual trade war, since exports are key to its economy.
Publicly, though, the message is vitriolic. International trade professor Zhu Lanye describes the environment.
Zhu Lanye: If you break my house, I'm going to break your house.
Trade war or not, the key players will confront each other in Pittsburgh next week. President Hu Jintao meets President Obama at the G20 summit.
In Shanghai, I'm Scott Tong for Marketplace.
"You break my house I break your house", what century is the Chinese mind in? I've heard a lot over the $1trillion in Sino-owned US treasury bonds. We just bought off our banks for far more than that. If we do wish to play the 1900 game I suspect it wouldn't take much to devalue the bonds and then pay them off. Let's see which house is really made of cards, shall we? If we wish to turn our tariff into a general embargo, who will hurt most? Aside from Wal-Mart I suspect this country can endure. I suspect with a large unemployed but highly productive work force it wouldn’t take long to replace the absence of the Chinese worker in our daily life, though at slightly higher cost but with a beneficial impact on our general quality of life. Besides, the Chinese get their cheap labor increasingly from India what would prohibit us from going directly to the source? Frankly we’d perhaps be better off for it.
Maybe China’s swift reaction to Obama’s decision is an indirect response to the country’s loss in the recent dispute with the U.S., EU and Canada over levying a higher tariff on imported parts and components that exhibit “CBU (Completely-Built-Unit) characteristics.†China is forced to give up such a regulation and agree to a 10 percent tariff on all imported parts and components instead of 25 percent according to its commitment when it resumed its WTO membership.
Who knows it's a win-win or lose-lose case. Anyway, trade war does no good to anybody. But it will never trigger any sanctions from Chinese side. personally "Sanction" is a too big word. The irony, i found, is that China seems to be intimately aware of the U.S. Chicken Tax, a protectionist trade war with Europe that began in 1963 which involves U.S. poultry into Europe and European trucks into the U.S. But the quick response of Chinese gov't on the weekend is really surprising.Anyway, good luck to both economic powers!
One huge gap Kai. Why did the US raise 35% tariffs?
For that answer, you will have to look elsewhere...perhaps even reuters.
http://www.reuters.com/article/topNews/idUSTRE58E1CB20090915?feedType=RS...
The tire duty was the first time Washington has applied special "safeguard" provisions Beijing agreed to before joining the World Trade Organization in 2001.
Safeguards can be invoked if a surge in imports is found to have hurt U.S. manufacturers. Once invoked on a product, they can be applied by other countries.
Looks like Chinese bureaucracies are not the only ones that generally don't operate on the weekend.
