Import power represents an economic weapon

By Mei Xinyu Source:Global Times Published: 2017/12/7 22:38:40

Illustration: Peter C. Espina/GT

Import capacity is power. In 2010, when I witnessed then 52-year-old Toyota CEO Akio Toyoda being queried over Toyota's quality scandal in the US House of Representatives, I drew this conclusion.

As one of the most influential enterprise leaders in Japan, why did he have to admit fault with his head bowed down in front of the US Congress, and why was the US able to do so? The answer is the import capacity of the US.

As the US is the largest single-country market in the world and possesses almost unlimited import capacity under the current international monetary system, Toyoda had to endure a humiliating hearing in order to keep this huge auto market, which was of crucial importance to the future of the enterprise. As for the US, since there are countless foreign companies with subsidiaries or property in the US that can be used to execute judgments, it is not very difficult to impose US jurisdiction over foreign companies and their executives.

Seven years after Toyota's quality turmoil, China has grown to be one of the largest importers in the world and a rapidly emerging outbound tourist country as well as a large foreign direct investment country. At least in theory, it already possesses unprecedented economic and trade influence on other countries.

Since China will remain the No.1 victim of international trade protectionism in the foreseeable future, how can we make good use of our economic and trade influence to create a better environment for our people and our industries?

First, our foremost task should be to help the domestic communities of our trading partners recognize the economic and trade clout of China and regard it as a development opportunity rather than a threat. After all, our goal is to resolve trade friction and our expected result is further development. To this end, we need to communicate consistently and in many ways by using culture, educational output and personnel exchanges to gain popularity among our trading partners.

In the light of our reality, we should, particularly in terms of all sorts of personnel exchanges, make every effort not to give super-national treatment to foreigners coming to China, whether they are businessmen or students. Excessive privilege can only give rise to disdain but not respect, which would be contrary to our original intention.

When we educate our trading partners to value "China's opportunities," we need to make full use of the effects of economic changes. As the world's largest importer of primary products, resource populism in exporting countries has troubled our enterprises and government.

In regard to this issue, we cannot simply promote mutual friendship. We should rather let our trading partners realize that they may pay a price for their resource populism.

Second, we can open up alternative sources of imports of both goods and services. Finding alternatives in advanced manufacturing and the high-end modern services industry can effectively eliminate the moral hazards of irrational domestic forces in our trading partners.

As to the diversification of import sources, our trading partners need to recognize that trading with many small importers may mean the sacrifice of import diversification. But for big importing countries like China, scale and diversification can be attained simultaneously.

We have to understand that a friendly attitude on one side can't completely avert friction and even fierce disputes with others. Accordingly, sanctions have become the last resort for us to achieve economic and trade influence. We need to consider how to minimize the disruption to our own economy and maximize damage to that of the target. Our priority should be placed on imported primary commodities like raw materials and energy, final consumer goods and consumer services like tourism and films.

In term of intermediate products that are part of the global industrial chain, interference should be avoided. For those export and manufacturing enterprises that have invested in China, efforts can be made to ensure their security and normal production.

All the above steps will ensure China's reputation as the country with the best environment for investment and manufacturing.

In considering the use of our economic and trade influence as a last resort, we should strive to avoid abuse and avoid the unnecessary humiliation of others. From an objective standpoint, the 2010 Toyota hearing in the US House of Representatives was improper. The insolence displayed by US consumer representatives and lawmakers excessively humiliated that man and even wounded millions of Japanese hearts.

In the long run, this approach will not benefit the US or even the interests of legislators and consumers. We need to learn from such cases.

The author is a research fellow with the Chinese Academy of International Trade and Economic Cooperation.


blog comments powered by Disqus