US tire tariffs shortsighted and unwise

• Source: Global Times
• [07:48 September 08 2009]
• Comments

GT: As economic and trade experts, what are your suggestions to Chinese enterprises to deal with the tariff and tighter protectionism when exporting to the US?

Spence: First, export markets and opportunities will continue to be available and attractive to Chinese enterprises. The headwinds, if I can put it that way, in the short and medium run are likely to be slower growth and higher savings in the US and generally slower growth in the advanced countries.

Also the Chinese yuan is likely to resume the pattern of managed appreciation as the crisis abates, and this will bring increased pressure on margins and requires a focus on productivity offsets.

Structural change in the Chinese economy is well underway and I expect that Chinese enterprises will find it attractive to expand and adjust their product portfolios as the competitive conditions evolve.

In addition, expanding personal disposable income and consumption is likely to be a policy priority in China in the coming years. That will cause domestic opportunities to expand, in tradable and non-tradable goods and services sectors.

The economic growth in China seems to be coming back nicely. Chinese enterprises and the economy are dynamic and flexible, key positive attributes in a global economy that is evolving very rapidly.

Bosworth: It is a foolish case, but China did agree to the 401 provisions. It would be best to avoid dramatic surges of exports so as not to give a basis for these actions.

China should, however, vigorously protest such actions as a violation of US commitments to the G20 efforts to solve the current crisis, and China should consider taking it to the WTO for adjudication.

GT: What do you think of the China trade policies of the Obama administration?

Spence: The Obama administration entered office in the midst of a global financial and economic crisis. As part of the crisis response, many countries, including the US and China, have introduced what look like protectionist measures.

This is understandable as the government is using resources to limit damage to the domestic economic and financial systems.

The challenge will be to remove the protectionist measures once the crisis is passed. This will be a major responsibility of the G20. In this context it is hard to know yet what the Obama administration's post-crisis policies with respect to trade and financial openness will be.

My best guess is that they will adopt an open trading policy and be supportive of restoring the openness of the global economy.

Bosworth: They have not dealt with any major issues yet. I do like the effort to have a greater exchange of views.