US protectionism hard obstacle to tackle

By Cui Weijie Source:Global Times Published: 2013-5-12 21:08:01

In late March, US President Barack Obama signed a bill that restricts parts of the federal government, including NASA and the Justice and Commerce Departments, from purchasing information technology systems produced by entities associated with the Chinese government.

Although the passage of the bill has no direct impact on the business of some Chinese enterprises in the US, it poses a real threat to the future development of these Chinese enterprises in this country.

It stigmatizes these enterprises and wrongly classifies them as "threatening cyber security." This may lead some other countries to follow the US' acts, which will have a huge negative impact to Chinese enterprises amid their overseas growth.

The bill, the same as a report last year accusing Huawei and ZTE of posing security threats and the Pentagon's charges of the Chinese military's cyber espionage this March, comes out of nothing and presumes guilt.

It shows the US, the strongest power in the world, adheres to unilateralism. The bill not only seriously violates the principle of nondiscrimination of the WTO, but also tramples the fair trade principle promoted by the WTO.

In the future, with China's international status rising, the "China economic threat" theory will be used in various circumstances, and restrictive measures in trade and investment will be carried out by the US.

Currently, the world is undergoing a new era of technological revolution. In some strategic emerging industries that China is vigorously developing, China and the US have formed a competitive relationship. The US will apply its tricks to these strategic emerging industries due to its unbalanced mentality, the interests of different groups, or the "presumption of guilt."

To maintain the legal rights of Chinese enterprises, China must take measures against the US acts. One can be to appeal to the WTO dispute settlement mechanism. The bill obviously violates the WTO principles of nondiscrimination and fair trade. If China makes a successful appeal, it can protect these Chinese enterprises. Even if it fails, it can put pressure on the US government and companies.

As China learns to make use of the WTO regulations, the restrictive measures and trade frictions that stem from the presumption of guilt will be reduced.

However, it's worth noting that the appeal process can be tediously long. When China demands negotiations, will the US agree on that? And will the negotiations yield any results? If not, China can request the forming of an expert team which will carry out initial rulings, re-rulings and the final ruling.

If the result is positive, and the US amends its law according to WTO regulations, it needs to undergo another round of legal procedures, such as voting by the House and the Senate and then the signature of the US president.

If this process is not smooth, there will be no substantial results within a fairly long period of time, while the US aim to set obstacles in China's path will have been reached. 

Take the US banning of China's poultry imports in 2007. It was only in July 2009 that the WTO established an expert team and took until September 2010 for the panel to declare China's victory in the appeal. The whole process took over three years, and the US had already managed to ban the imports.

So besides appealing to the WTO, the government should also extend its determinations to protect the interests of Chinese enterprises. Several proposals should be prepared. For example, China can investigate cyber security issues of US companies in China and their imported goods, and take strong measures in response to the US.

The author is associate research fellow at the Institute of Industry Development and Strategy of the Chinese Academy of International Trade and Economic Cooperation.

Posted in: Viewpoint

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