How China and the U.S. Handle WTO Complaints

The way China and the United States handle WTO complaints differs. We allow the complaints to drag through adjudication for years. We in the U.S. will even win a WTO decision, but then simply wait while China does nothing, as in the case of China's excessive tariffs on foreign auto parts.

China has a different method for handling WTO complaints. At the same time that she files the complaint, she takes an action against American products that is way out of proportion, forcing America to cave.

Last week, at the same time that China filed a WTO complaint against an American ban on her cooked-chicken products, she completely cut off further issuance of licenses to import American chicken (13% of all of our exported chicken). Here is the story from Kim Souza in The Morning News:

SPRINGDALE — Despite news reports from China that U.S. chicken imports will continue as normal, the country has put a de facto import ban in place, said Farha Aslam, industry analyst with Stephens Inc....

News that Chinese importers of U.S. chicken were not able to get permits for importing American poultry products Thursday was a reversal of prior actions, as China's Ministry of Commerce refuted the ban claims just two days ago...

The Chinese government filed a complaint against the U.S. with the World Trade Organization saying that U.S. congressional actions to limit Chinese poultry from coming into the U.S. were unfair, malicious and violate global trade rules.

China is practicing protectionism through a variety of means including tariffs, a dollar-yuan peg to keep American products expensive and Chinese products inexpensive, and various non-tariff barriers including import licenses. In 2008, China imported just 25¢ from the United States for every $1 we imported from her.

She is so effective with non-tariff barriers to foreign products that, according to the World Bank, her imports are expected to decrease this year even while her economy grows at a 7.2% clip.

Throughout this Great Recession, she has been steadily hiking her export subsidies, just raising subsidies on textiles, for example, from 15% to 16%. She is insuring that Chinese businesses can produce below cost so that they can steal market share by driving their foreign competitors bankrupt.

In response, the only thing that President Obama has done is file a WTO complaint that China will ignore. If we had a competent government, it would do what we suggest in Trading Away Our Future:

We would announce to all the countries that have been accumulating dollar reserves in order to run a trade deficit with the United States, that effective the following year their deficit on goods and services would have to be reduced twenty percent. They may respond to this challenge by planning to increase their imports from us, reduce their exports to us, or some combination of both. Failure to meet this annual goal would result in our imposition of a requirement that all imports from the offending country would require an Import Certificate (IC) purchased from the US Treasury Department or other designated agency of the federal government. (The US Treasury Department has experience in auctioning off its own obligations; much the same process would be involved in auctioning off import certificates.)

Prospective importers from countries that fail to reduce their deficits in timely fashion would have to apply for an IC and follow the Treasury’s instructions. Over a period of five years, the US Treasury Department would steadily reduce the amount of available import certificates so that the targeted country’s trade exports to the United States would be no higher than 5% above their imports from the United States. The Treasury would publish the amount of ICs issued and available and the date of each auction. Each certificate would have to be utilized within a specified period. (pp. 95-96)

The Richman plan would force China to take down her barriers to American products and stop dumping her products below cost in American markets. President Obama's WTO complaints will drag on for years through the WTO adjudication process while China steals our remaining industries.

Disclosure: No positions.

Comments

[athena:]

We dont have to resort to that . The dollar will fall and they will understand how stupid their plan was.

Jul 06 07:51 AM

[Ben Gee:]

Do you ever hear a winning team complain about the rules? If the rules are not fair, go change the rules. Or maybe try to play the game better. I do not buy to help the seller. Neither does any country. If people do not buy my stuff, either it is no good or too expensive. Trade is not fair when people are forced to buy or sell.

Jul 06 08:35 AM

[I am not a ...:]

In basic simple terms you are of course right ,it's a matter of cutting of ones hand to spite ones face.
But do not forget that USA has been guily of doing exactly the same sort of thing to one of it's strongest allies,Australia,when it imposed tarifs and restrrictions on things ranging from high quality uphoslstery leathers to Wheat ,when it attempted to muscle Australia of out the lucrative iraqi wheat market by informing on the Aust.Wheat boards Oil for wheat deal with Sadaam.
The world today is a big glass house and USA needs to remember that it should be careful when starting to throw stones.


On Jul 06 07:51 AM athena wrote:

> We dont have to resort to that . The dollar will fall and they will
> understand how stupid their plan was.

Jul 06 08:36 AM

[Prudent Man...:]

We are already economically comparatively non-competitive as we talk loudly without a stick.

Shove increased taxes and cap and trade on our producers and we are digging our own economic grave. Those politicians who want to be loved by the world are being laughed at for their unrealistic folly. We built industry in Germany and Japan after WWII while we let are own industry, through excessive corporate taxes and intractable labor unions, flounder. How many Japanese and German cars are in your neighborhood while GM is in bankruptcy?

Jul 06 09:30 AM

[Ferdinand E...:]

I've worked in Hong Kong, Singapore and more recently Thailand, and in those places I found it almost impossible to hold a conversation with a European or North American without getting the feeling that they wanted to see China and/or the Chinese penalized for their success.

I don't buy this sort of thing, nor do I buy the arguments in this article. The Chinese are merely playing to win, which - in case you have forgotten or never knew - was at one time thought of as the American way.

Jul 06 09:33 AM

[Tom E.:]

The US no longer has to sell free trade. We have always taken bad deals and looked the other way at bad behavior to keep globalization going. This has benefited US multinationals, but hurt US workers who have not had a place at the table in 30 years.

It is time to change.

Jul 06 10:10 AM

[User 357705:]

Precisely correct! On both points.

Further, I submit that Americans especially object to being on the receiving end of their own practices.


On Jul 06 09:33 AM Ferdinand E. Banks wrote:

> I've worked in Hong Kong, Singapore and more recently Thailand, and
> in those places I found it almost impossible to hold a conversation
> with a European or North American without getting the feeling that
> they wanted to see China and/or the Chinese penalized for their
> success.
>
> I don't buy this sort of thing, nor do I buy the arguments in this
> article. The Chinese are merely playing to win, which - in case
> you have forgotten or never knew - was at one time thought of as
> the American way.

Jul 06 10:58 AM

[Ben Gee:]

The Richman Plan is a plan for economic suicide. It will reduce trade by 50% with China that may not be so bad. It will reduce trade by a simular amount with oil producers. What is the US going to replace import oil with.
Did you hear the US is complaining China is NOT selling coke? Coke is made from coal, the US has coal coming out of its nose. China has to import some of the coal that go into coke from Australia. And the US is complaining China not selling its coke? Do making the coke in the US make sense? Why not? Because making coke is dirty and poluting. So the US say that China breaks the rule by not selling coke as if its deficite with China is not bad enough.

Jul 06 11:02 AM

[Howard Richman:]

Athena,

I agree with you that the dollar will eventually collapse, but I don't agree with your assessment that the collapse will cause China to see they have made a mistake. Although they will end up with some bad bonds, they will also end up with high GDP, high military power, and ownership of much of America. Moreover, will have weakened the power of their chief political adversary.

Howard

Jul 06 12:28 PM

[Howard Richman:]

Ben Gee:

I disagree with your assessment that "The Richman Plan is a plan for economic suicide." Let me discuss your three points:

1. You wrote: "It will reduce trade by 50% with China that may not be so bad."

This aspect will be good for the U.S. in both the short and long run. More exports to China and fewer imports means more income for Americans to spend which pulls the US out of our short-term problem, the recession. Greatly increased investment in the American manufacturing sector pulls the US out of our long-term problem - our economic stagnation and huge foreign debt.

2. You continue, "It will reduce trade by a simular amount with oil producers. What is the US going to replace import oil with?"

The Richman plan does not apply to all oil producers, just those that are collecting dollars and using them to buy our assets instead of our products.

3. The rest of your comment is a thoughtful take on Obama's first WTO complaint. You began: "Did you hear the US is complaining China is NOT selling coke?..."

Howard

Jul 06 12:45 PM

[Howard Richman:]

Prudent Man,

I agree with you that President Obama is trying to make our trade situation worse with Cap and Trade. See my commentary pulbished Friday by American Thinker:

www.americanthinker.co...

Jul 06 12:52 PM

[The Recusant:]

Howard Richman wrote:
"I agree with you that President Obama is trying to make our trade situation worse with Cap and Trade."

"trying"??--Does he have a great deal to gain by intentionally ruining the US economy? The cap and trade law may effect our international trade adversely, but I'm sure a host of economy consultants far more experienced than you that are bending his ear in the other direction.

By the way, using "she" to feminize China is rather distracting and improper since the country is not a ship.

Jul 06 06:28 PM

[Billy Gee:]

Bravo, Mr. Richman. The array of NON-TARIFF barriers on U.S. goods and services by China is very large and growing. The terrible effects of hoarding U.S. dollars for investments rather then purchasing U.S. products ( NOT raw materials) is a key factor in this onerous recession the U.S. will suffer for many years. This is the modern equivilent of Smoot-Hawley levied by the Chinese against the U.S.

Your ideas might be some of the last ideas to save trade between the U.S. and China before the system collapses from Chinese government arrogance (not the Chinese people).

Counterfeiting, piracy, non-tariff barriers and currency manipulation by China is growing un-abated and unanswered by the U,S, The U.S. government is inept in dealing with China on trade issues and now with huge demands for credit by the Obama administration the stance will further soften (if that is possible).

Jul 07 12:52 AM

[User 357705:]

This comment proves my earlier point that Americans object to being recipients of their own practices.


On Jul 07 12:52 AM Billy Gee wrote:

> Bravo, Mr. Richman. The array of NON-TARIFF barriers on U.S. goods
> and services by China is very large and growing. The terrible effects
> of hoarding U.S. dollars for investments rather then purchasing U.S.
> products ( NOT raw materials) is a key factor in this onerous recession
> the U.S. will suffer for many years. This is the modern equivilent
> of Smoot-Hawley levied by the Chinese against the U.S.
>
> Your ideas might be some of the last ideas to save trade between
> the U.S. and China before the system collapses from Chinese government
> arrogance (not the Chinese people).
>
> Counterfeiting, piracy, non-tariff barriers and currency manipulation
> by China is growing un-abated and unanswered by the U,S, The U.S.
> government is inept in dealing with China on trade issues and now
> with huge demands for credit by the Obama administration the stance
> will further soften (if that is possible).

Jul 07 05:11 AM

[Howard Richman:]

Recussent correctly objects to my word choice in a comment when I wrote that Obama is "trying" to make the our trade situation worse through "cap and trade." What I meant to say was that Obama is "trying" to pass Cap and Trade which would make our trade situation worse.

Incidentally, Obama's objection to the tariffs that the House put into the Cap and Trade Climate Bill does suggest the possible interpretation that he wants to give America's industries to China. But I attribute his statement to incompetence, rather than maliciousness. See:

www.americanthinker.co...

Jul 07 08:59 AM

[Glen88:]

The US (along with other nations) are complaining that China sells coking coal to its steel producers for far less than the market price. This gives Chinese steel producers a large price advantage. China engages in this type of market distortion all the time (see rare earth metals).



On Jul 06 11:02 AM Ben Gee wrote:

> The Richman Plan is a plan for economic suicide. It will reduce trade
> by 50% with China that may not be so bad. It will reduce trade by
> a simular amount with oil producers. What is the US going to replace
> import oil with.
> Did you hear the US is complaining China is NOT selling coke? Coke
> is made from coal, the US has coal coming out of its nose. China
> has to import some of the coal that go into coke from Australia.
> And the US is complaining China not selling its coke? Do making the
> coke in the US make sense? Why not? Because making coke is dirty
> and poluting. So the US say that China breaks the rule by not selling
> coke as if its deficite with China is not bad enough.

Jul 07 04:04 PM