Protectionism Is Like Locking Oneself Up In a Dark Room

by+Qiao+Zhenqi

On March 5， 2017， the Fifth Session of the 12th National Peoples Congress （NPC） opened at the Great Hall of the People in Beijing.

In the government work report delivered at the meeting， Chinese Premier Li Keqiang pointed out that the world economy would continue to experience sluggish growth， and that instability and uncertainty are growing significantly amid an exacerbating tendency toward protectionism and the mood of anti-globalization. There is also an increased possibility that such conservative mentality in general and trade policies in particular of major economies could create spillover effects.

Given the circumstances， the Chinese government has made clear its standpoint in coping with the global economic situation， both at present and in the near future.

Premier Li pointed out that economic globalization meets the fundamental interests of all countries， and that China will unswervingly promote global economic cooperation， safeguard the key role of multilateral trade mechanisms， and actively participate in multilateral trade negotiations.

“Black Swan” Events

When talking about international trade， “black swan events”became a frequently-mentioned term among participants at the annual sessions of the NPC and the National Committee of the Chinese Peoples Political Consultative Conference （CPPCC）， collectively known as the “Two Sessions.” Many NPC deputies and CPPCC members expressed their concerns about the drop in global trade arising from anti-globalization and protectionism. The global political landscape is undergoing tremendous changes. Events like Brexit， general elections occurring in major European countries， the Trump administration taking office， and the pending presidential election of the Republic of Korea （ROK） are expected to cause serious policy changes， thus exacerbating trade protectionism globally.

“Brexit， Trumps election， and the rise of far-right parties in Europe all testify to the popularity of extreme nationalism，” notes Yin Zhongqing， vice chairman of the Financial and Economic Affairs Committee of the 12th NPC. “It is increasingly obvious that the economic policies of some major economies are shifting towards anti-globalization.”

His remarks have been evidenced by recent statistics. A report released by the World Trade Organization （WTO） in June 2016 shows that G20 economies enacted a total of 145 trade restrictive measures from October 2015 to May 2016， averaging at over 20 per month， the highest level since the WTO began to monitor trade restrictive measures worldwide in 2009.

It is evident that against the backdrop of sluggish economic growth， methods such as implementing trade protectionism， erecting trade barriers and manipulating trade on the pretext of antidumping have become primary means for some countries to grab a larger share of the international market. China has fallen victim to a slew of anti-globalization practices by a number of its trading partners. Statistics from the Chinese Ministry of Commerce indicate that China encountered 119 trade remedy investigations， launched by 27 countries and regions， in 2016， involving a total of US$14.34 billion. Compared to the previous year， the number of investigation cases and the amount involved increased 36.8 percent and 76 percent， respectively.

“Trade protectionism policies and measures， direct or indirect， impede fair competition in the international market，” asserts Zong Qinghou， an NPC deputy and chairman of Hangzhou-based Wahaha Group Co.， Ltd. He suggested the government actively utilize international trade rules and put forward proper foreign trade measures to safeguard Chinas lawful rights and interests， and to seek common development based on the principles of equality and mutual benefit.

Broadening Modes of China-U.S. Trade

This year marks the 38th anniversary of the establishment of China-U.S. diplomatic relations. Economic and trade relations between the two countries have witnessed substantial progress over the past decades， generating concrete benefits for both sides.

On average， U.S. cargo exports to China grew by 11 percent annually over the past decade. Outside North America， China is the fastest-growing export market for the U.S. From 2001 to 2016， U.S. service exports to China increased fifteen-fold， and its surplus in trade of services multiplied by 29. Statistics from the U.S.-China Business Council show that bilateral trade has helped create 2.6 million jobs in the U.S.

The U.S. has also earned tremendous benefits from bilateral investments. By the end of 2016， Chinese enterprises had accumulated non-financial direct investments of nearly US$50 billion in 44 U.S. states， creating nearly 100，000 jobs. Besides， U.S. companies have gained huge profits by investing in China. A survey report on Chinas business environment released by the U.S.-China Business Council in October 2016 shows that 90 percent of U.S. enterprises in China have been running with profits.

However， the U.S. government neglects the mutually beneficial connotations of China-U.S. trade. It over-emphasizes Chinas trade surplus， turning a blind eye to the structure of Chinese exports to the U.S. and Chinas demands for hi-tech imports. Fu Ying， spokesperson of the NPC annual session， stressed at a press conference that China hopes to solve its trade imbalance with the U.S. through broadening modes of trade.

The U.S. has maintained strict restrictions on the categories of its exports to China. The fact that some American politicians still regard China as a competitor rather than a partner has made exports of some hi-tech products to China impossible.

Promoting China-EU Multifaceted Cooperation

On February 28， 2017， the European Commission （EC） decided to impose anti-dumping duties ranging from 65.1 percent to 73.7 percent on Chinese steel plates for a five-year period. Of the 41 trade restrictive measures on steel products， 18 were targeted at Chinese exports. The EC continues to use the ‘analogue country method in its investigations into Chinese products， which considerably harms the legitimate rights of Chinese companies.

In 2001， China was admitted into the WTO. According to Article 15 of the Protocol on the Accession of the Peoples Republic of China， the importing WTO member may use a methodology not based on a strict comparison of domestic prices or costs in China if the producers under investigation cannot clearly show that market economy conditions prevail with regard to the manufacture， production and sale of that product. This methodology is referred to as the ‘analogue country method. The regulation is intended to allow investigating nations to choose to use data from a country at a similar development level to determine price comparability of products from China. The Protocol also stipulates that the ‘analogue country method should only be applicable for a 15-year transition period and would expire with regard to China in December 2016. China has fulfilled its obligations to the WTO， but its efforts have not been rewarded. Till today， many countries have yet to fulfill their commitment to acknowledge Chinas market economy status.

Chinas Ministry of Commerce points out that the difficulties faced by the steel industry are primarily attributed to the sluggish world economic recovery and declining demand. So， it is groundless that the European Union （EU） blamed Chinas exported steel products， and trade restrictive measures cannot help the EU address the challenges imposed on its steel sector.

“Some countries simply blame their domestic problems on globalization，” remarks Kong Xiaoyan， an NPC deputy and director of Tianjin Property Rights Exchange. “Trade represents a significant part of globalization and will definitely be impacted by the mounting anti-globalization trend.”

Chi Fulin， a member of the CPPCC National Committee and president of the China Institute for Reform and Development， said that in view of the complicated situation caused by the fact that several European countries will hold general elections this year， China should accelerate its cooperation with the EU in various fields， especially investment agreement negotiations， the Belt and Road Initiative， and the possibility of establishing free trade areas.“Such issues are not only important to China， but also meet the demands of the EU and will set good examples for the improvement of the global governance structure，” he added.