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Trade Protectionism: The Chinese Pot and the US Kettle

Posted By Derek Scissors, Ph.D. On February 23, 2009 @ 9:06 am In International | Comments Disabled

chinese_trade_minister_chen1

Chinese trade minister Chen Deming’s op-ed [1] in the Wall Street Journal today chides the rest of the world on turning toward protectionism. This is remarkable on two counts: (i) that the PRC should lecture any country on protectionism and (ii) that the US has opened itself to being lectured by China.

China intervenes in markets to distort trade as much or more than any country. While global consumption is shrinking, the PRC is forcing proportionally more of its goods on everyone else. That’s why China’s trade surplus over the past six months is the largest in world history [2]. China’s entire financial system is geared to keeping exports competitive. Beijing limits movement of money and exchange rates, enabling it to subsidize exporters. On a smaller scale, the PRC has instituted a raft of export support measures, including rebates and fiscal stimulus targeting industries dominated by production for exports [3]. In contrast, China has yet to take any fresh action to dismantle their many tariff and non-tariff barriers [4].

Unfortunately, there is no doubt the U.S. has become a worthy target for a lecture on resorting to protectionism. New, broader Buy American provisions will make it much harder for many foreign firms to compete for U.S. government contracts. Not only might countries retaliate with barriers against U.S. goods but, more important, America’s retrenchment against trade signals to the world that protectionism is an acceptable part of any recovery strategy. Nothing could be further from the truth. Should countries follow where America leads, the contraction in international trade will result in a longer, more costly recession [5] than if the world held the line against bad trade policies.

Heritage Foundation Senior Trade Policy Analyst Daniella Markheim co-authored this post.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2009/02/23/trade-protectionism-the-chinese-pot-and-the-us-kettle/

URLs in this post:

[1] op-ed: http://online.wsj.com/article/SB123509699453029305.html

[2] the largest in world history: http://www.heritage.org/Research/AsiaandthePacific/wm2292.cfm

[3] rebates and fiscal stimulus targeting industries dominated by production for exports: http://english.mofcom.gov.cn/aarticle/counselorsreport/americaandoceanreport/200901/20090105987617.html and http://www.bloomberg.com/apps/news?pid=20601089&sid=a8cUGaH5SyXU

[4] yet to take any fresh action to dismantle their many tariff and non-tariff barriers: http://www.shanghaidaily.com/article/?id=391563&type=Business

[5] the contraction in international trade will result in a longer, more costly recession: http://www.heritage.org/Research/tradeandeconomicfreedom/wm2256.cfm

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