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Strategies & Market Trends : Galapagos Islands
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To: Lazarus_Long who wrote (51297)3/19/2004 11:36:08 AM
From: Original Mad Dog  Read Replies (1) of 57110
 
The problem is that the U.S. itself maintained an unfair subsidy in the form of an export tax break which was recently challenged under international trade rules (the U.S. lost). While that case was pending it was hard for us to challenge things like the Chinese tax rebate, which accomplished the same thing by a different route.

IMO this is just a warning shot across the bow. The real issues with China are (1) laughably weak IP protection -- China has become the world's technology copying machine; and (2) currency protections which serve effectively as a huge subsidy on Chinese exports and surtax on imports. The currency issue is harder to attack under the WTO framework, but other things such as the tax rebate being challenged in this case as well as disparities in labor and environmental regulations will probably be the next step.

I also think that Bush may have been reluctant to push these issues because of a desire for Chinese cooperation on the War on Terror and the North Korea situation. With North Korea still up in the air, we are likely to see a very slow push to enforce WTO rules against China. I would still not invest heavily in any company that is counting heavily on profiting through exports to China.
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