TJ get ready for protectionims to hit China. Everybody loved the cheap stuff from and the profits of using China as an industrial base. Now here is this export a juggernaut.
World wakes up and tries to adapt and get Yuan up. To no avail.
China is going to face protectionism since it is going to be the only way to bring the balance back.
Falling US dollar sparks protectionist retaliationFont Size: Decrease Increase Print Page: Print David Uren, Economic correspondent | October 26, 2009
Article from: The Australian
CHINA slapped a 36 per cent tariff on nylon imports last week as part of its continued retaliation against the Obama administration's 25 to 35 per cent duties imposed on its tyre imports from China.
China has also started anti-dumping investigations on US chicken and car parts imports.
They are minor disturbances in the vast flow of trade between the two countries, but are a sign of things to come if, as seems likely, Asia's recovery proceeds much more rapidly than those of the US and Europe.
The unequal pace of recovery is already making global imbalances worse and introducing new tensions to global relations.
The market's judgment of the severity of financial problems confronting the US has sent the dollar on a slide since March.
This is greatly increasing the competitiveness of US exporters, but with the Chinese yuan and a range of other Asian currencies, including the Thai baht, the Vietnamese dong and the Hong Kong dollar, more or less roped to the US dollar, they too are gaining great export advantage.
The US dollar has fallen by about 14 per cent on a trade-weighted basis since March but, excluding China and other currencies linked to the US dollar, the fall has been more than 20 per cent.
The US dollar is now approaching levels not seen since the crisis of 1971 when the Bretton Woods system of fixed exchange rates collapsed.
Australia is unique in regarding its rising dollar as a kind of manifest destiny -- every other country suffering from a rising currency is screaming. The Bank of Canada's latest economic review said the strength of the Canadian dollar was acting as a drag on recovery and its governor, Mark Carney, declared last week that "intervention is always an option".
The euro hit a 14-month high of $US1.50 last week, despite European Central Bank chief Jean-Claude Trichet only a few days previously calling for US policy-makers to pursue a "strong dollar" policy.
Last week the Brazilian authorities responded to the flood of capital entering and pushing the value of its currency higher by imposing a 2 per cent tax on foreign portfolio investment.
Central banks of those Asian countries that do not keep their currencies in a tight band with the US dollar, including South Korea, Taiwan, The Philippines and Indonesia, have all intervened in the last month to stem their rise in value.
At the moment, most of the global focus is on the currencies and the action of central banks, but it can only be a matter of time before the fall-out on trade fires protectionist moves at a political level. Trade action is likely to be aimed squarely at China, particularly if its economy is seen to be achieving respectable growth while those of Europe and the US remain depressed.
In Australia, the view from Treasury is that a strong local dollar is part of the necessary adjustment to our long-term future as Asia's preferred supplier of resources.
However, the Rudd government will not remain deaf for long to the pleas of manufacturing industry, or to the plight of Queensland's tourism industry or the university sector nationwide.
World trade is showing a slight improvement, with volumes rising 0.5 per cent in the three months to July. But trade remains 11.1 per cent lower than it was a year ago, so competition in the reduced export markets is fierce.
A report in The New York Times shows that China is winning market share in the US at the expense of other exporters.
"Those market share gains are threatening to increase trade frictions with the US and Europe," the report says.
China has overtaken Canada as the biggest supplier to the US in the past year, its imports rising from 15 to 19 per cent while Canada's have dropped from just under 17 per cent to 14.5 per cent.
The cheap currency countries -- China and the US -- recorded falls in their exports to the world of 22 and 24 per cent respectively, whereas high currency Germany's sales were down 34 per cent and those of Japan were down 37 per cent.
The New York Times report noted that in some markets China was achieving absolute gains in sales.
In knitwear, for example, US imports from China rose by 10 per cent in the first seven months, while purchases from Latin America were down by between 19 and 24 per cent.
The leaders of the G20 nations vowed at their first summit, in the heat of the crisis last November, to "refrain from raising new barriers to investment or to trade in goods and services, imposing new export restrictions, or implementing World Trade Organisation (WTO) inconsistent measures to stimulate exports".
The ink was barely dry on the grandly titled Washington Declaration before the new Obama administration allowed a "buy American" clause to be slipped into its stimulus bill.
The UK-based Centre for Economic Policy Research has since tracked 121 blatant violations of the pledge by G20 nations. "A G20 nation has broken the no-protectionism pledge every three days," the centre says. Russia, India, Indonesia and Germany have been the worst offenders.
About a third of these measures have been government bailouts of locally owned industries, 15 per cent have been tariff measures, 14 per cent were direct trade measures such as anti-dumping, while public procurement, local content requirements, export subsidies and outright import bans have all been used to protect domestic industries.
The increasing tension created as nations and industries emerge from the crisis at different speeds will be on show at the G20 meeting of finance ministers and central bank chiefs in Scotland on November 9, and at the APEC economic leaders summit in Singapore a week later.
There will be talk at those meetings, as there has been at international gatherings of economic officials for almost a decade, of achieving a "speedy" conclusion to the Doha trade talks. Trade minister Simon Crean has been attempting to restyle the trade round as an "economic stimulus", arguing that trade multiplies the benefits of economic growth. "What sort of nonsense is it for us to be talking about co-ordinating fiscal stimulus strategies unless we're going to co-ordinate as well the multiplier," Crean says. "And that's why this government in particular needs to get the message that Doha ain't just a trade round. Doha is fundamentally about an economic stimulus."
But at the heart of the multilateral trade negotiations is a bargain in which every country agrees to make individual sacrifices in order to achieve a greater shared gain. No one will be prepared to make sacrifices if the gains from trade are seen to be flowing overwhelmingly in one direction. |
