Broader Ties Trump Trade

U.S.-China trade disputes are on the rise, but experts say broader tensions may ease.
By Michael Lelyveld
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BOSTON-Trade conflicts have been piling up between the United States and China, testing the relationship between the two economic powers, analysts say.

Since the United States imposed duties on low-cost Chinese tires in September, at least a half-dozen more disputes have emerged on items ranging from steel pipes to paper and imported cars.

In past years, tensions over tariffs have led to warnings of a possible trade war.

But with U.S. President Barack Obama's visit to China, there seems to be less chance that trade frictions will rupture bilateral ties.

Analysts say the multi-layered interests of U.S.-China relations can withstand the trade strains, although risks of escalation remain.

"It could go either way," said David Bachman, a China expert and professor of international studies at the University of Washington in Seattle.

"The downside risk is there and, if mishandled, things could get quite bad," Bachman told Radio Free Asia.

"But I think that there's a willingness on both sides to keep these things as compartmentalized as possible."

Since President Obama approved duties of up to 35 percent on Chinese tires, the Commerce Department proposed anti-dumping tariffs on U.S. $2.6 billion of Chinese-made steel pipes on Nov. 5.

One day later, the U.S. International Trade Commission launched an anti-dumping investigation into imports of Chinese coated paper and industrial salts.

On Nov. 6, China's Ministry of Commerce blasted the U.S. moves as "protectionist" and opened an anti-dumping probe of its own into U.S. off-road and other vehicles.

More disputes have emerged over U.S. exports of auto parts and chicken products, as well as China's limits on raw material exports.

"There's always the potential that trade and broader issues of economic exchange between the U.S. and China can blow up, but I suspect that, at least for the short term, they probably can be managed," Bachman said.

Currency disputes

Although the individual cases have caused frictions, the effect has been tempered by the Obama administration's decision against charging China with currency manipulation.

Critics have urged the Treasury Department for years to sanction China for undervaluing the yuan in order to boost low-cost exports and rack up big trade surpluses. But experts say such a move could spark conflicts on a wider economic front.

"I actually think that the trade cases, at least what we've seen so far, are not an unhealthy thing," said Patricia Mears, director of international commercial affairs at the National Association of Manufacturers in Washington.

"I think these are pressure releases."

Mears said the case-by-case approach has helped to address some of the complaints from U.S. industries that have been hurt most by China's currency policy.

"Does it solve the overall problem for a big industry? No, but it does take some of the pressure out of it," Mears said.

Despite the recent buildup of new trade cases, predictions of a possible trade war have been markedly less than in past years, she said.

"When you saw several years ago the pressure really building for something to be done on the Chinese currency, this was coupled with an enormous sense of frustration on the part of affected industries that nothing was being done to hold China accountable," Mears said.

'Letting off steam'

Gary Hufbauer, senior fellow at the Peterson Institute for International Economics in Washington, agreed that the sectoral approach to trade disputes has eased pressure on the currency manipulation issue.

"It seems to me that both leaders—President Hu Jintao and President Obama—have decided that they're both going to let the steam off through these trade cases and not exert any presidential-level effort to control them," Hufbauer said.

Much of the industry push for tariff relief is to be expected on both sides in a period of economic crisis, said Hufbauer, although there are concerns that the moves could go too far.

"I would imagine that their economic advisers on both sides of the Pacific are urging them not to let it escalate any further, and I would guess they might productively talk about heading off the next wave of trade cases," he said.

Hufbauer said the conflict could become "much more dangerous" if a fight breaks out over the currency issue, but individual tariff and dumping disputes are likely to be manageable.

"I think it's a tolerable level of friction," he said.

"We've had this same level of friction often with Europe and with Japan, and still we're able to have decent relationships on a lot of other issues."

Bachman said trade disputes are less likely to "rise to the top" of the U.S. agenda if China cooperates on key issues like nuclear proliferation by North Korea and Iran.

"If China's not cooperating on bringing about a resolution that's in conformity to American interests, then this gets to be an add-on that begins to build coalitions against it," Bachman said.

"So far, the Obama administration has been trying to keep cooperation at the top of the agenda," he said.





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