The US government filed a complaint with the World Trade Organization (WTO) against Chinese industry subsidies on February 2, 2007. In targeting
China's state subsidies for industries including steel, paper and information technology, the US claims that
China is able export goods at a low price and that US firms are consequently deprived of a level playing field, both at home and in other markets.
In addition to the reactions heard worldwide, the Chinese state, domestic research institutes, business circles, experts and interested parties have all publicly expressed their opinions regarding the US move. Some general trends can be seen in mainstream viewpoints and may be summarized as follow:
A measure to ease domestic political pressure on the US government
There is an awareness in
China that the current US government is facing huge domestic pressures on a wide variety of fronts. In 2006, the US trade deficit with
China reached a new historical record at USD 213.5 billion. In addition, the US imported 5.5 million tons of steel products from
China in 2006, representing a year-on-year growth rate of 130 percent. Although this figure was just less than 11 percent of the total steel imported by the US, the fast growth rate raised the concerns of the interested American industries and their representatives in Congress. The US decision to apply to the World Trade Organization was taken even as bilateral negotiations between
China and the US still continued regarding
China's steel exports.
A tactic to gain more concessions from China
Steel industry profits are currently at a high level in the US. There is no evidence to indicate that the
US steel industry has suffered losses due to Chinese steel imports or Chinese industrial subsidies in general. Almost all steel industry experts in
China tend towards the view that the US will have difficulty putting forward convincing evidence to the WTO on this issue.
It is widely believed in
China that another major aim of the US subsidies complaint is to squeeze more concessions from
China. The concessions in question concern the greater appreciation of the RMB and the greater opening up of
China's financial sector and
manufacturing industry (in particular the steel and
automotive sectors).
China is still a new member of the WTO and needs more time to be familiar with the rules and procedures regarding trade disputes. The US, on the contrary, is skilled at defending its interests by means of the WTO regulations.
China's WTO experts tend to share the view that the US government is planning to force
China to give ground in the above mentioned areas through use of the WTO suit threat and potential retaliatory tariffs.
An opportunity for China to gain further WTO experience
If the two sides fail to resolve this matter within 60 days, the US can appeal to a WTO dispute settlement panel for a decision. In fact, this is the third time that the US has brought
China before the WTO since the latter joined the organization in 2001. Previously, the US twice filed with the WTO against
China, in connection with semiconductor products and auto-parts.
China is continuing on its learning curve and is becoming more adept in dealing with such suits. From this angle, both the Chinese government and the relevant national industries are facing this case with an optimistic attitude. They hope to become more professional as regards the workings of the WTO mechanisms, and also to be able to protect and defend their interests more effectively in the future.
To date there have been tight trade and investment ties between
China and the US, and for this reason it is clear that any serious bilateral economic conflict would bring disaster to both sides. This argument is widely accepted in
China and very few people think a trade war between these two big countries is likely. According to official data, the US is the country which has benefited most from the current multilateral world trade system, with an average annual profit of over USD one trillion from global free trade. It will be almost impossible for the US to take any extreme measures with a view to making serious changes to the current situation.