Dan Ikenson: U.S.-China Trade War Is More Roar Than Dragon Fire

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In this episode of China Money Podcast, guest Dan Ikenson discusses the latest U.S.-China trade frictions and if there is really an escalating trade war between the two countries.

Q: Just earlier this week, the U.S. Commerce Department released preliminary decisions to impose duties on solar panel imports from China. How bad is the current U.S.-China trading relationship?

A: Certainly, the disputes the two countries have been having have been played up a lot in the media. This is an election year in the U.S. There will be a change of leadership in China at the beginning of next year. So scapegoating and pointing the fingers at each other is part-and parcel of that political process.

When we have these trade disputes, we tend to inflate the meaning of them all. For example, the solar panel case. That is just an anti-dumping case in the U.S. In other words, the WTO permits the U.S. and other member countries to have certain anti-dumping and countervailing duty laws, where domestic industries can file for duties to be imposed, provided that they demonstrate that the domestic industry is materially injured and the cause of the injury is unfair trade.

So that doesn’t reflect government policy. It’s not like it’s an Obama administration initiative. It’s the U.S. solar panel producers.

Q: Give us some historical perspectives. For instance, President Obama’s decision on tires in 2009. Have there been precedents?

A: The tires case is unique. When China joined the WTO in 2001, it agreed to allow the U.S. and other standing WTO members to treat it differently with respect to several issues. Under one circumstance, China allowed the U.S. to have a so-called China Specific Safeguard. There was concern in the U.S. about surged imports from China that would injure some U.S. industries.

So China allowed the U.S. to have this law until 2013. During the Bush administration, the domestic industries brought cases under that safeguard five times. And, President Bush was recommended to impose duties on Chinese products four times. And each time, he said no.

On the tires case, President Obama agreed to impose duties. That was the first time in history that a U.S. president signed off personally on protectionist measures against China. I think that was the spark that initiated a series of tit-for-tat actions between the two countries.

Q: Do you see the trading relationship get worse in the future?

A: It could worsen. But people tend to miss the fact that the U.S.- China trade relationship is the largest in the world. And most of our trade creates no waves. It’s only a small percentage of our trade that creates frictions.

The U.S. and China have brought 18 cases to the WTO. The U.S. brought 12 cases against China. China brought six cases. But there have been fifty-four cases between the U.S. and Europe under the WTO. So I don’t think these actions necessarily reflect deterioration in the relationship as much as it reflects a maturing of the relationship.

That said, this is an election year. There has been lots of China bashing. We have some really serious problems in the U.S. that Congress is incapable of addressing. They are all too willing to blame it on somebody else like China. Particularly now, it polls well. Americans are a little bit skeptical on the meaning of China’s rise.

I suspect if we get through this year without things erupting and descending too dramatically, next year things could become much better.

Dan Ikenson is the director at Herbert A. Stiefel Center for Trade Policy Studies at American think-tank, the Cato Institute. Having worked in international trade since 1990, Ikenson’s research focuses on WTO disputes, regional trade agreements and U.S.-China trade issues. Ikenson is the coauthor of book Antidumping Exposed: The Devilish Details of Unfair Trade Law.

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