Allison Jackson

China, US Face Off at WTO Ahead of G-20 Meet

Beijing. China has hauled the United States before the World Trade Organization in a bid to buy time and prevent a tariff dispute from overshadowing top-level talks at next week’s Group of 20 nations summit, analysts said on Tuesday.

Beijing lodged a complaint with the WTO over what it claimed were unfair tariffs imposed by Washington on its tire products, before two key meetings between presidents Barack Obama and Hu Jintao.

“Neither the US or China wants this to spiral out of control and putting it into the WTO is a pressure release valve in the short-term,” said Geoffrey Garrett, head of the US Study Center at the University of Sydney. “Both sides want to do what they can to make the G-20 meeting productive.”

Washington ignited the latest dispute last week by slapping a 35 percent tariff on Chinese tire imports. It also made a preliminary decision to impose duties of up to 31 percent on Chinese steel pipes used in oil and gas wells.

Beijing quickly hit back, saying on the weekend that it would investigate possible unfair practices in US exports of automotive products and chicken meat.

The tit-for-tat comes as Hu is set to head to Pittsburgh, Pennsylvania, for the G-20 summit on Sept. 24-25, and Obama is scheduled to make his first presidential trip to China in November.

Russell Leigh Moses, a Beijing-based political analyst, said that by appealing to the WTO, China could be seeking to ensure the issue does not divert attention from G-20 talks on global financial reform and climate change.

“It’s either an indication that they believe they will prevail at the WTO, or a very strong effort to take the subject off the table for the G-20,” Moses said. “It’s in some ways a brilliant move, because it takes it away from the G-20 and has the added benefit of steering both leaders away from embarrassment on the eve of the G-20.”

Experts said the dispute was primarily about each side defending manufacturers in sensitive sectors and would not adversely affect the overall bilateral relationship, which Obama has said will “shape the 21st century.”

“Here is an amalgam of clashing interests in which each side is suspicious of the other’s intention and eager to court domestic opinion,” Moses said.

“Both sides are acting as we would expect them to act; they are not averse to cooperation, but they see at this early stage more of an upside to confrontation.”

Obama has come under pressure to introduce tariffs on tire imports, amid warnings that a surge in the Chinese-made goods had cost more than 5,000 jobs in the United States. At the same time, China needs to pump up exports to reach its economic growth target of 8 percent — seen as essential for job creation and keeping a lid on social unrest.

Obama this week insisted the dispute would not escalate out of control and that the two countries had a “strong strategic relationship” — a comment that analysts said was an attempt to defuse tensions.

“Obama has to address the issue without being too tough on China, without escalating the situation,” said Shiro Armstrong, an economist at the Australian National University.

“It is in everyone’s interest for China to comply with its WTO accession agreements and there is a balance in ensuring this without pushing too hard.”

Analysts said investors were worried that the latest row would fuel a rise in protectionism that could derail the global recovery.

“Any trade-related dispute and sanction between the US and China, the two most important countries in the global economy, could carry significant implications,” said Qing Wang, a Hong Kong-based economist for Morgan Stanley.

“The prevalence of trade protectionism was believed to be a key contributing factor to the Great Depression in the 1930s.”

The tariffs would cost China $1 billion in export earnings, or a mere 0.4 percent of the country’s total exports to the United States in 2008, Wang said, citing figures from the China Rubber Industry Association.

Garrett said China and the United States had entered the “toughest” period of their trade relationship and predicted more disputes as they try to resolve deep “economic imbalances.”

The United States has been grappling with a growing trade deficit with China, while Beijing has accumulated the world’s biggest stockpile of foreign currency at $2 trillion, much of it invested in US Treasury bonds.

“I would expect that going forward, the economic imbalances between the two countries are going to become a source of friction and this is the first big evidence of that,” Garrett said.



Agence France-Presse

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