Tuesday, 17 February 2009

China open for business as the US closes

Surely I cannot be the only one to see the irony in the different responses of China and the US to the current financial crisis. Respect to China for learning economics both quickly and correctly. Shame on the US for pandering to political lobby groups (again).

China is of course acting in its own self interest. A trade war would be more devastating for China whose reliance on exports is high.

China editorial slams 'Buy American' provision [AP]

BEIJING (AP) — Measures in a $789 billion U.S. stimulus package that favor American goods are a "poison" that will hurt efforts solve the financial crisis, an editorial by China's official news agency said.

Provisions in the U.S. stimulus bill approved Friday favoring American steel, iron and manufactured goods for government projects are protectionist measures that could trigger trade disputes, said the editorial issued late Saturday by the Xinhua News Agency.

"History and economics have told us, facing a global financial crisis, trade protectionism is not a solution, but a poison to the solution," the editorial said.

U.S. labor groups that pushed hard for inclusion of the measures have argued that their main purpose is to ensure that U.S. Treasury dollars are used to the fullest extent to support domestic job creation.

China has promised to avoid "Buy China" protectionist measures in its own multibillion-dollar stimulus effort, and appealed to other governments to support free trade. Deputy Commerce Minister Jiang Zengwei said in early February that China would "treat domestic and foreign goods equally so long as we need them."

Protectionism was a key concern of weekend meetings of the Group of Seven industrialized nations in Rome. U.S. Treasury Secretary Timothy Geithner assured G-7 finance ministers on Saturday that the stimulus package would not violate the United States' commitment to free trade.

Xinhua's editorial said protectionist measures taken during the Great Depression of the 1930s caused trade wars, hurting international trade.

President Barack Obama is expected to sign the economic stimulus package on Tuesday in Denver, Colorado.

The package, aimed at combating the worst economic crisis since the Great Depression, was Obama's first major victory in Congress.

Requirements known as "Buy American" were softened as the bill progressed through Congress and after strong criticism from abroad. Senate and House negotiators agreed to a version that would require the government not to violate trade agreements when implementing the law.


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3 comments:

G. E. Anderson --- said...

Since Xinhua is the only one screaming about protectionism, it is easy to assume that China is above engaging in such behavior.

China is not as innocent as it would seem:

http://www.21cbh.com/content.asp?newsid=106995

"优先采购国内生产的设备" "Give priority to purchasing domestically made equipment". In other words, "buy Chinese".

Most of the industrial stimulus plans contain similar language. If you look at local stimulus plans, they contain local protectionism. "Buy Anhui", "buy Changchun", etc.

Charles Frith said...

A rice cartel just formed.

http://www.vnbusinessnews.com/2009/02/thailand-and-vietnam-agree-to-set-joint.html

Anonymous said...

Ahem...

China Said to Purchase $530 Million of Local Aluminum

http://uk.reuters.com/article/ousiv/idUKTRE51I01H20090219