NEW YORK ?Instead of reaching a compromise on trade issues between the U.S. and China, last week? meeting with Chinese president Hu Jintao by President Bush seemed to reveal just how wide the trade discrepancies are between the countries.
Previous to Jintao? visit, Nicholas Lardy, a senior fellow for the Institute for International Economics predicted, ?n currency, on intellectual property, on the trade imbalance, I think the body language from the Chinese in advance of the visit is: ?on? expect too much.? Lardy? forecast was dead on.
When China became a member of the WTO in 2001, safeguards were put in place in the hope of giving the rest of the manufacturing world a little time to catch up before the expected rush of a (relatively) free Chinese market. Years later when the quotas were removed, imports increased at an enormous rate ?alarming China? many global competitors and creating a worldwide ?nee jerk?reaction to stop the flow of Chinese imports. In the short term, the trade protections put in place by the U.S. and the European Union have served to slow down the Chinese current, at least for now. Additionally, the current quotas only cover 13 percent of all apparel and textile imports (by volume, in January). But as Thomas A. Glaser of VF Asia Ltd. pointed out at a recent conference on the subject, quotas and safeguards on a thriving market do little more than temporarily dam the river of imports.
In all fairness, opponents of China? current trade policies have more than a thriving Chinese market to squabble about. It seems as though China has a considerable trick up its sleeve: a stagnant currency. Opponents of China? current import system charge that their inflexible currency artificially lowers the price of goods by anywhere from 15 percent to 40 percent. The effect, adversaries claim, is the U.S.? immovable $202 billion trade deficit with China, as well as continued job loss in the apparel and trade industry within the U.S.
In his country's defense, Jintao said the U.S.? trade deficit is not solely a result of its relationship with China ?it is a deficit contingent on trade worldwide.
