U.S. Imposes Duties on Chinese Goods

Ambrose Bierce, in The Devil’s Dictionary, defined an alliance as, “When two thieves have their hands so deeply plunged into each other’s pocket that they cannot separately plunder a third party.”

We seem to be in that position with China. The problem is that we’d like to renegotiate our “alliance,” but we are trying to treat them like an independent party, rather than someone with whom we are deeply enmeshed.

The Commerce Department imposed preliminary countervailing duties on Chinese, Indonesnia, and South Korean free sheet coated paper, which is the glossy paper used in magazines, photographic stock, and books. These sanctions are significant not for the volume of trade involved – only $224 million of imports – but for the precedent they set. This is the first time since 1991 the US has imposed countervailing duties against a “nom-market economy.” Before, according to a New York Times story, it had been deemed too difficult to determine the level of subsidies given to state-owned companies. But as we had noted earlier, Chinese coated paper prices reflected a substantial level of government assistance.

Coated paper made for a good case because not only was it clear cut, but it involved a relatively small volume of goods. It’s a shot across China’s bow, an signal that the US wants China to take measures to help lower its trade surplus with the US, such as lowering the value of the yuan. And it opens the door for other US manufacturers to file complaints on other types of goods.

As much as measures like this are overdue, it comes at a time of worsening US/Chinese relations. The US has voiced its opposition to China’s plans to expand its military; the Chinese have more or less blown off our efforts to get them to revalue their currency (their recent float of the yuan is a dirty float, a mere token gesture). When we’ve complained about trade surpluses, the Chinese have taken to lecturing us about our lack of savings. And things may get worse with the next installation of the IPCC report, which will put China as one of the losers to climate change and North America as a beneficiary. Before, China and the US had been in the same camp as carbon producers unwilling to give up the habit. Now China may come to see its interests here somewhat differently.

I’m not saying that we shouldn’t try to reconfigure our relationship with China. But I wonder how many moves ahead we’ve thought in this chess game.

China, predictably, reacted like a stuck pig to the duty imposition:

The Chinese government sharply criticized the move in a rare public statement released by the Chinese Embassy in Washington. “The Chinese side will watch closely over the development and reserve all rights to safeguard its lawful rights and interests,” it said. The statement added that the U.S. action was “unacceptable to the relevant industry in China” and had “hurt their feelings.”

On Saturday, China Commerce Ministry spokesman Wang Xinpei said in a statement on a government Web site, “China strongly demands the United States to reconsider this decision and correct it as soon as possible.”