Home » Opinion » Chinese Views
China lives up to its WTO obligations
By John Gong |
January 29, 2010, Friday
|
Print Edition
Print Edition
ACCORDING to the General Administration of Customs, China overtook Germany as the world's top exporter after December exports jumped 17.7 percent.
Total exports for 2009 reached US$1.2 trillion, ahead of the US$1.17 trillion for Germany forecast by its foreign trade organization, BGA.
This is a remarkable achievement amid the tide of protectionism with antidumping, countervailing and special safeguard measures all around the world.
Not surprising, China's surge as a trade powerhouse is accompanied by the surge of criticism. There have been considerable voices in the US as to whether China has lived up to its WTO obligations, and that China's so-called unfair trading practices have undermined the ability of US companies to compete in the global marketplace.
Those concerns, or accusations in some cases, can be summed up in three areas: currency manipulation, failure to enforce intellectual property rights, and governmental subsidies. Here I would like to defend against each of these accusations.
As to currency manipulation, it should be first noted that China ended the absolute dollar peg about five years ago. Today, China's currency rate is managed by a floating exchange rate regime that is based on market supply and demand with reference to a basket of currencies, certainly including the US dollar.
It should also be noted that since the end of the dollar peg in 2005, the Renminbi or yuan has appreciated a cumulative 22 percent against the dollar.
It is interesting to note that voices in the US about the yuan are mostly about currency appreciation, as opposed to currency convertibility. This is understandable, because the largest victim of a freely convertible yuan is likely to be the dominant status of the US dollar as the world currency.
China's insistence on a managed float around a basket of currencies weighted heavily towards the US dollar is actually an anchoring force of stability for the US dollar and consequently the US economy. Alas, one can't have the best of both worlds - a cheap dollar vis-a-vis the yuan while still keeping the world currency status.
As to intellectual property (IP) rights, China has made great strides in improving the IP system and its enforcement. Ten years ago when I visited Beijing, I would see pirated copies of Hollywood movies everywhere.
The Chinese government runs ads on TV educating the masses against purchasing pirated audiovisual products. Enforcement of software licenses has been much strengthened.
During the recent US-China Intellectual Property Protection Cooperation and Research Forum held in Chicago, three American judges, including two from the US District Court (Northern District of Illinois), stood out to express the view that there is a misconception in the US that China has not made efforts in improving its IP protection.
But certainly there is still room for improvement, and there is a lot to be learned from the development of IP law in the US.
Finally, the government subsidy issue needs to be interpreted in a historic context.
Every major export force, including developed countries in the European Union and North America, has been engaged in such practices to various degrees.
The case immediately coming to mind is the Boeing versus Airbus saga, in which each side has accused the other side of accepting government subsidies.
The massive US$81 billion auto bailout of Detroit may also be a state subsidy flag under the WTO framework.
These are precisely the issues that are currently being negotiated at the Doha round of WTO negotiations, and a gradual, evolutionary and multilateral approach to phase out these unpalatable elements is the answer for the world to move towards an ultimately free and fair trade environment.
Regarding the ultimately free and fair trade environment, I have to quote one of America's founding fathers, in sharp contrast to the mountain of trade laws and labyrinthic regulation infrastructure in the US.
In a trade report to the US Congress in 1793, Thomas Jefferson said the following, which still holds much truth today, withstanding the test of time:
"Instead of embarrassing commerce under piles of regulating laws, duties, and prohibitions, could it be relieved from all its shackles in all parts of the world, could every country be employed in producing that which nature has best fitted it to produce, and each be free to exchange with others mutual surpluses for mutual wants, the greatest mass possible would then be produced of those things which contribute to human life and human happiness; the numbers of mankind would be increased, and their condition bettered."
(The author is associate professor of economics at the University of International Business and Economics in Beijing. His e-mail: johngong@gmail.com)
Total exports for 2009 reached US$1.2 trillion, ahead of the US$1.17 trillion for Germany forecast by its foreign trade organization, BGA.
This is a remarkable achievement amid the tide of protectionism with antidumping, countervailing and special safeguard measures all around the world.
Not surprising, China's surge as a trade powerhouse is accompanied by the surge of criticism. There have been considerable voices in the US as to whether China has lived up to its WTO obligations, and that China's so-called unfair trading practices have undermined the ability of US companies to compete in the global marketplace.
Those concerns, or accusations in some cases, can be summed up in three areas: currency manipulation, failure to enforce intellectual property rights, and governmental subsidies. Here I would like to defend against each of these accusations.
As to currency manipulation, it should be first noted that China ended the absolute dollar peg about five years ago. Today, China's currency rate is managed by a floating exchange rate regime that is based on market supply and demand with reference to a basket of currencies, certainly including the US dollar.
It should also be noted that since the end of the dollar peg in 2005, the Renminbi or yuan has appreciated a cumulative 22 percent against the dollar.
It is interesting to note that voices in the US about the yuan are mostly about currency appreciation, as opposed to currency convertibility. This is understandable, because the largest victim of a freely convertible yuan is likely to be the dominant status of the US dollar as the world currency.
China's insistence on a managed float around a basket of currencies weighted heavily towards the US dollar is actually an anchoring force of stability for the US dollar and consequently the US economy. Alas, one can't have the best of both worlds - a cheap dollar vis-a-vis the yuan while still keeping the world currency status.
As to intellectual property (IP) rights, China has made great strides in improving the IP system and its enforcement. Ten years ago when I visited Beijing, I would see pirated copies of Hollywood movies everywhere.
The Chinese government runs ads on TV educating the masses against purchasing pirated audiovisual products. Enforcement of software licenses has been much strengthened.
During the recent US-China Intellectual Property Protection Cooperation and Research Forum held in Chicago, three American judges, including two from the US District Court (Northern District of Illinois), stood out to express the view that there is a misconception in the US that China has not made efforts in improving its IP protection.
But certainly there is still room for improvement, and there is a lot to be learned from the development of IP law in the US.
Finally, the government subsidy issue needs to be interpreted in a historic context.
Every major export force, including developed countries in the European Union and North America, has been engaged in such practices to various degrees.
The case immediately coming to mind is the Boeing versus Airbus saga, in which each side has accused the other side of accepting government subsidies.
The massive US$81 billion auto bailout of Detroit may also be a state subsidy flag under the WTO framework.
These are precisely the issues that are currently being negotiated at the Doha round of WTO negotiations, and a gradual, evolutionary and multilateral approach to phase out these unpalatable elements is the answer for the world to move towards an ultimately free and fair trade environment.
Regarding the ultimately free and fair trade environment, I have to quote one of America's founding fathers, in sharp contrast to the mountain of trade laws and labyrinthic regulation infrastructure in the US.
In a trade report to the US Congress in 1793, Thomas Jefferson said the following, which still holds much truth today, withstanding the test of time:
"Instead of embarrassing commerce under piles of regulating laws, duties, and prohibitions, could it be relieved from all its shackles in all parts of the world, could every country be employed in producing that which nature has best fitted it to produce, and each be free to exchange with others mutual surpluses for mutual wants, the greatest mass possible would then be produced of those things which contribute to human life and human happiness; the numbers of mankind would be increased, and their condition bettered."
(The author is associate professor of economics at the University of International Business and Economics in Beijing. His e-mail: johngong@gmail.com)
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