Trade Conflict Between U.S. and China on the “Verge of War”

Trade Conflict Between U.S. and China on the “Verge of War”. November. 19, 2003 22:55. havefun@donga.com.

There are signs of a possible trade battle between the U.S. and China as China cancelled its plan to send its delegation of U.S. product buyers in order to protest against the U.S.’ move to slap new import quotas on Chinese textiles.

Grant Aldonas, Commerce Undersecretary for International Trade Administration of the U.S. Department of Commerce, announced on November 18 that the U.S. has decided to tentatively impose a quota on products such as knit fabrics, gowns, and bras as a measure to protect the U.S. industry from Chinese imports. Among the total Chinese textile imports to the U.S. ($9 billion), these three products make up 4.7 percent ($422 million).

The U.S. plans to cap the growth of Chinese imports to 7.5 percent annually, as the estimation of the first half of this year shows that textile exports from China had increased 175 percent in a year.

The related industries and the U.S. Congress have been blaming the Chinese imports for high unemployment rates in areas such as North Carolina and thus have been urging for action. Therefore, it seems that future import of other products from China will be stalled.

Due to the U.S. decision to impose a quota, the Chinese buyers’ trip to the U.S. to purchase soybeans has been cancelled with an excuse of procedural problems with the visa applications for all 30 members of the delegation. This group is a part of the large-scale buyers’ delegation that the Chinese government has formed with the thoughtful intention of reducing its trade surplus from exporting to the U.S. before Chinese Premier Wen Jiabao’s visit to the U.S. early next month.

As a special provision for joining the World Trade Organization (WTO), China had agreed to accept temporary quotas in case its textile exports caused disorder in the market of its trade partner. Meanwhile, the dollar tumbled in the afternoon that day (local time) after the U.S. Commerce Department announcement as the euro surged to a record high of above $1.1960 against the dollar in the New York exchange market.

Researcher Kim Sung-sik of LG Economic Research Institute analyzed the cause of weakened dollar as “investors selling dollars due to the assumption that dollar value will stay low for a while since the quota is an act of the U.S.’ determination to reduce the huge current deficit.”