Editorial: Learning the diplomacy of trade

• Source: Global Times
• [01:11 July 02 2009]
• Comments

There is a certain pessimistic mood among Chinese on trade prospects. People complain that the prices of anything Chinese buy go up, while the prices of anything Chinese sell go down.

There are reasons to think this is correct. On June 23, the Obama administration lodged its first WTO complaint, accusing China of restricting the export of key raw materials needed for the production of steel, aluminum and other products.

In the meantime, Chinese steel makers are bargaining with the world’s largest iron ore producers for a fair price deal. In recent years, the price hikes of iron ore have pushed up prices in China, the largest iron ore importer, for nearly everything from cars to apartment buildings. Here China again is blamed for violating trade rules.

The media has started painting a picture of a looming trade war with full coverage of ongoing trade barbs between major trade partners.

Trade disputes, with millions of jobs at risk on each side, can stir strong nationalism and lead to serious diplomatic conflicts, or worse. It is especially so when the world faces a rising new power.

During its emergence, the US fought various trade wars with Europe for well over a century.

Trade wars between the US and Japan that started after World War II continue today, covering textile, steel, TV sets, automobiles, machinery, and so on.

Global trade has evolved greatly since then. The purpose of the WTO is to keep trade disputes from breaking into prolonged trade wars where nobody wins. With disputes settled multilaterally, the WTO has greatly contributed to the stability of the global economy.

An anti-free trade mood is still growing in the world today as the economic crisis deepens, but trade complaints have been lodged within the framework of the WTO. No country wants or can afford to fight a trade war outside this platform.

It is expected that more disputes will be brought to the WTO for negotiation, arbitration or litigation. China should be prepared to be involved in more WTO lawsuits than ever.

In fact, China has been sued and filed suit less within the WTO than the US. It should learn to use WTO rules to protect its own interests.

Expect more trade disputes. It will take time both for China to learn to maneuver within the global trade system, and for the world to fully accept a new, growing player.

But most importantly, keep the door open to trade.