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People in Focus
Special> Sino-U.S. Economic & Trade Relations> People in Focus
UPDATED: August 24, 2007 NO.35 AUG.30, 2007
Silent Majority Speaks Out
Economists urge U.S. legislators not to impose trade penalties on China
By DING ZHITAO
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It is said that history tends to repeat itself. Seventy-seven years ago, 1,028 economists signed a petition urging the U.S. Congress and President Herbert Hoover to reject a protectionist trade bill against imported goods. This August saw a very similar scene when exactly 1,028 leading U.S. economists warned Congress not to impose retaliatory trade measures against China.

Economists in Beijing believe the recent petition indicates that U.S. economists understand the trade interrelation and interdependence between China and the United States and that they have a responsibility to voice their concerns about it.

"That silent majority will stand out at critical moments," said Zhou Shijian, a renowned expert on international economic and trade issues. "Economists cannot take a wait-and-see attitude when they sense a problem ahead."

A week before the petition was issued, related U.S. Senate committees passed two bills threatening punitive trade measures against China. It has been reported that the U.S. Congress is considering about 50 more bills. On July 26, the Senate Finance Committee approved legislation to impose duties against goods from countries with "fundamentally misaligned" currencies. China was believed to fall into this category. On August 1, the Senate Banking Committee passed a bill to permit the U.S. Department of the Treasury to take new measures to press China to change its current currency policy.

Protectionist bills to punish China will cause a backlash in the United States, because trade between the two countries has evolved into a highly interdependent relationship, said Zhou. He added that the United States needs China's inexpensive products and China needs the U.S. market to sell its goods.

"Seeking a fast rise of the yuan will be a lose-lose deal for the two countries," Zhou said. During last Christmas season, the price of toys made in China and sold in the United States rose by 10 percent due to the yuan's appreciation, he added.

The U.S. economists' petition echoes their Chinese counterparts' concerns. "American consumers and business would pay the price for this senseless war through higher prices, worse jobs and reduced economic growth," the 1,028 U.S. economists from 50 states and top universities wrote in their petition published in The Wall Street Journal on August 2.

Punitive measures are helpless to correct the trade imbalance between China and the United States, said Shang Ming, Director General of the Department of Treaty and Law at the Ministry of Commerce. The competitiveness of the United States will not improve if the country limits imports from China, so the U.S. trade deficit will remain, he said.

According to Reuters, U.S. Treasury Secretary Henry Paulson also said he was against "making trade a scapegoat" shortly after he ended a trip to Beijing in early August. "Enacting protectionist legislation would make us worse off," Paulson said at the time.

U.S. Congress probably would not pass protectionist legislation, because multinational companies would protest such a move, Zhou said. In 1992, multinational corporations persuaded some congressmen to drop their stance against postponing China's Most Favored Nation status. The multinationals convinced the legislators that adding higher tariffs to Chinese exports would shrink the amount of products coming from China and ultimately hurt American business in China and U.S. exports to China, Zhou said.

The recent petition will exert a subtle influence on the U.S. Congress, because what it calls for is in the best interest of the United States, Zhou said. Legislators would likely consider the economists' viewpoint, because the group is more objective than other interested parties such as multinationals, Zhou added.

The United States should take note of China's effort to balance trade between the two sides, Chinese observers said.

China purchased commodities worth $16.2 billion from the United States in 2006, according to Ministry of Commerce statistics. In May 2007, Chinese entrepreneurs signed more than 100 purchase agreements with the United States, which totaled more than $30 billion.

In late 2006, China also renamed its biennial Export Commodities Fair in Guangzhou, capital of Guangdong Province in the country's south, the Import and Export Fair in an effort to boost imports to China.

Measures that contribute to healthy trade relations between China and the United States are not the result of boycotts or threats, Shang said. "Negotiation and dialogue are the best way to reach the goal," he added.

"We should sit down and talk, instead of saying or doing things that try to hurt each other," said Zhou, adding that he is optimistic about the petition's potential effect.

"Hopefully, history will not repeat itself again," Zhou said, pointing out that in 1930, neither the U.S. Congress nor the president listened to the economists, and the Great Depression followed.

 



 
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