US trade protectionism is harsh, more deceptive and targeted
By Wang Xiaosong |
China Watch |
Updated: 2018-07-30 16:14
In the ongoing Sino-US trade friction, the United States accused China repeatedly of conducting “unfair trade” and not fully opening its market. The Trump administration insisted to require China to open up market “on a reciprocal basis” in rounds of negotiations on solving the huge trade deficits. The US has long been preaching to the world that it is a free trade promoter and defender. However, it has implemented plenty of strict trade protectionism measures, some of which blatantly challenged WTO rules, and some, deceptively, wrecked other countries’ economy.
By comparing the US’ trade protectionism with China’s policies, we will see how American government protects domestic industries by setting a deluge of rigorous trade barriers and implementing various trade protection measures.
Comparison of tariffs in Chins and US
The US stressed the imbalance in car tariffs: China imposes 25 percent of tariff on imported cars while the US levies 2.5 percent on the same product. But the partial comparison does not reveal the whole picture.
According to the WTO statistics, in 2017, China’s simple average tariff rate on all products is 9.9 percent, on agricultural products is 15.5 percent, and on industrial products is 9 percent. Correspondingly, the rates of the US are respectively 3.5 percent, 5.2 percent and 3.2 percent in the same year. Seemingly, the overall tariff level of the US is lower. However, China, strictly abiding by the WTO rules, has slashed its tariffs and remains one of developing countries with the lowest tariff. In addition, the maximum tariff rates the US set for all kinds of products are all higher than those of China, also the proportion of products covered by extremely high tax rates. That means in the US, the tariff barriers in particular sectors are excessively high although the average protection level is low.
Furthermore, from the list of products with tariffs over 25 percent (as the figure the US mentioned) in both countries, it is clearly that the maximum tariff rate China set is 65 percent (on a few agricultural products, covering only 0.22 percent of all kinds). The goods with tariffs over 50 percent are mainly agricultural products like pipe tobacco and chemicals like DAP (diammonium phosphate). Among those with tariffs over 25 percent, only part of internal-combustion engines, televisions, information technology products and automobiles are capital-intensive industrial commodities, and others are all agricultural products and simply-manufactured goods. Certainly, imposing high tariffs on cars and other products reflects the Chinese government's goal of supporting the development of important industries, given the development stage of China, however, imposing high tariff on cars to support the industry is justified, especially since China has already lowered the rate to 15 percent, displaying its determination to open up.
Indeed, tariff as a tool of industrial protection also prevails in the US, and in certain areas, it is more harshly employed than in China -- the highest tariff the US imposes on tobaccos reaches 350 percent. Meanwhile, tariffs over 100 percent are levied on certain medicines, textile materials and precious metals, covering over 0.5 percent of all kinds; most textiles and clothing also are imposed high tariffs, ranging from 30 percent to 100 percent. One more thing worth mentioning is that although US tariff rate on cars is 2.5 percent, its rate on tractors is as high as 27.5 percent, and a 35 percent tariff is imposed on spare parts of autos such as AC and sound control signal equipment. The US also levies a 25 percent tariff on steel panels and springs, lightening equipment and engines of cars. Therefore, the US market is not as open as it claims to be, for they protect the car industry through constraining foreign goods in the upstream spare parts field, which is highly targeted.
In general, the proportion of products that China impose tariffs over 25 percent is 0.48 percent, while the figure of the US is 3.31 percent, which means a larger part of products is levied high tariffs in the US. The only reason why the country’s overall tariff rate is lower is that the US sets zero tariffs on a wide range of goods. Duty free products are allowed when US products are highly competitive in the field or they demand the foreign products of extreme low prices.
Comparison of non-tariff measures
The aim of the WTO and its predecessor GATT is to promote free trade, and the rounds of negotiations it organized lowered the tariffs worldwide. As a result, the developed countries represented by the US put more emphasis on non-tariff barriers in recent years to protect domestic market.
After China joined the WTO, comparing the non-tariff measures China and US adopted respectively will see that the US has initiated and implemented far more measures targeting on all WTO members than China did in sanitary and phytosanitary (SPS), technical barriers to trade (TBT) and special safeguard measures. In terms of quantitative restrictions, the US initiated more but implemented less, while both countries hardly used safeguards.
Concerning the bilateral measures, the US launched way more anti-dumping and countervailing cases than China, and has a much longer history in exerting these measures. Relating to the SPS, since the US is the framer of technical standards, a large quantity of related cases was initiated by the country, some leading to restriction measures. China was only involved in two similar cases.
Furthermore, regarding the non-tariff measures the two countries took against each other, the US launched more anti-dumping and countervailing measures against China than China did against the US. China never uses SPS to constrain US goods.
Non-tariff measures like anti-dumping usually lead to high import surtaxes, and in turn cause damaging results. But since these measures are legitimate according to WTO rules, they could constitute covert trade barriers.
Conclusion
After analyzing and comparing the original data from WTO official website, we could draw the conclusion that the trade protectionism of the US is harsh, deceptive and targeted. The country strictly protects its domestic market in certain sectors while calling for free trade and fair trade around the world. The slogans are made true only when the trade area is in line with their own interests. The problems of “unbalanced openness” that the US claimed of China also exist in themselves.
Admittedly, compared with the case of China, the average tariff level of the US is lower and its duty-free products take a larger proportion. However, the US imposes extremely high tariffs -- over 300 percent -- on certain goods, and the assortment of goods with tariffs higher than 25 percent outnumbers that of China. Especially, the US tariffs on auto industry is not as low as what they claim to be, for they only compared the two countries’ tariffs on cars, but “neglected” the important auto products and spare parts such as tractors and engines.
As the tariff becoming less effective, the US appears to be a frequent user of non-tariff trade barriers. The tools they employed such as anti-dumping and countervailing measures, directly hindered the commodities of trade partners from getting into the US market. Particularly, the US contained Chinese products harshly by means of wide and frequent combats since China joined the WTO.
In essence, trade protection measures do function in restricting products from abroad and enhancing domestic market. Throughout history, all the economies set trade barriers to realize economic goals except the UK, which once adopted complete free trade policies during the Victorian age. China and the US are no exceptions. The US government even supports industries at home at the cost of violating the WTO rules. According to the latest report released by the WTO trade policy deliberative organ, the US still attaches all kinds of subsidies to cotton, sugar and other agricultural products to add to their competitiveness, which was clearly prohibited by WTO rules and regulations. As a result, other members of WTO could do nothing but adopting protection measures as well to protect their own industries, both retaliating and “emulating” the practice of the US.
China, as a beneficiary of globalization and an advocate of free trade, was integrated into the world economic system in the course of opening up. Looking forward, China will open further in accordance with its own development stage, lower the trade barriers and make contributions to the sound development of world economy.
The author is researcher of National Academy of Development and Strategy, Renmin University of China (RUC), and professor of School of Economics, RUC. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
In the ongoing Sino-US trade friction, the United States accused China repeatedly of conducting “unfair trade” and not fully opening its market. The Trump administration insisted to require China to open up market “on a reciprocal basis” in rounds of negotiations on solving the huge trade deficits. The US has long been preaching to the world that it is a free trade promoter and defender. However, it has implemented plenty of strict trade protectionism measures, some of which blatantly challenged WTO rules, and some, deceptively, wrecked other countries’ economy.
By comparing the US’ trade protectionism with China’s policies, we will see how American government protects domestic industries by setting a deluge of rigorous trade barriers and implementing various trade protection measures.
Comparison of tariffs in Chins and US
The US stressed the imbalance in car tariffs: China imposes 25 percent of tariff on imported cars while the US levies 2.5 percent on the same product. But the partial comparison does not reveal the whole picture.
According to the WTO statistics, in 2017, China’s simple average tariff rate on all products is 9.9 percent, on agricultural products is 15.5 percent, and on industrial products is 9 percent. Correspondingly, the rates of the US are respectively 3.5 percent, 5.2 percent and 3.2 percent in the same year. Seemingly, the overall tariff level of the US is lower. However, China, strictly abiding by the WTO rules, has slashed its tariffs and remains one of developing countries with the lowest tariff. In addition, the maximum tariff rates the US set for all kinds of products are all higher than those of China, also the proportion of products covered by extremely high tax rates. That means in the US, the tariff barriers in particular sectors are excessively high although the average protection level is low.
Furthermore, from the list of products with tariffs over 25 percent (as the figure the US mentioned) in both countries, it is clearly that the maximum tariff rate China set is 65 percent (on a few agricultural products, covering only 0.22 percent of all kinds). The goods with tariffs over 50 percent are mainly agricultural products like pipe tobacco and chemicals like DAP (diammonium phosphate). Among those with tariffs over 25 percent, only part of internal-combustion engines, televisions, information technology products and automobiles are capital-intensive industrial commodities, and others are all agricultural products and simply-manufactured goods. Certainly, imposing high tariffs on cars and other products reflects the Chinese government's goal of supporting the development of important industries, given the development stage of China, however, imposing high tariff on cars to support the industry is justified, especially since China has already lowered the rate to 15 percent, displaying its determination to open up.
Indeed, tariff as a tool of industrial protection also prevails in the US, and in certain areas, it is more harshly employed than in China -- the highest tariff the US imposes on tobaccos reaches 350 percent. Meanwhile, tariffs over 100 percent are levied on certain medicines, textile materials and precious metals, covering over 0.5 percent of all kinds; most textiles and clothing also are imposed high tariffs, ranging from 30 percent to 100 percent. One more thing worth mentioning is that although US tariff rate on cars is 2.5 percent, its rate on tractors is as high as 27.5 percent, and a 35 percent tariff is imposed on spare parts of autos such as AC and sound control signal equipment. The US also levies a 25 percent tariff on steel panels and springs, lightening equipment and engines of cars. Therefore, the US market is not as open as it claims to be, for they protect the car industry through constraining foreign goods in the upstream spare parts field, which is highly targeted.
In general, the proportion of products that China impose tariffs over 25 percent is 0.48 percent, while the figure of the US is 3.31 percent, which means a larger part of products is levied high tariffs in the US. The only reason why the country’s overall tariff rate is lower is that the US sets zero tariffs on a wide range of goods. Duty free products are allowed when US products are highly competitive in the field or they demand the foreign products of extreme low prices.
Comparison of non-tariff measures
The aim of the WTO and its predecessor GATT is to promote free trade, and the rounds of negotiations it organized lowered the tariffs worldwide. As a result, the developed countries represented by the US put more emphasis on non-tariff barriers in recent years to protect domestic market.
After China joined the WTO, comparing the non-tariff measures China and US adopted respectively will see that the US has initiated and implemented far more measures targeting on all WTO members than China did in sanitary and phytosanitary (SPS), technical barriers to trade (TBT) and special safeguard measures. In terms of quantitative restrictions, the US initiated more but implemented less, while both countries hardly used safeguards.
Concerning the bilateral measures, the US launched way more anti-dumping and countervailing cases than China, and has a much longer history in exerting these measures. Relating to the SPS, since the US is the framer of technical standards, a large quantity of related cases was initiated by the country, some leading to restriction measures. China was only involved in two similar cases.
Furthermore, regarding the non-tariff measures the two countries took against each other, the US launched more anti-dumping and countervailing measures against China than China did against the US. China never uses SPS to constrain US goods.
Non-tariff measures like anti-dumping usually lead to high import surtaxes, and in turn cause damaging results. But since these measures are legitimate according to WTO rules, they could constitute covert trade barriers.
Conclusion
After analyzing and comparing the original data from WTO official website, we could draw the conclusion that the trade protectionism of the US is harsh, deceptive and targeted. The country strictly protects its domestic market in certain sectors while calling for free trade and fair trade around the world. The slogans are made true only when the trade area is in line with their own interests. The problems of “unbalanced openness” that the US claimed of China also exist in themselves.
Admittedly, compared with the case of China, the average tariff level of the US is lower and its duty-free products take a larger proportion. However, the US imposes extremely high tariffs -- over 300 percent -- on certain goods, and the assortment of goods with tariffs higher than 25 percent outnumbers that of China. Especially, the US tariffs on auto industry is not as low as what they claim to be, for they only compared the two countries’ tariffs on cars, but “neglected” the important auto products and spare parts such as tractors and engines.
As the tariff becoming less effective, the US appears to be a frequent user of non-tariff trade barriers. The tools they employed such as anti-dumping and countervailing measures, directly hindered the commodities of trade partners from getting into the US market. Particularly, the US contained Chinese products harshly by means of wide and frequent combats since China joined the WTO.
In essence, trade protection measures do function in restricting products from abroad and enhancing domestic market. Throughout history, all the economies set trade barriers to realize economic goals except the UK, which once adopted complete free trade policies during the Victorian age. China and the US are no exceptions. The US government even supports industries at home at the cost of violating the WTO rules. According to the latest report released by the WTO trade policy deliberative organ, the US still attaches all kinds of subsidies to cotton, sugar and other agricultural products to add to their competitiveness, which was clearly prohibited by WTO rules and regulations. As a result, other members of WTO could do nothing but adopting protection measures as well to protect their own industries, both retaliating and “emulating” the practice of the US.
China, as a beneficiary of globalization and an advocate of free trade, was integrated into the world economic system in the course of opening up. Looking forward, China will open further in accordance with its own development stage, lower the trade barriers and make contributions to the sound development of world economy.
The author is researcher of National Academy of Development and Strategy, Renmin University of China (RUC), and professor of School of Economics, RUC. The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
All rights reserved. Copying or sharing of any content for other than personal use is prohibited without prior written permission.
