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Sino-US tensions over trade and Taiwan

Updated On: Apr 03, 2007

China is fuming over new Washington’s decision to impose tariffs (preliminary duties ranging from 10.9% to 20.4%) on made-in-China glossy paper and labeled the decision as “unacceptable”. 

The move by Washington is not totally unexpected given the Democratic control of the Congress and it is only a matter of sooner than later that the US government moves on trade ties with Beijing

Chinese Commerce Ministry’s spokesman, Wang Xinpei, said Beijing was strongly dissatisfied with the US move, and “reserved all rights to safeguard China’s legitimate rights”.  A demand was hence made to the US to reconsider its decision and “make prompt changes”. 

He also added Chinese disappointment as such action went against a newfound spirit of dialogue between the two superpowers given their closely-linked agendas of denuclearizing North Korea and willingness to use soft power to persuade Tehran to give up nuclear weapon:  “This action of the US side goes against the consensus reached by the leaders of both countries to resolve disputes through dialogue”.

Washington cited Chinese government subsidies (in the form of government grants, tax incentives, debt forgiveness and other unfair subsidies) as the reason for the latest move. 23 years after not touching items such as paper originating from China, US Commerce Secretary Carlos Gutierrez’s announcement of the tariffs is in line with China critics who argue that a different China was in play and that a different set of economic strategies were needed to cope with rising Chinese economic power and to fix a soaring trade deficit with China, which rose to US$200 billion (S$300 billion) in 2006. On glossy paper alone, US manufacturers are losing out to more than doubled importation of Chinese products in 2006 valued at US$224 million.

This also signaled the failure of the conciliatory approach advocated by US Treasury Secretary Henry Paulson to continue warm ties on the economic front based on a common consensus on the issue of piracy and the devaluation of the yuan. The economic doves have lost on this count. Washington’s decision on glossy paper will encourage lobby groups ranging from semiconductor to steel to furniture industries to do the same for their products. These industries have been suffering from inability to compete with cheap Chinese imports which have flooded the US market.

A warning of more to come seemed to be suggested by Mr Gutierrez who insisted that the US was 'demonstrating its continued commitment to leveling the playing field for American manufacturers, workers and farmers'. Lurking in the background are unresolved US complaints of unfair trade practices at the World Trade Organization against China. However, as a caveat, the Commerce Department offered an olive branch to the Chinese. US Commerce Secretary added that the decision did 'not signal any economic retreat from engagement with China'.  In response, China appeared prepared to “appease” the US in the trade arena by preparing a plan to buy some US$19 billion in US goods.

However, in another area of tension, China has stood firm.

Less than a week ago, China's ambassador to the United States called on Washington to stop selling military weapons to Taiwan and sending 'the wrong signals' what China considers as a renegade province. Ambassador Zhou urged the United States to 'honour and adhere' to its one-China policy and 'stop selling advanced weapons to Taiwan and stop sending wrong signals to the Taiwan independence forces'.

'We hope that the US side will work with China to oppose and repulse any form of Taiwan independence activities by the Chen Shui-bian authorities to maintain peace and stability in the Taiwan strait and safeguard the shared strategic interests of both our countries,' Mr Zhou said. 'So what I am trying to say is that the question needs to be handled with great care, great caution and the United States has a commitment to China...and the essence of that is one China,' he said. 'And we hope the United States government will honour its commitment to China, not only in words but also in deeds,' he said.

As China warns the US over arms sales to Taiwan, Taiwan is moving ahead with its independence drive. 'What we've been after is the right to determine the future by ourselves, of the 23 million people here,' President Chen said at a meeting with his own party. President Chen said the 'great China identity' was preventing Taiwan from becoming a 'normal and complete country'. 'The great China identity has ... relegated Taiwan into a local government.'

Chinese ambassador to Washington was firm in warnings to Taiwan and other third parties that China 'will never tolerate Taiwan's independence or allow anyone to separate Taiwan from the motherland... through any means'. The Ambassador accused Taiwanese President Chen Shui-bian of being 'more reckless and dangerous' by pursuing independence. 'The Taiwan questions bears on the sovereignty and territorial integrity of China, involves China's core national interest and touches upon the national sentiments of the Chinese people,' Mr Zhou said. (2 April 2007)

Sources:

China fumes over new US tariffs (Straits Times, 1 April 2007)

Taiwanese rally in support of Chiang legacy (Channelnewsasia, 1 April 2007)

China prepares plan to buy US$19b in US goods (STI, 2 April 2007)

Taiwan president calls for island's new identity (Straits Times, 1 April 2007)

Chinese envoy warns US over Taiwan (Straits Times, 29 March 2007)