WTO entry helps China pull it off

NEW DELHI: Beijing can certainly teach the world how to swim with the sharks in Cancun without being eaten alive. Instead of buying more from American and European farms after joining the WTO, China has actually become an even larger net exporter of agricultural products in its very first year as WTO member.

More importantly, China’s agricultural exports to US rose 23% to cross the $1bn mark for the first time. In contrast, US exports to China increased by only $128m. The lesson for India is clear: if you really know how to fish, you can reel in any shark you want.

After joining WTO in ’01, China’s agricultural exports surged 13.3% in ’02, while its farm imports rose only 3.5%. China’s $1.5-bn rise in farm exports exceeded the $369m increase in farm imports by more than $1bn. As a result, its trade surplus in farm products shot up to a whopping $2.2bn in ’02 (January-December).

Both the US and EU were keen that China join the WTO because many analysts had predicted that its WTO commitments to cut tariffs, reduce the role of state trading monopolies, and streamline regulations would open China’s markets to greater imports. Its commitment to remove export subsidies was expected to make its corn and other grain uncompetitive in world markets.

However, export of corn and horticultural products like vegetables, fruits and nuts have added more than $1bn to China’s $1.5-bn increase in farm goods exports last year. Instead of dropping, corn exports touched 11.7m tonnes in ’02, increasing $542m in value.

The joker in the pack, of course, was China’s export of consumer-oriented farm produce. Most forecasts relating to China’s WTO accession focused on prospects of greater imports of bulk commodities such as grain, cotton and soyabeans. Less attention was paid to China’s emergence as a major exporter of vegetables, fruits, meat products and processed foods. As these products are labour-intensive and need less land per unit of output, they are well suited to China’s land-scarce, labour-abundant economy.

During ’02, these goods were worth $6.7bn in exports, accounting for more than 60% of all farm exports.

Trade pundits, particularly in the US government, expected China’s new tariff rate quota (TRQ) system to boost imports of key commodities (rice, wheat, corn, cotton, wool, vegetable oil and sugar), whose trade was tightly controlled by PSUs before WTO accession.

China’s WTO agreement set quotas for imports at tariffs as low as 1%. China was not required to fill these quotas, but imports of commodities under TRQ were expected to rise due to the combined effects of low tariffs and extension of importing rights to all potential end-users.

But American trading companies were in for a rude shock. The TRQ system did little to boost imports during ’02, and the quotas were largely unused. Its imports of wheat, corn, rice and rapeseed oil amounted to less than 10% of their respective quotas. Business was especially bad in corn, cotton and wheat, where US is competitive in the China market. Palm oil, where US is not a player, was the only commodity whose quota was nearly filled. In total, import of farm goods under TRQs amounted to just 20.8% of the total quotas set for ’02.

Though one reason for the drop in import of wheat, corn and rice were the adverse world market conditions, which made trade uneconomic during the latter half of ’02, Beijing’s administration of the TRQs also may have had something to do with it. China also successfully disrupted soyabean imports from US in ’02 by its vaguely worded regulations for GM foods.

In the coming years, China will remain an important importer of corn, wheat and soyabeans, apart from processed foods to meet growing consumer demand, which is fuelled by rising incomes. But it is unlikely to be averse to using all tricks in the book, such as phytosanitary measures, tightened inspection rules, delays in approval of TRQs, new domestic regulations for importers, indirect taxes and fees, to restrict the imports. Simultaneously, China will become an increasingly important source of inexpensive vegetables, fruits, fish and processed foods by raising food safety standards and quality, giving stiff competition to others. As they say, “It’s not the game which matters, but it’s the skills you bring to it.”

A proposed solution to China's trade war against the USA. said trade war already in progess at a store near you.

In no particular order of importance.

1. Get rid of government subsidies for offshore investment of US companies. OPIC is the first such program which should go but support of World Bank programs that subsidize the outflow of Capital would be another.

2. Use tariffs on those nations which are engaged in unfair trade practices such as currency manipulation (China and India for example), those nations which refuse to open their markets to US products (China for example with its 50% tariffs on US consumer goods and non tariff barriers), those nations that subsidize competition to American Industry (airbus for example) and those nations which have slave conditions for their workers.

3. Use tariffs and other means to prevent the relocation of jobs offshore that are essential to the national defense. If necessary take control of the company seeking to export vital technology or industry by means of eminent domain (No I do not like this last option and I will only defend its use as an absolute last resort like say in the case of rare earth magnets essential to smart bomb technology). Provide a hardened, widely distributed infrastructure to supply all that is needed for our military units and civil defense that can be continued to be deployed in the event of any military attack.

4. An immediate end to guest worker programs. If people wish to come to the USA to work and make a life let them immigrate according to the rules.

5 Provide economic development zones where the corporate income tax is zero for operations within these zones. In order to operate in this zone a company must agree to only purchase American components if available and employ only American citizens or legal immigrants in these operations. These economic development zones shall be eventually be expanded to include every bit of every state once the benefits are shown I would like them to be totally implemented immediately but I realize4 that may be overreaching.

6. Scale back unnecessary regulation including the tort system. Institute a cap on punitive damages, limits on class action suits, and limits on liability to the actual percentage of liability with no plaintiff able to collect if said plaintiff was involved in the commission of a felony at the time of the alleged tort or was more than 49% negligent in the alleged tort. Note that the loser in a frivolous lawsuit shall pay the attorney fees of the winner. There are many other regulatory structures that also need to be included that need to be included such as repealing the Family leave mandate, getting rid of OSHA etc.

7. Increase the domestic content in purchases by the Department of defense and give absolute preference in non-domestic content to proven allies of the USA over say the French or Germans. The only reason any content for DOD purchase may come from non US allies is that content is not available elsewhere and is essential.

8. Do not allow expense involved in moving operations overseas to be included in business expenses under the IRS code.

9. Prosecute for perjury anyone who has made a false statement in order to employ an H1B or L1 visa worker. I will be lenient on the actual perjurer if he/she was ordered to make this false statement and he/she provides testimony to aid in the conviction of the person ordering the perjury. Just because a person is a CEO does not give them a pass on criminal behavior.

10. Prosecute anyone who orders the transfer of vital defense technology or funds a R&D project that could be of use to our military overseas except to strong allies of the USA. Make the necessary enhancements to our espionage laws so that continued support or funding of any R&D in a nation whose government has threatened the USA is guilty of espionage. The UK and Australia come to mind as meeting these criteria for being eligible for transfer of technology first. There will be other nations and a gradation of what can be transferred to which specific nation. Under no circumstances may technology be transferred to any nation whose government has threatened the USA within five years without a complete change of government or specific exemption from Congress and the administration.

11. Deport all illegal aliens immediately and take measures that prevent the entry of any more illegal aliens. Fine all companies knowingly employing illegal aliens Criminal sanctions should be imposed on anyone helping an illegal alien stay in the USA in violation of our laws.

12. Decrease the punishing levels of taxation on companies and eliminate the double taxation on corporate dividends. See effects of item 5 for how minimal this will be if item 5 covers the entire USA. Eliminate all IRS provisions that inhibit free use of independent contractors by businesses for example section 1706.

13. Eliminate the minimum wage so that the worker can be paid based on productivity. Overtime compensation will remain the same but instead of 150% of the "wage" the worker would receive 150% of the production pay. If one through 13 are enacted # 14 becomes an irrelevancy as no one will be working for that low a wage.

Now since I started posting this plan another idea has come up that in my opinion is a very good policy that stands on its own. Now I give credit to Jim Gibson and Freeper Ed_in_NJ for coming up with the idea, separately to the best of my knowledge. However I can be corrected on that. The tariff phrasing is from Jim Gibson.

“I suggest that the US Customs Department charge a $1,000-per-container inspection fee on every container entering the United States. This fee would be used to completely fund the cost of inspections. If we assumed that a four-man team could fully inspect two containers a day or about 500 per year, it would require 48,000 inspectors. Allowing for at least 2,000 support personnel, we would need at least 50,000 workers. Because these workers would require high intelligence and skill levels they should earn at least $30 per hour. At 40-hour weeks plus benefits, I estimate the cost per worker to be over $75,000 per year, all paid by the foreign manufacturers. Even so, this would still leave over $2.25 billion to cover all other costs. Any revenue not used would be used to compensate American workers displaced by foreign imports. “

I urge and encourage everyone who agrees with this plan and or the terror tariff idea to communicate this to every politician you can think of.

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