China pledged to lift its ban on U.S. pork on Thursday and the United States took a step toward easing restrictions on chicken imports as the two superpowers agreed to tackle a series of trade irritants.The bilateral agreement came as part of the 20th US-China Joint Commission on Commerce and Trade (JCCT) - a periodic, high-level meeting between the two countries' top trade and commercial officials. And it's a crystal clear example of what the United States can accomplish when it quietly negotiates with China on basic bilateral trade irritants. Indeed, according to China's CCTV, a total of 11 agreements were reached during the two-day JCCT summit in Hangzhou. Another Reuters story points has the details of a few of those agreements:
The flurry of trade accords between China and America comes ahead of President Barack Obama's visit to China in mid-November to reach agreements on currency, the environment and trade with its second-largest trading partner and the largest foreign holder of its government debt.
China's promise on pork sent U.S. hog futures higher on Thursday and also lifted the stock of Smithfield Foods Inc (SFD.N), the largest U.S. hog and pork producer.
"We're going to work through whatever details remain to try to get this done as expeditiously as possible," U.S. Agriculture Secretary Tom Vilsack told Reuters during a telephone interview from Hangzhou, where the countries held trade talks.
China is a top buyer of U.S. meat, chicken, soybeans and other products, purchasing $560 million worth of pork in 2008. China imposed the ban on U.S. pork five months ago following the outbreak of the H1N1 flu virus, also known as swine flu. The disease cannot be caught by eating pork.
China's Agriculture Minister Sun Zhengcai did not say when he would announce a formal end to the pork ban.
"He didn't put a specific timeline on it, but as you know President Obama is coming to China in a couple of weeks, and I don't know whether that is part of their calculation or not," Vilsack said.
China's willingness to lift its pork ban was not related to the recent move by Congress to end its ban on imports of Chinese poultry products, Vilsack said.
"I asked Minister Sun that specific question, and he was very emphatic in indicating that there's no connection," he said.
But Vilsack said his department will soon begin the process to review China's food safety laws and poultry plants with an eye to allowing U.S. imports of poultry meat....
Importantly for U.S. businesses, China agreed to treat products of U.S.-China joint ventures as local products in government procurement tenders, and would submit a revised offer to join the World Trade Organisation's government procurement agreement by 2010, U.S. Trade Representative Ron Kirk said.These are also quality agreements (assuming of course, that the Chinese follow through). Kudos to the participants, including USTR Kirk, Commerce Secretary Locke and Agriculture Secretary Vilsack, for their good work.
China will remove its local content requirement in tenders for wind power equipment, Zhang Guobao, head of the National Energy Administration, said.
Unfortunately, today also provided a stark contrast to the JCCT pleasantries and an equally clear lesson on what happens when US politicians forego quiet diplomacy and start with the chest-thumping. Here's the AP with the latest:
China has told the U.S. that it will take steps that could lead to higher tariffs on imports of autos made by GM, Chrysler and Ford.
Steve Collins, president of industry trade group the American Automotive Policy Council, said Wednesday that U.S. officials have told the three Detroit automakers that China is expected to begin an investigation under anti-dumping [me: and apparently anti-subsidy] laws into their business practices as soon as next week.
If the investigation concludes that the companies receive government subsidies, or sell products in China at below-market prices, China could slap tariffs on U.S. auto imports.
The move is the latest trade dispute between the two countries, which are already fighting over steel pipes, chicken products, and pirated movies and music. The trade spats worsened after the Obama administration last month announced up to 35 percent duties on Chinese-made tires, to be imposed for the next three years....
GM and Chrysler have received billions of dollars in aid from the government's $700 billion bailout fund, though Ford has not....
Total auto sales in China so far this year have surpassed those in the U.S., giving China a wide lead over the U.S. as the world's top auto market. Through September, 9.66 million vehicles were sold in China, up 34 percent from the same period last year.As the AP story indicates (and as I've discussed previously), the autos case and a far bigger case against US Chicken parts were filed immediately after the President's decision to impose prohibitive tariffs on US tires under Section 421 of US Trade Law. Both cases demonstrate how China reacts when US politicians decide to "get tough" and pursue direct, unilateral trade actions against the PRC in order to change Chinese behavior. (Hint: they don't like it.)
During the same time, U.S. sales plunged 27 percent to 7.8 million units, according to Autodata Corp., a research firm.
Sales in China are expected to continue climbing to 12.6 million units in 2009, while analysts say U.S. light vehicle sales for the year will wind up around the 10.5 million level.
Now, the AP article correctly points out that the Chinese market - while quite important to the future of US automakers - does not import many (only about 9000 in 2009) "Big 3" cars because the American automakers mostly sell their Chinese-made cars in China (a common phenomenon for a lot of allegedly "offshored" US products, by the way). On the other hand, the autos case could still be important for two reasons: (1) once anti-dumping or countervailing duty (CVD) orders are in place, they tend to stick around for a long, long time, so any resulting tariffs could (if high enough) prevent the Big 3 from shifting business strategies and shipping more US-made cars to China if/when market dynamics change; and (2) the case could lead to "copycat" CVD cases against bigger US exporters that receive government funds (including loans, tax breaks, etc.) if the Chinese investigations find that broad-based government subsidy programs like the TARP, the Stimulus*, or any other major bailout are illegal. (Indeed, this copycat strategy occurred when the United States reversed its longstanding policy and began conducting CVD investigations of Chinese imports in 2006 - the many subsequent cases routinely targeted the same Chinese subsidy programs alleged in the original case.) So while small in value, the autos case could have significant implications down the road, as could the Chicken subsidies case.
The pork and autos examples clearly demonstrate that there's a right way and a wrong way to get China to liberalize its markets and obey international trading rules. The right way is quiet bilateral diplomacy and, where that fails, multilateral dispute settlement at the WTO. It produces results (and the recent US wins at the WTO are also testament to this fact). The wrong way is direct unilateral potshots like the Section 421 decision or long-threatened tariffs attacking China's alleged currency manipulation. That path leads only to Chinese retaliation and further pain for US exporters and consumers. In other words, it's stupid.
Fortunately, it looks like the Obama Administration might be figuring this dynamic out, albeit slowly and clumsily. According to another report on the JCCT summit, USTR Kirk suggested that the bilateral summit occur twice a year. If true, that's a very good sign that US-China trade relations are once again headed in the right direction.