[NOTEBOOK]How to Tame the Chinese Trade Dragon

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[NOTEBOOK]How to Tame the Chinese Trade Dragon

When it comes to international trade disputes, China's response is unpredictable. In some cases it takes clear, direct retaliatory action. In other cases, its strategy only becomes visible in retrospect.

An example of China taking a direct approach is its recent imposition of a retaliatory tariff on Japanese goods. The Chinese government made it clear that the tariff was introduced because of a safeguard Japan had placed on Chinese goods: Japan had banned imports of three farm products from China, including leeks. China responded by increasing tariffs on three Japanese products, including cars.

But China's reasoning when it announced that it was starting an anti-dumping investigation into imports of lysine was rather more circuitous. Lysine is an additive for animal feed, and Korea holds about a 70 percent share of the Chinese market. China failed to mention whether its investigation had something to do with the Korean government's earlier restrictions on imports of Chinese poultry products because of an outbreak of "bird flu." The Korean government emphasized that the virus was detected using the global standard testing method and invited China to come and see the results for itself. But China will not acknowledge the invitation.

China also implemented strong, direct action in the garlic dispute with Korea in April. China said then that Korea had imported only 22,000 of the 32,000 tons of garlic it had promised to import. China threatened to ban imports of Korean mobile phones and polyethylene if Korea would not agree to import the garlic.

So in which cases does China choose to respond clearly and with strength? Usually, it is when it finds a plausible excuse or weak spot in other nations, analysts say.

Think back to China's retaliation against Japan. If we look again, we can see that other factors in the situation favored strong retaliation against the Japanese measure. Japan's safeguard measure on Chinese goods was implemented toward the end of Prime Minister Yoshiro Mori's rule. His popular support had hit rock bottom and he was desperate to win the votes of farmers - and thus he banned cheap Chinese farm product imports. But then Junichiro Koizumi took over as prime minister, with a cabinet that enjoyed a popular support rating of 70 percent. Analysts say China knew the Koizumi cabinet felt less concerned about the farmers' vote, so chose that moment to retaliate.

There was also some calculation involved in the garlic case with Korea. China was sure that Korea would not be willing to give up its mobile phone market in China for the sake of 10,000 tons of garlic. So China flexed its muscles.

The problem is, which mouse will bell the cat and put a check on China's actions? Japan is not in a position to. It relented after China imposed its retaliatory tax and has decided to send a negotiation team to Beijing. And the Japanese textile industry suddenly cancelled a request for an anti-dumping investigation into Chinese knitted garments on June 20.

It would be difficult for Korea to stand up to China because of China's might, the sources of which are its 1.3 billion population, annual growth rates of 7 or 8 percent a year and the endless flood of foreign investment into the country.

The way to tame the giant can be glimpsed, I think, in the United States' willingness to accept China into the World Trade Organization even after it lost face in the U.S. Navy reconnaissance plane collision incident. The United States realizes that once China has made a full debut on the international stage, it will feel much more compelled to behave in a "gentlemanly" manner.

To prepare, our government and corporations should educate their personnel in Chinese affairs.

Thanks to our long historical relations, Korea understands Chinese sentiment well. If we make the effort, we may have a special advantage that other countries cannot imitate.


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The writer is international economic news editor of the JoongAng Ilbo.


by Shim Shang-bok

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