China says no to trade protectionism to fight crisis

Special Report:Global Financial Crisis

BEIJING, Feb. 9 (Chinese media) -- As the "Buy America"

provision raises alarms against trade protectionism among state leaders and

economists, China on Monday said "no" to a similar plan that bans foreign

products in domestic stimulus projects.

"We won't practice 'Buy China'," said Vice Commerce

Minister Jiang Zengwei at a press conference. "We'll treat domestic and foreign

products equally as long as they are needed."

The U.S. Senate last week voted to soften, not

remove, a provision in its roughly 900 billion-U.S. dollar stimulus plan that

requires all public works projects funded by stimulus dollars to use only

U.S.-made iron and steel.

The provision has invited concerns from major trading

partners of the United States, including Europe, Canada and Japan. Economists

warned it could trigger trade wars.

CHINA ON

ALERT

"Why should we turn to trade protectionism under the

current situation (of global financial crisis)?" said Jiang, noting that it's

impossible to meet a country's demand with only domestic products in the course

of globalization.

China must be wary of a possible protectionism, said

Zhang Xiaoji, a foreign economic relations researcher at the Development

Research Center of the State Council, a think tank under the Cabinet.

The country, which relies heavily on its exports,

will suffer a heavy blow if trade protectionism gains influence in the face of

deepening global crisis, said Zhang.

Exports, which account for about a third of China's

total economic output, saw consecutive year-on-year declines in November and

December as foreign orders dwindled.

"We should not only oppose trade protectionism in

other countries but also support global trade ourselves," said Zhang, suggesting

opening up domestic market wider as China's trade surplus remains large.

He told Chinese media China's own massive stimulus package

will "certainly give a shot in the arm to the country's imports."

China unveiled a 4 trillion-yuan (586 U.S. dollars)

stimulus plan in November to boost domestic demand and prop up growth.

Chinese Premier Wen Jiabao said earlier this month

the government will send a purchasing group to Europe for importing advanced

equipment and technology.

During the week-long trip to Europe, he called on

nations to guard against trade protectionism, saying China will not purposely

seek a trade surplus.

With that move, China sent a clear signal of opposing

trade protectionism and call for other countries to join the battle, said Zhang

Yansheng, director of the International Economic Research Institute under the

National Development and Reform Commission.

Major economies like China and the United States

should take on the responsibility of making themselves examples of resisting

trade protectionism, said Zhang Hanlin, head of the China Institute for WTO

Studies with the University of International Business and Economics (UIBE).

"We'll buy your goods if you buy products from us,"

he said. "The bigger you are, the heavier the duty you have."

PROTECTIONISM A

DOUBLE-EDGED SWORD

Trade protectionism seems to protect domestic

industries and jobs but actually hurts the interests of every country, said

ZhangXiaoji.

"It's a double-edged sword," he said. "While

exporters suffer from restrictions, consumers in the importing country will be

forced to buy more expensive domestically made goods."

Moreover, impeded international trade could risk

prolonging the spreading economic woes, as proved by history, he said.

In the 1930s, sweeping trade wars sharply slashed

international trade and contributed heavily to the decade-long Great Depression,

as most economists have concluded.

The worldwide protectionist tide was triggered by the

U.S. Smoot-Hawley act in 1930 that raised tariffs on foreign imports by an

average of 20 percent.

"In logical thinking, such a huge mistake will not be

repeated," said Zhang Xiaoji. "But today's world trade rules are not perfect ...

Politicians can easily turn to protectionism in the wake of rising unemployment

amid deepening crisis."

In Spain, authorities started in November to pay

lump-sum unemployment benefits to immigrants who went home and stayed away for

three years.

Late in January, thousands of people went on strike

across Britain over the use of foreign labor.

Despite signs of protectionism in some countries,

things are unlikely to lead to trade wars, said UIBE trade expert Zhang

Junsheng.

He said the World Trade Organization rules out the

possibility of tariff hikes and state leaders will be more careful to avoid

trade wars.

When meeting in Davos last month, leaders from

Britain, Mexico, the Republic of Korea and South Africa called for a resumption

of stalled free trade talks to combat a dangerous turn to protectionism.

Mei Xinyu, an MOC trade expert, predicted a trend of

protectionism will last for a certain period, advising the Chinese government to

actively strive for fair treatment for its own industries.

That could be done by immediately reviewing whether

China's trading partners have breached the WTO rules, said Mei. He also

suggested applying anti-dumping and anti-subsidy duties appropriately.

Official: China not to practice "Buy

China"

BEIJING, Feb. 9 (Chinese media) -- China won't resort to

trade protectionism with a plan similar to the "Buy America" provision that bans

foreign products in domestic stimulus projects, said a Ministry of Commerce

(MOC) official here Monday.

"We won't practice 'Buy China'," said Vice Commerce

Minister Jiang Zengwei at a press conference. "We'll treat domestic and foreign

products equally as long as they are needed." Full story