Chinese School - Economist foresees US trade sanctions against China

BIZCHINA / Center

Economist foresees US trade sanctions against China

(Xinhua)
Updated: 2007-07-04 15:10

American economist Stephen Roach believes there is a strong chance the
United States will impose trade sanctions on China before the end of the
year.

"The biggest challenge facing the world economy that I can see is the
trade protectionism that is building up between the United States and
China," he said in an interview with Xinhua during a visit to Beijing in
his new role as chairman of Morgan Stanley's Asia operations.

Roach has testified in the US Congress three times from February to May
on US-China trade issues. "This is very rare. It shows me that the
American Congress is very serious about taking actions against China," he
said.

The Chinese government protested solemnly on Friday against the
"indiscriminate and automatic" detention of some of China's aquatic
products by the United States, the latest in a line of food safety issues
that have arisen between the two countries and one that Chinese analysts
feel might be a prelude to a twist in the China-US trade ties.

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"In its rush to impose trade sanctions on China, the US congress risks
making a policy blunder of monumental proportions," Roach said.

"We don't have a bilateral problem with China. We have a multilateral
problem here. Blaming deficits on China won't fix anything," Roach said.

The United States registered US$836 billion in trade deficit last year.
The Chinese bilateral deficit of US$232 billion represented the largest
portion - 28 percent - of America's overall multilateral trade gap but
the deficits with other partners were three times as much, he explained.

"The United States runs trade deficits not because it is victimized by
unfair competition from China or anyone else but because it suffers from
a chronic shortfall in domestic savings," Roach said.

America's net national saving rate plunged to a record low of one percent
of the national income for the 2004-2006 period, leaving the United
States no choice but to accumulate trade deficits to attract foreign
capital.

Trade sanctions such as tax and countervailing duties are functional
equivalents of tax hikes on US consumers and American multinational
business. In response, China can put reciprocal tax on products sold to
the United States and diversify China's foreign exchange reserve from the
US dollar.

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