May 16, 1996
PRESIDENT CLINTON will not allow himself to be seen as soft on China's cheating on trade commitments during the election campaign. The trade war that continued building yesterday probably will be contained until November and resolved later. It has the virtue of being about genuine trade issues and not about other matters in dispute between two great countries.
U.S. officials say that Chinese firms pirated U.S. music, films, books, software and patents to the annual tune of $2.3 billion in lost sales since China agreed in February 1995 to stop the practice. Since the army and privileged persons operate some of the 31 identified pirate disc plants in China, largely in the free-wheeling south, the Beijing regime may not be able to shut them down. Neither government is prepared to admit that.
The U.S. after long aggravation has released a list of some $3 billion in products, largely textiles and consumer electronics, to be culled to $2 billion, liable to punitive duties up to 100 percent unless there is an agreement by June 17. Except in silk, these are goods that manufacturers in other cheap labor countries can replace. So Washington hopes the effect on the U.S. consumer will be slight before November, though some rise in prices might be expected when supply shortens. While some U.S. retailers and importers could be hurt, U.S. manufacturers and creators are assuaged.
If implemented, this could be the largest trade punishment of all time. But the Chinese are prepared and their retaliation list is conspicuously moderate. It includes equally punitive import duties on U.S. cars, vegetable oils and cotton. But it omits the import in which the U.S. interest is highest, Boeing airliners that compete with European Airbus. That way, the Chinese can hold airliners hostage for the next round should this strife get worse.
Demanding enforcement of an existing agreement helps President Clinton's determination to keep China on the most favored nation list. The idea is not to escalate the trade war but to limit it. And to win the points. In the long run, more trade is in everyone's interest. When carrying out a trade war, that goal should always be kept in mind.
Pub Date: 5/16/96
