Sunday, 21 February 2010

US hangs tough

Hard-hit by the recession, rising feed costs and the ‘swine flu’ scare, the pork industry in the United States cheered when China announced that it was lifting a seven-month ban late last year.

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Guanyu 道 said...

US hangs tough

By Chua Chin Hon, US Bureau Chief
20 February 2010

WASHIINGTON: Hard-hit by the recession, rising feed costs and the ‘swine flu’ scare, the pork industry in the United States cheered when China announced that it was lifting a seven-month ban late last year.

‘Our producers have been losing their shirts the last couple of years, and China closing its market has been very painful for us,’ said Mr. Nick Giordano, the vice-president and counsel for international affairs at the National Pork Producers Council.

Renewed access to the growing Chinese market - which hit a record US$690 million (S$974 million) in 2008 - could mean the difference between a return to profits, or a third straight year of red ink for the battered industry.

But the trouble is, US pork exports to China have not resumed since, according to Mr. Giordano.

Politics, rather than pork, is the real sticking point, reckoned pig farmer Ron Juergens.

‘If we put extra tariffs on things that China is exporting to the US, then China is going to find some ways to put tariffs on things that we are exporting to them. They play their games,’ he said in a phone interview from his farm in western Iowa.

Indeed, both countries have been engaging in a series of tit-for-tat disputes on the trade front since September, when the Obama administration first slapped new tariffs on imports of Chinese tyres. Beijing retaliated by launching anti-dumping probes into US automotive products and chicken.

Washington struck again in late December by imposing new duties on Chinese steel pipes, prompting Beijing to slap similarly hefty tariffs on US poultry this month.

Analysts see these increasingly frequent and noisy spats, which are followed in lockstep by US complaints about the value of the yuan, as the inevitable consequences of the massive trade gap between the two countries. The US’ trade deficit with China last year fell by 15.4 per cent from the 2008 record high of US$268 billion, but it is still the largest imbalance with any country.

While specific disputes typically die down as quickly as they emerge, observers here have been wondering if overall US-China trade tension could escalate to new heights this year, given that a distinct chill has already settled into bilateral ties due to the Google dispute and the proposed arms sale to Taiwan.

A growing number of commentators in the US have already expressed worries that the trade spats could spin out of control, given Beijing’s growing assertiveness and the onset of a bitter election year in the US.

Political risk consulting firm Eurasia Group, for instance, rated US-China ties as the biggest global risk for this year in its annual assessment report.

‘This year, the gloves start coming off,’ it noted.

‘In 2010, a mid-term election year with high unemployment, labour and even some industry groups will lead the Obama administration to send the message that China’s economic policies cannot persist and will lay down the gauntlet with more tariffs on Chinese exports.’

Disgruntled American voters unhappy with the economy and high unemployment rate have already punished President Barack Obama’s Democratic Party in three recent local elections.

But with no quick recovery in sight, US legislators from states hard-hit by economic competition from China are already openly calling on Mr. Obama to get tough on Beijing.

Senator Arlen Specter of Pennsylvania, who is facing a tough re-election battle this year, recently likened Beijing’s economic policies to ‘international banditry’. He said: ‘They take our money and then they lend it back to us and own now a big part of the US.’

While Mr. Obama has stressed that America could not afford to close itself from global competition, he vowed to ‘get much tougher’ on China.

Not everyone, however, is convinced that the fighting words from both sides would escalate into an all-out conflict.

Guanyu 道 said...

‘If you talk to officials in both countries, there is a fundamental understanding that there is too much at stake to let the back-and-forth trade spats and the political pot shots from getting completely out of hand,’ said Mr. Charles Freeman, an expert on China’s political economy at the Centre for Strategic and International Studies.

This, however, is cold comfort for the pork industry and other players caught in the crossfire. Mr. Juergens, for instance, axed four employees last year and might have to fire more people if business conditions worsen.

For Mr. Giordano, the impasse with China could mean diminishing support for trade with Beijing.

‘We really want to stand up and cheer on the US-China trade relationship instead of being a malcontent. But we’ve been put in position where we can’t do that at this point.

‘That’s really a shame.’