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China to US: This means War. Really.

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Politics

China to US: This means War. Really.

It started on Saturday, with Obama’s administration announcing punitive 35% tax on Chinese tyres. On Monday, Chinese responded by launching an investigation into US chicken and automotive parts exports. From the outside, it looks as just another skirmish between the biggest trade partners in the world. But in this one, some experts see possible seeds of the future war. President Obama used a 2001 WTO measure that was designed to block Chinese imports and was then grudgingly accepted by Beijing as a price of joining the organization. But this is 2009 and Chinese are massively powerful now and will want to alter the way they are being treated by the US. Whilst some industry watchers still see in Chinese moves the normal controlled retaliation, it is possible that the conflict will spread to other industries with possible negative effects for the global trade.

It started on Saturday, with Obama’s administration announcing punitive 35% tax on Chinese tyres. On Monday, Chinese responded by launching an investigation into US chicken and automotive parts exports. From the outside, it looks as just another skirmish between the biggest trade partners in the world. But in this one, some experts see possible seeds of the future war.

President Obama used a 2001 WTO measure that was designed to block Chinese imports and was then grudgingly accepted by Beijing as a price of joining the organization. But this is 2009 and Chinese are massively powerful now and will want to alter the way they are being treated by the US. Whilst some industry watchers still see in Chinese moves the normal controlled retaliation, it is possible that the conflict will spread to other industries with possible negative effects for the global trade.

Responding to new US tariffs imposed on Chinese tire imports, and stepping up the pressure in return, Beijing filed a World Trade Organization complaint Monday.  The conflict represents a potentially serious, larger problem as both nations are preparing for the G-20 meeting in Pittsburgh on Sept. 24-25 to discuss the global downturn.

This WTO complaint triggers a 60-day process where the two sides must try to resolve the dispute through negotiations. China can then call for a WTO panel to investigate and rule on the case.  The WTO confirmed China has filed a “request for consultations” on the issue.

While this trade dispute is officially about tires, chickens and cars, it has broader implications as well.  Both governments face domestic pressures to take tougher stands on such economic issues that put pressure on domestic jobs.  As a result, these trade frictions may increase political tensions between the two nations even as they try to work together to revive the global economy and combat mutual security threats, like the nuclear ambitions of Iran and North Korea.

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