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Commentary: US-invested businesses in China will fall into victim of US trade aggression
By Wei Jianguo
Stakeholders seeking product exclusions from tariffs on Chinese goods exported to the US will get 90 days to file such requests, Washington announced on July 6, just hours after it activated 25 percent tariffs on some $34 billion worth of Chinese imports.
The filing period will end on October 9, said the office of US Trade Representative (USTR), adding that any exclusions granted would last for one year, retroactive to July 6, 2018.
"In making its determination on each request, USTR may consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other US interests and whether the particular product is strategically important or related to Chinese industrial programs, including 'Made in China 2025,'" according to the USTR.
Many wonder why the Uncle Sam cannot wait to make such a decision, while a wise brain can find the clues pointing to its panic.
Data showed that about 59 percent of the products on the first tariff list are manufactured by foreign-invested corporations in China, among which over 70 percent are processed by American companies operating in China.
As these products processed in China also constitute key part in global industry chain, the US administration were desperate to throw out a “lifebuoy” to keep its own companies out of the affair.
But the exemption is probably not the right remedy to save the US corporations. Statistics revealed that trolley luggage, wallets, knapsacks, sneakers and other tourism products on the list compose a market worth $31 billion for the US, but 87 percent of these products are made in China.
Jonathan Gold, vice president of the US National Retail Federation, has expressed unequivocal opposition to the trade war, as he could not find substitute for the products in other places outside of China.
About 69% of American companies operating in China said no to tit-for-tat trade war between China and the US, according to a survey made by American Chamber of Commerce in Shanghai. They reject the US administration to take the increased tariffs as gambling chips, and also do not want to file for tariff exclusions each year in the future.
It is true that many US high-tech companies keep a close strategic cooperation with Chinese industrial programs. Putting bullish bet on China’s huge potential for productivity, they aspire for a long-term cooperation with China.
But the US’ unilateral actions put these elites into dilemma since they can only get one-year-long probation even if their requests are approved, and ultimately, they may be forced to establish their headquarters and production bases in China as Tesla did.
If the Donald Trump administration deteriorated the conflicts with the $200 billion more in tariffs, the US businesses would only suffer more even though the administration continued to subsidize for their loss.
Those businesses will be more dissatisfied with the decision as they are reluctant to lose such a large market with huge potential. Moreover, US enterprises cannot afford the costs of fatal turbulence in bilateral trade order, as their cooperation in the Chinese market has been processing smooth despite of some tangential bumps over the past forty years since China’s reform and opening up.
We also found that the US administration and media cited unfair treatment as the excuses for the declined investment returns of American firms operating in China.
But such accusations cannot hold water. Their investment in Japan, Australia, Europe and other markets also witnessed a similar curve characterized with a high profit margin in the first days after market access and a lower but stable one in later years.
In addition to that, it has to be clarified that most of the US companies running in China are bullish on the stability and sustainability of China’s policies, in a hope that China could continue its reform and opening up steps, and do more to protect intellectual property right and lower threshold for market access.
Latest data from the Ministry of Commerce shows that over the first half of 2018, newly established foreign-invested enterprises in China increased by an impressive 96.6% from a year earlier, and a double-digit growth will be secured in the next five years. China is quickening its pace on the way to world’s best business environment.
The US administration rolls out follow-up measures to repair its negligence only to prove that its defective trade protectionism policies go against the will of the public. China, given such background, should persist in its way to open up market and continue its role as advocator of free trade and guardian of multilateral trading system.
(By Wei Jianguo, former vice minister of commerce and vice president of the China Center for International Economic Exchanges)
The filing period will end on October 9, said the office of US Trade Representative (USTR), adding that any exclusions granted would last for one year, retroactive to July 6, 2018.
"In making its determination on each request, USTR may consider whether a product is available from a source outside of China, whether the additional duties would cause severe economic harm to the requestor or other US interests and whether the particular product is strategically important or related to Chinese industrial programs, including 'Made in China 2025,'" according to the USTR.
Many wonder why the Uncle Sam cannot wait to make such a decision, while a wise brain can find the clues pointing to its panic.
Data showed that about 59 percent of the products on the first tariff list are manufactured by foreign-invested corporations in China, among which over 70 percent are processed by American companies operating in China.
As these products processed in China also constitute key part in global industry chain, the US administration were desperate to throw out a “lifebuoy” to keep its own companies out of the affair.
But the exemption is probably not the right remedy to save the US corporations. Statistics revealed that trolley luggage, wallets, knapsacks, sneakers and other tourism products on the list compose a market worth $31 billion for the US, but 87 percent of these products are made in China.
Jonathan Gold, vice president of the US National Retail Federation, has expressed unequivocal opposition to the trade war, as he could not find substitute for the products in other places outside of China.
About 69% of American companies operating in China said no to tit-for-tat trade war between China and the US, according to a survey made by American Chamber of Commerce in Shanghai. They reject the US administration to take the increased tariffs as gambling chips, and also do not want to file for tariff exclusions each year in the future.
It is true that many US high-tech companies keep a close strategic cooperation with Chinese industrial programs. Putting bullish bet on China’s huge potential for productivity, they aspire for a long-term cooperation with China.
But the US’ unilateral actions put these elites into dilemma since they can only get one-year-long probation even if their requests are approved, and ultimately, they may be forced to establish their headquarters and production bases in China as Tesla did.
If the Donald Trump administration deteriorated the conflicts with the $200 billion more in tariffs, the US businesses would only suffer more even though the administration continued to subsidize for their loss.
Those businesses will be more dissatisfied with the decision as they are reluctant to lose such a large market with huge potential. Moreover, US enterprises cannot afford the costs of fatal turbulence in bilateral trade order, as their cooperation in the Chinese market has been processing smooth despite of some tangential bumps over the past forty years since China’s reform and opening up.
We also found that the US administration and media cited unfair treatment as the excuses for the declined investment returns of American firms operating in China.
But such accusations cannot hold water. Their investment in Japan, Australia, Europe and other markets also witnessed a similar curve characterized with a high profit margin in the first days after market access and a lower but stable one in later years.
In addition to that, it has to be clarified that most of the US companies running in China are bullish on the stability and sustainability of China’s policies, in a hope that China could continue its reform and opening up steps, and do more to protect intellectual property right and lower threshold for market access.
Latest data from the Ministry of Commerce shows that over the first half of 2018, newly established foreign-invested enterprises in China increased by an impressive 96.6% from a year earlier, and a double-digit growth will be secured in the next five years. China is quickening its pace on the way to world’s best business environment.
The US administration rolls out follow-up measures to repair its negligence only to prove that its defective trade protectionism policies go against the will of the public. China, given such background, should persist in its way to open up market and continue its role as advocator of free trade and guardian of multilateral trading system.
(By Wei Jianguo, former vice minister of commerce and vice president of the China Center for International Economic Exchanges)
