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"Buy Chinese" hypocrisy pointed out |
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Written by Stumo
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Thursday, 18 June 2009 |
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Finally, a major paper runs an article pointing out Chinese hypocrisy for challenging the Buy American provision in the stimulus bill while doing the same itself. We still have not seen the hypcrisy of Canada and Europe, who have buy domestic laws, discussed. And there has been no discussion of the fact that the Agreement on Government Procurement (AGP), which many WTO countries have signed, allows a lot of domestic procurement while non-signatories to that AGP have no limitations.
June 18, 2009
BREAKINGVIEWS.COM
Lesson for China in Smoot-Hawley
By JOHN FOLEY and JEFF SEGAL
A request from Beijing that local governments “Buy China” is worrying —
and hypocritical. Even as President Hu Jintao joined leaders of Brazil,
Russia and India at a summit meeting in Yekaterinburg, Russia, in
calling for an end to protectionism, a diktat from several Chinese
ministries suggested that government projects should favor domestic
suppliers in spending some $586 billion of fiscal stimulus money. Such
doublespeak is dangerous. Countries with bloated export sectors
shouldn’t throw stones.
The downside is that the Foley/Segal article wrongly compares buy domestic provisions with protectionism. There is a strong interest in shoring up domestic economies in the U.S. and elsewhere. If taxpayer money is to truly stimulate a domestic economy... if it is to fulfill its purpose... then the money should be spent domestically to produce the jobs and investment envisioned. Whatevery you say about the FDR stimulus, it did stimulate domestically without leaking overseas.
The rest of the article is below the fold.
Buying local would certainly cause pain for foreign suppliers. After China’s last big fiscal stimulus in 1998, imports rose by 18 percent and 36 percent in the following two years. This time, over a third of the projects are railways, roads, airports and power grids, potentially big users of foreign machinery and technology. Foreign suppliers have already lost out on high-profile multibillion-dollar tenders for wind turbines and high-speed trains.
But genuine protectionism would hurt China, too. Recall the Smoot-Hawley Act of 1930, in which the United States raised tariffs against imports to protect domestic industries and shore up employment. At first it worked. But when other countries retaliated, unemployment in the nation more than doubled. China might face a similar problem. And with civil unrest Beijing’s greatest worry, such a price looks too high.
Luckily, locking out foreigners in practice would be impossible. Much of China’s import growth comes from things it can’t produce enough of itself, like oil, iron, copper and aluminum. Besides, Beijing cannot watch everyone. Procurement is done on a local level: Beijing doesn’t have a database to track what projects are supplied by whom, according to people familiar with bidding processes, and each city’s whims are vastly different from the next.
It may be that promises to buy local are merely meant to stoke up confidence, as is Beijing’s style. But the danger is that even talk of a “Buy China” policy may fan the flames of protectionism elsewhere. Exporters in the United States protested the “buy American” provisions in this country’s economic stimulus package for the same reason. India and the United States are already mulling complaints over Chinese “dumping” of goods like steel and tires, which are seen to be hitting domestic industries. At worst, China could reap the whirlwind of Smoot-Hawley without even the fleeting benefits.
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Here is a video of CPA member Zach Mottl on the Business News Network in Canada. The issue is Buy America in the stimulus legislation, and the unfair trade practices of our trading partners. |
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