Nov 8, 2017 in Economics

The Implications of China's Trade Policies for International Politics

Introduction

China trade policies are geared to having more imports that bring balance to their trade. The government of China is working hard to improve the structure of their imports and stabilize those imports. This is done on the bulk of commodities, while, at the same time, importing more advanced technological equipment. In addition, it imports essential raw materials and parts, as it expands the imports of their consumer goods. The government does this by providing money for more import promotion as it develops foreign trade. Moreover, interest subsidies are provided for the government encouraged imports. This is done by also adjusting the coverage of the interest subsidies. These procedures call for import support from many developing countries. The same guidelines are significant in China’s trade policies and economic transition. The policies help China in balancing their international trade and foreign exchange assets. In addition, they help in easing the situation created by rising prices in China against the background of the high consumer price index. The measures taken by China drive the prices down for imports and give the country a better chance of enjoying imported commodities. This happens even as the yuan appreciates. These measures and together with China trade policies have implications for international politics.

WTO Trade Policy Review

China has conducted a bi-annual trade policy review with WTO in several years. The exercise is done every two years. This significant exercise is done this way because of the accession. The process allows WTO member nations to ask questions on other members’ national trade policies that comply with the WTO rules. These policies are some of the reasons as to why countries have issues with China trade policies and why these policies have implications for international politics. European business has identified a number of issues in regard to China’s trade policies. They included government procurement, National Indigenous Innovation Policy (NIIP), and intellectual property rights.

Government Procurement

Businesses in the world have been significantly influenced by the policies of China, for example the “Buy Chinese” policy. The released draft of the government policy on Government Procurement Implementing Rules has raised many concerns. This happened because of the hardening of such Chinese practices as pricing thresholds and definition of domestic products among others. Businesses wanted to have more understanding of the applicability and content of the regulations. In addition, the Bidding Law and interaction with the Government Procurement Law were necessary. Moreover, businesses wanted to have a clear view of what the Chinese government meant by domestic requirements. Such policies are what cause positive and negative reactions to China’s trade policies. They end up having effects on the international politics, as different countries hold different opinions; there are those who will agree to such policies, while others will oppose them.

National Indigenous Innovation Policy (NIIP)

There are policies that establish a preferential treatment for the goods and products that have the indigenous IPR. This is the trend that China has chosen to undertake. They are selecting products and technologies that tilt towards the geographical source of the creation. European business encourages and supports the innovations that China introduces. However, this trend tends to divest Chinese users of the products and technologies that are best tailored to their market needs. In addition, the trend discriminates those that are aligned with foreign invested and foreign Chinese companies. Furthermore, this deters these companies from promoting inventive technologies and products in China. These trends and other related policies that are connected with a broader indigenous innovation limit technologies and products that China develops and those that are used by the citizens. In addition, they exclude several innovative suppliers like the associated R&D. This results in depriving the Chinese of the innovation benefits that the Chinese market would get.

Intellectual Property Rights

Many countries support China’s efforts in the implementation of the WTO and TRIPS rules. However, European business is apprehensive of the definite execution that China has taken on the implementation frameworks. Streamlining the intellectual property legislation by China is a concern. The progress of the measures comes into question. Although there is some acknowledgement of the effective enforcement, there are problems with the IPR at both local and regional levels.

Commitments and Adoption of the International Standards

There are concerns that China has to revise regulations and laws of the existing liberalizations in the country. These should be based on improving the market opening and transparency, which will lead to a nondiscriminatory and sound regulatory environment. China should implement the WTO commitments in opening large sectors such as insurance, wholesale services, retail, and telecom sectors. In addition, sectors like computer reservation system services should be included. The trade policies have been the principal friction between China and other countries like the United States. The countries blame China for violations of the international trade norms.

Accusations

The accusations of Chinese trade policies result in straining the relationships between China and other countries. These policies affect international politics. The strategic significance of the United States and China are caused by the trade policies. The countries do pursue the well-reasoned and documented trade guideline infractions. China is accused of manipulating its currency in order to keep the exports artificially economical. In addition, China is accused of relying on the exaggerated statistics. A large gap that exists between many countries that import from China and Chinese imports from other countries is one of the issues that affect international politics. Many countries believe that this is due to the currency manipulations. China has advanced their trade policies making an excuse for being a country that is still developing. Thus, it lacks an officially authorized infrastructure that is vital to the administration of trade issues. An example of such an issue is the intellectual property rights (IPR).

There are countries that accuse China of breaking the promises that it has made in the WTO attainment agreement. This is shown by the fact that the country undervalues its currency, violates the intellectual property rights, and fails to report subsidies. The trade surplus and the undervaluing by 15 to 75% are seen as a currency manipulation. The WTO set of laws did allow China to use executive measures in upholding the IPR. Moreover, this was allowed as the court system was given time to mature. In addition, the Chinese government is accused of having the IPR laws in place; however, they do not enforce them as required.

Policy Options

The trade policies of China make it hard for other countries to trade competitively with the country. This has forced some countries to consider implementing extraordinary measures in dealing with China’s trade policies. They believe that China is practicing some trade violations. This can be done through the WTO and China’s WTO consent agreement. The measures that are recommended by countries like the U.S include passing Congressional resolutions or applying a countervailing duty. These assert the claim that China is manipulating its currency. The resolutions can be unnecessary and unhelpful, as China can still go ahead and trade with other trading blocks using the same trade policies. The use of the WTO can be the best way to address the issues that affect the relationships between China and other countries. This is the best way of solving the disputes without allowing the accusations and shrill rhetoric to undermine the cause of other countries and their credibility.

The deficit of America in relation to China hit high records in the past. This has increased international politics between the two countries. The reason is the trade imbalance between the countries which is attributed to the Chinese currency. The yuan, which is deemed as the cornerstone of the unfair Chinese trade practices, has gradually gained in value against the dollar. This has happened in the recent years, and it has reduced most of the advantages that the cheaper currency gives the Chinese exporters. This is when they are selling their goods overseas. The mutual trade tensions have intensified between the U.S and China due to the political and economic debate on the China currency. The pressure has shifted to the Chinese practices which most of the trade experts and American companies feel are threatening the future of the U.S economic security. This is caused by the Chinese move to have various policies and rules that are intended at shielding the increasingly beneficial market from the dominance of foreign nations, while, at the same time, encouraging national champions to participate globally.

The shift has been at the peak stage when Chinese economic policy attracted the international, overseas direct venture to unfairly sustaining Chinese owned companies. The Chinese devised methods of attracting the indigenous innovation. These included having rules and policies of pressurizing alien firms to share their technology with Chinese companies or other nations to have business with China. The challenge that is faced by the foreign firms is access to markets. Therefore, nations have taken cases to WTO to be tough with China on the issues of economic policies that include illegal government subsidies and piracy. As a result, China is viewed by many countries as having unfair trade policies.

The U.S government accused China of its trade policies and called on its government to follow the rules that are established in the world economic system. In addition, they implored the government of China to realize that prosperity and expanding power needs increased responsibilities. The Chinese government, on the other hand, has continued to strive to have a balance between investment and trade. Trade unions, manufactures, and law makers in the U.S feel that the currency that is controlled by the Chinese government is the key impediment to the U.S economy and American businesses. The yuan that is free-floating would rise in value in comparison to dollar. Thus, this will give Chinese customers a better buying muscle to procure more of the American-made commodities.

International Relations

China has made some significant progress in intensifying its international trade ties. This happened after joining the World Trade organization (WTO). However, there are significant concerns on behalf of such countries as the U.S on their trade and economic policies. Since joining the WTO, China has taken some impressive steps towards implementing commitments in their trade policies. However, despite all the progress, the membership of China in the WTO is still complex for many countries to understand. This is due to the trend in China where there is an intensified trend towards the state intervention in the country’s economy. Evidence given by the Congress of the U.S on China’s WTO compliance, which is compiled annually by the USTR and needed by the U.S-China Relations Act of 2000, did commend the country for making some legal system improvements in protecting the intellectual property rights, eliminating non-tariff barriers to the trade of services and goods, and reducing tariffs. The steps did deepen China’s incorporation into the international trading system. The result has been that there is added trade and investment over the period. This has made trade expand between China and many of its trading partners like the United States.

The trade has increased, and U.S exports to China have risen tremendously over the years. This has led to the fact that China has become the United States’ leading goods export marketplace from the traditional markets in North America. At the same time, China provides a considerable market for U.S services. This has made the cross-border delivery of classified business services increase. The USTR report says that China’s improvement towards a more market liberalization has started to slow down. This is because some of China’s practices and government policies have raised some important concerns. The report further says that China has not fully embraced the vital WTO principles of transparency, nondiscrimination, and market access. In the report, it is said that the occurrence of the interfering practices and policies, in addition to the role that the state plays in the Chinese economy, has continued to spawn noteworthy concerns. The most significant issues are those of China’s local innovation policies, inequity in foreign enterprise, and troubles with the intellectual property rights enforcement.  Furthermore, the United States and China have worked to address the concerns mentioned above.

Progress has been made on some meaningful issues; however, there are still many unresolved issues that affect international politics. This requires China to uniformly follow some basic principles, entirely embrace the rule of law, and reduce market access barriers to transparency and nondiscrimination. By doing so, China will be able to realize the potential that is also provided by other nations that are members of the WTO. The benefits include depth and breadth of investment and trade. In addition, the prosperity provided by a global trading system that is balanced can be achieved. China and other members of the WTO who number about 153 should talk on measures on the global trade to have enhanced international politics. The measures are expected to drive the prices of imports down; this will give China a chance to enjoy greater imported commodities, while the yuan appreciates. In addition, the duties that are charged on some imports will be adjusted. Tentative tax rates should be introduced. This will help to lower the import duties that are charged on some commodities and raw materials that people use. Moreover, the adjustment of duties will be applied to imports of some advanced components and equipment.

An important goal is to reduce the duties that are charged on the key raw materials and other components. These are used in strategic industries that are emerging. These are the ones that cannot be created by China. The most significant result of expanding the imports of the consumer commodities and many other things is to cause more competition in the domestic markets. In addition, it is essential to provide more high quality products to the consumers. This has called for adoption of easier ways of getting finance. The effect is to encourage the import of more advanced resources and products. Furthermore, while expanding imports, getting finance is crucial. For the meantime, China has moved to expand its imports. This will in turn bring more market room for the economies that are troubled by the reduced trade frictions and economic crisis. An important point here is that China’s economic growth will go on, and this will promote confidence in the global economic recovery.

Conclusion

The Chinese government led by top ranking officials has made several visits to Eastern Europe and Central countries to beef up the trade and economic ties. In addition, they want to establish a dialogue in the region to avoid unnecessary tension associated with international politics. The visits are also meant to explore new investment opportunities. They are doing this by increasing their efforts in expanding imports from European countries. Moreover, they are accelerating the pace of their investments in Europe. China has, however, shown the preference for cooperation in real economy as opposed to investing in the European bailout fund. European countries and China should feel positive effects of trading and build closer economic relations to establish even closer links. The two-way trade between Eastern European and Central countries and China is growing rapidly. China has created partnership in innovative cooperation and high technologies with advanced Northern and Western European countries. In addition, in less developed countries in Eastern and Central Europe, Chinese investors are setting up companies and investing in infrastructure projects. The Bank of China has opened branches, and it is expanding its services in less developed countries in order to support the investment activities. Moreover, the China Development Bank has given Chinese businesses some credit backing in order to expand in such regions.

The prevailing economic environment and the global crisis have not made the trade easier; therefore, protectionism is not encouraged. This is because the policy and protectionist actions can put into perspective economic and trade relations. Strengthening relations between the two sides requires fair trade practices, and this also boosts economic growth. Chinese companies invest in European infrastructure market, more so in Eastern and Central Europe. Poland can serve as an example of this, as it intends to build up a national highway network, and, in the same vein, it schedules to construct a high rate railway. This is an area where China is more experienced.

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