European protectionist fiasco a lesson for the US
(China Daily)
Updated: 2005-08-31 05:53

European retailers' warnings that the hold-up of Chinese textile imports could lead to stores going bankrupt and shoppers facing empty shelves this autumn and winter galvanized EU trade negotiators into action to review the quota agreement reached just three months ago.

This trade fiasco demonstrates that protective measures, at best, are zero-sum games for those who resort to them. The bigger market shares domestic textile producers gain from artificial trade barriers will be largely offset by losses not only for domestic consumers but also other related domestic businesses.

Worse, protectionism is a loss-loss deal for both sides in international trade while undermining the global effort to build a free and fair trade order.

Trade protectionism has incurred huge costs for Chinese textile producers. Rising uncertainty in the global market has seriously disrupted their production. The consequences hit numerous low-wage Chinese textile workers harder than the current hold-up is affecting European retailers.

The two-day China-US trade talks on textiles, the fourth round since June, began yesterday in Beijing. The United States still threatens to slap protectionist measures on several categories of Chinese textile imports.

The US Government's decision to yield to domestic protectionists has time and again egged them on to demand more and more.

But the real cost of protectionism has not been fully taken into trade negotiators' consideration.

Even if the United States avoids supply disruptions that have recently plagued Europe by timely replacing Chinese exports with imports from other countries, consumers will have to pay more, as those in Europe will, as cheap Chinese goods are refused.

The long-term consequences of postponing necessary industrial restructuring that can maximize its competitive edge otherwise will only get more serious.

To prosper in the new world economy, the United States must fix its industrial structure problems from a domestic perspective.

(China Daily 08/31/2005 page4)

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