Posted on 06/16/2009 11:24:29 PM PDT by FromLori
China has introduced an explicit “Buy Chinese” policy as part of its economic stimulus programme in a move that will amplify tensions with trade partners and increase the likelihood of protectionism around the world.
In an edict released jointly by nine government departments, Beijing said government procurement must use only Chinese products or services unless they were not available within the country or could not be bought on reasonable commercial or legal terms.
EDITOR’S CHOICE Chinese brands aid Best Buy - Jun-17
China extends $10bn credit line to central Asia - Jun-16
Bric quartet defined by differences - Jun-15
Chinese farther along golden brick road - Jun-15
The government also said it was launching an investigation in response to complaints from domestic industry associations which accuse local governments of favouring foreign suppliers in procurement related to the country’s Rmb4,000bn ($585bn, €421bn, £356bn) economic stimulus package.
“From a domestic political perspective this makes some sense because local governments do tend to favour foreign products in some categories,” Dong Tao, chief China economist for Credit Suisse, said. “But given how important free trade is for China’s economy this is not the right message for them to be sending to the rest of the world right now.”
Just a few months ago Beijing was raging against a proposed “Buy American” clause included in the US economic rescue package.
“Some countries raised clauses to prioritise the purchase of products of their own countries in their economic stimulus packages,” Yao Jian, a Chinese commerce ministry spokesman, told reporters in February. “We express deep concern about these [measures] ... under the current financial crisis, measures issued by all countries should not cause negative impacts, and especially they should not send out wrong messages.”
Most economists agree China’s economy is starting to recover as a result of its aggressive stimulus package but the country is still struggling with unemployment and fears widespread layoffs could lead to serious social unrest.
“The whole world is dying to see China spread its orders around and save their economies,” said Mr Tao. “But what this policy reflects is heightened anxiety about these job pressures and the potential for social unrest.”
The edict was issued jointly by the legislative office of the State Council, China’s cabinet, the national development and reform commission (the country’s powerful state planning agency) and the ministries of industry and information, supervision, housing, transport, railways, water resources and commerce.
The new edict bans local governments and departments from discriminating against domestic suppliers in their procurement. Foreign companies operating in China argue that the opposite is in fact true and that they have been largely cut out of procurement related to the government’s stimulus package.
“We are puzzled by this discussion, especially since most European companies operating in China are locally incorporated and have not benefited directly from the government’s stimulus package,” said Joerg Wuttke, president of the European Union Chamber of Commerce in China. “Requiring government procurement to favour Chinese goods and services certainly won’t help to address China’s trade surplus of €170bn.”
Trade data in recent months show import volumes, particularly of raw materials, have stabilised and started to increase strongly, while exports have stabilised but remain very weak following precipitous drops in both exports and imports since the fourth quarter of last year. China’s trade surplus rose 15.7 per cent to $88.8bn in the first five months from the same period a year earlier.
“Any movement – overt or subtle – to discriminate against foreign products and services is protectionist and an inefficient use of stimulus funds,” said James Zimmerman, partner with the international law firm of Squire Sanders & Dempsey in Beijing.
Copyright The Financial Times Limited 2009
ping
China is desperate to spur it’s own economy. One more sign that it is not as without impact from this global recession, as it has tried to make folks think.
ENOUGH!
When is America going to fight back? The USA created modern China.
For heavans sake!
There were lots of people here that thought it was a wonderful idea that congress put in the requirement to “buy American”. Now that other countries are starting to follow congress’s lead we’ll see what happens...
They’re not as desperate as US though. China has over $2trillion in reserve which they could spend on their on citizen instead of on the US government
Absolutely!! What are these Chinese bone heads thinking??
Oh well, 1929 here he go all over again. That's exactly what happened then, Euro-peon countries started making protectionist policies, and started a trade war which created the depression. It will be no different this time. Stock markets all over the world and world economies barely sputtering now will crumble back into a deep depression driven by deflation.
So much for all those Obama worshipers optimism thinking the worst of this recession was over- it's only getting started. GM will be down to making one car now, or truck, or cart.
WHISTLER, British Columbia (AP) — Canadian mayors have passed a resolution that would potentially shut out U.S. bidders from local city contracts.
The resolution is in retaliation to “Buy American” provisions in President Barack Obama’s stimulus bill. Mayors voted 189-175 to approve the resolution at the Federation of Canadian Municipalities conference in Whistler, British Columbia.
http://www.google.com/hostednews/ap/article/ALeqM5gGHdn2-M3NXsZe3jw0Y9ic42H1lgD98LDCG82
When did they do that? They were the ones who started this train wreck in the first place. Shortly after Obama won the Democrat primaries, 88,000 Chinese factories had closed their doors, throwing millions out of work, and leaving enormous unpaid bills.
Our media completely ignored it, they were too busy tearing down Sarah Palin and shining Obama's shoes.
Because China imports huge amounts of commodities, commodity markets here began to crash, followed by the banks who quickly ran out of liquidity to cover all the unpaid debt piling up between foreign banks and US banks, which in turn exposed all those useless high risk mortgage scam when banks holding and other companies who had invested in these bundled up supposedly class A long term investments went looking for more assets to add liquidity.
This isn't just China starting a trade war, this is China responding to Obama's exact same policy, and the growing "buy American" campaigns many stupid unions are launching.
Canada has no room to complain they already had protectionist policies in the nafta agreement.
When is America going to fight back? The USA created modern China.
For heavans sake!
ENOUGH? We're the ones, Or rather, Obama and his union pals, who started this.
Obama was warned repeated by every country to NOT start a trade war when he announced his "buy American" conditions in his stimulus plan. Since then, the Autoworkers, SEIU, and all the big unions have been launching "buy American" campaigns.
This will NOT be good for us.
exactly. How soon everyone forgets...
They did that because of SEIU, Autoworkers, Teamsters, IBEW and others launching their own buy American Campaigns.
Politicians on both sides of the border a few weeks ago were trying to talk some sense into these idiots and stop their campaigns, but they just wouldn’t listen. Now they can pay the price as millions of more jobs that depend on goods flowing across the borders disappear as this escalates
Really? Like what?
We slapped a huge tariff on Canadian lumber, Bush slapped another tariff on steel, We even have a tariff on Canadian maple syrup for crying out loud. Nafta aside, we are far worse for slapping tariffs on stuff at the whim of certain senators.
And we are found in the wrong when Canada goes to the WTO to settle the dispute.
Like this...
Ourselves to blame
Posted: June 08, 2009, 8:18 PM by NP Editor
free trade, provincial trade barriers, Lawrence L. Herman
‘Buy American’ restrictions wouldn’t hurt Canada if we’d taken care of our sub-federal trade barriers
By Lawrence L. Herman
H
ow did we get into this mess, scrambling to try to fix the Buy American problem? What an unfortunate state of affairs. The federal government runs this way and that, looking desperately for ways to get Canadian suppliers out from under the Buy American restrictions. Without much leverage — notwithstanding the real threat of a protectionist trade war — Prime Minister Stephen Harper is trying to repair a problem that is largely of Canada’s own making.
When the North American Free Trade Agreement was negotiated, the provinces refused to open up their local procurement markets to American suppliers. They then refused to do the same under the Government Procurement Agreement in the World Trade Organization.
While the Canadian provinces said no, other countries opened up their own sub-federal markets to the Americans. Americans did the same, offering reciprocal treatment to these same countries. But because the provinces refused such a deal for American suppliers, the United States was not obliged to give local access to Canadian suppliers. That’s the way it works under international trade rules.
So, ironically, while exporters from other countries have access to the billions of Washington’s stimulus money being spent on local projects, Canadian suppliers are cut out, even though Canada has a free trade agreement with the Americans and we are their largest trading partner. Now Ottawa is hoping for a quick fix, when in all likelihood it will take months of hard bargaining to put a deal together.
In the meantime, Washington’s massive stimulus dollars are being wheeled out the door and local projects are rolling along, while Canadian suppliers look on, excluded, in spite of years of doing business with some of these same municipalities. The stimulus money may be exhausted by the time an agreement is reached, assuming a deal is in the cards.
Even getting to the negotiating table will be difficult, since it requires lining up the provincial governments and getting them to put something attractive on the table. And once we start negotiating, it will be tough sledding. From a negotiator’s standpoint, it’s a terrible position to be in.
All of this is the culmination of years of concessions, express and implied, that Ottawa has made to the provinces on international trade and economic matters. As a result, not only is Canada alone among the G7 countries in lacking a national securities regulator, we have provinces negotiating free-trade agreements among each other as if they were independent countries.
This is a perversion of the ideals enshrined in the Constitution Act. The Fathers of Confederation, recognizing the vast geographical challenge the new nation faced, also saw the devastation brought about by excessive state power in the U.S. civil war, and wanted a strong central government for Canada, giving Ottawa the exclusive right to legislate and regulate for the common good on matters of national dimension.
For that reason, section 91 of the Constitution gives the Federal Parliament, among other plenary powers, full authority over both international and interprovincial trade and commerce. That authority is exclusive and, where the national interest is involved, is not subject to provincial veto or even provincial concurrence.
By refusing to act under this authority, successive governments in Ottawa have betrayed that vision and unwittingly relinquished much of parliament’s legitimate constitutional authority. The result is that, rather than having our central government in control of trade policy, including interprovincial trade, where it belongs, the vacuum has produced an odd patchwork of internal trade deals brokered among provinces like traders in an oriental bazaar.
Both federal parties share the blame for this. And now the pigeons are coming home to roost.
So Canada goes forward as the demandeur south of the border, trying to convince the United States that it’s really in its interests to do Canada a favour. Even with some important American allies, the response so far in Washington has been less than friendly.
This unfortunate situation is all the more striking in that the NAFTA actually calls for ongoing efforts by Canada and the United States to continue to negotiate the opening of local procurement markets on a reciprocal basis. Because of Ottawa’s inattention, nothing was seriously done on this unfinished file in the 15 years since the NAFTA entered into force.
Notwithstanding its protectionist thrust, the “Buy Canadian” resolution adopted by the Federation of Canadian Municipalities this past weekend might actually help give the Canadian side some leverage with the Americans. If the resolution leads to a new bilateral procurement deal that safeguards the principles enshrined in the NAFTA and respects our integrated business relationships, so much the better.
In the background to all of this are the impending trade negotiations with the European Union. These are important talks. But the big question for the EU is whether it’s possible to seriously negotiate with Canada if so much in these negotiations is held hostage to provincial concurrence.
The unavoidable lesson here is that Canada has to be able to conduct its affairs on trade matters coherently and strategically, speaking with one voice, both with the United States and with its other trading partners. Without Ottawa taking a strong leadership role and exercising its legitimate constitutional authority over both international and interprovincial trade, and with provinces playing off their interests against each other and against the federal team, we deliberately weaken ourselves in our international dealings.
The current Buy American problem illustrates this perfectly.
Financial Post
Lawrence L. Herman is international counsel at Cassels Brock & Blackwell LLP.
That is true. I don’t think we quite realize how sticky the situation in China could get though, if a significant portion of their factory workers were laid off. This is going to be a new thing for those workers, having income and then having it snatched out from under them. I see some very unhappy campers if that comes to pass.
Still, am I happy we’re as upside down as we are. Hell no.
Well that’s an interesting premise. I certainly can’t say you’re wrong. I will say that I have been very critical of the leftist lending policies in the United States, which I have blamed for most of this mess.
As much as China may hate us, I can’t see them cutting off their nose to spite their face.
Someone is going to have to continue to purchase their goods, or that two trillion will dry up awfully fast.
I expect China to start making BIG moves against Africa (it's target colony) over the next several years.
[Politicians on both sides of the border a few weeks ago were trying to talk some sense into these idiots. . .]
I remember. Congress was supposed to remove the “buy American” provision which has also stalled some construction projects because some materials are made outside the U.S.
“Buy Chinese” policy
I thought we already had that implemented here in the USA.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.