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Sun, Jun 12, 2005 - Page 12 News List

Everyone talks about increased globilization but the reality is that many countries are actually becoming more protectionist


Every country talks about free trade, but it seems none wants to practise it. This appears to be the common denominator in trade conflicts that are heating up again between the US and Europe and China and the industrialized countries.

The US, the largest trading power in the world and traditionally the moral standardbearer for free trade, without a doubt is among the "sinners" who can't resist reaching for the forbidden fruit of the government subsidy. In Washington, where globalization is a favorite topic, the countries and industries that profit from it are not spared the pain that it causes.

US President George W. Bush, who always preaches the notion that free trade means finding new markets for US products beyond US borders, appears to be giving in to pressure for more protection for the US economy.

Irwin Stelzer, economic policy director of the Hudson Institute speaks of a brewing storm that threatens to sweep away a consensus in Washington reached over decades over the advantages of free trade.

Chinese Trade Minister Bo Xilai is not alone in accusing the US (and the EU) of practising unfair protectionism and maintaining a moral double standard, according to US news reports. In light of a horrendous US trade deficit, signs are mounting that protectionism is growing.

One US giant that is rejoicing over the situation is Boeing Co in the northwestern US city of Seattle. Congress recently passed a bill that in reality bars the US Air Force from purchasing refuelling tanker jets from the European Aeronautic, Defense & Space Co (EADS).

The US' air force has been seeking to fill a contract for US$100 billion. EADS is not named in the bill, but it is clearly what the bill means with its reference to "foreign companies ... that receive government subsidies".

The US and Europeans have been arguing for years, occasionally bitterly, over whether subsidies distort competition.

The US wants government support for European jet manufacturer Airbus to be eliminated, while the Europeans argue that the US indirectly subsidizes Boeing.

Washington also has been caught somewhat flat-footed by a new trade challenge from China. Since the loosening of textile trade laws in January, imports from China have surged. The result is efforts in the US to set up barriers to this new trade.

Washington has established quotas and is considering further measures, but the EU recently struck a deal. Under its terms China agreed to rein in over the next three years the growth in its textile exports to Europe. The deal heads off the threat of a trade conflict between Beijing and Brussels.

The agreement was struck late yesterday in Shanghai after a ten- hour session of talks between Peter Mandelson, the EU's Trade Commissioner, and Bo Xilai, China's Commerce Minister. It limits the annual increase in the volume of China's textile exports to an average of 10 percent per year until 2008.

China's portion of the US clothing market will rise from 16 percent currently to 50 percent, according to a WTO study. This development has arisen so quickly, it has shocked the US government, which has used the issue to highlight its complaint that China's exports are boosted by Beijing's control of the yuan's exchange rate.

"Is globalization coming to an end?" the Christian Science Monitor asked recently. It would be a worrisome signal from the largest trade power in the world if a few cotton and sugar farmers are able to stop such a deal, the newspaper added.

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