Canada Will Be `Relentless' in Pressuring China on Yuan After G-20 Meeting

(Bloomberg – Paul Badertscher)
Canadian policy makers said they will be “relentless” in keeping pressure on China and other economies with fixed exchange rates to allow their currencies to appreciate, following meetings with colleagues from the Group of 20 nations last weekend.

Finance Minister Jim Flaherty and central bank Governor Mark Carney said that while the G-20 made progress on promoting flexible currencies and other issues, they remain a long way from the ultimate goal. “We’re not satisfied with the degree of exchange rate flexibility, the moves on exchange rate flexibility, in key emerging markets,” Carney said in an interview following the meeting in Gyeongju, South Korea. Read more here.

Faked in China: Inside the Pirates’ Web

(Reuters/News Center)

Anybody could tell right away that the Louis Vuitton shoulder bag was fake because it was delivered in a recycled box that once shipped batteries.

Warnings printed on the inside of the box read: “Danger Contains Sulfuric Acid” and “Poison - Causes Severe Burns” — not the sort of messages that would normally accompany a product from one of the world's most iconic luxury brands.

But it sure looked real. It was dark brown, sported a braided strap with brass fittings and the Louis Vuitton monogramme stamped all across the bag.

I had ordered the bag from a website called www.ericwhy.com for this special report, which explores the growing problem of counterfeit merchandise sold over the Internet.

Reuters wanted to trace the problem from a consumer in Washington D.C. to the shadowy producers based in Guangzhou China, where my colleague Melanie Lee found the illicit workshops and markets. Read more here.

The Rare Earth Battle

(Joseph J. Dehner, Frost Brown Todd LLC)
An immediate response of China to the US announcement that it would launch a 301 inquiry aimed at the Chinese “green” technology sector is a rare earth counter-attack. In this reported highly protectionist move, China has temporarily halted exports to the US of rare earth materials. Used in making advanced technology products, rare earth materials are a variety of scarce minerals. China currently produces 95% of the world's trade in these important items, according to a New York Times article of October 19, 2010 - K Bradsher, “China is said to halt exports to US of some key minerals.” The report indicates that this is being done without any official announcement of such an embargo aimed at any particular country. Read more here.

China Said to Widen Its Embargo of Minerals

(New York Times – Keith Bradsher)

China, which has been blocking shipments of crucial minerals to Japan for the last month, has now quietly halted some shipments of those materials to the United States and Europe, three industry officials said this week.

The Chinese action, involving rare earth minerals that are crucial to manufacturing many advanced products, seems certain to further intensify already rising trade and currency tensions with the West. Until recently, China typically sought quick and quiet accommodations on trade issues. But the interruption in rare earth supplies is the latest sign from Beijing that Chinese leaders are willing to use their growing economic muscle.

“The embargo is expanding” beyond Japan, said one of the three rare earth industry officials, all of whom insisted on anonymity for fear of business retaliation by Chinese authorities. They said Chinese customs officials imposed the broader restrictions on Monday morning, hours after a top Chinese official summoned international news media Sunday night to denounce United States trade actions. Read more here.

INTERPOL and Hong Kong Customs Join Forces to Improve Regional Police and Customs Anti-Counterfeiting Co-operation

(Web Newswire)

Greater emphasis on the leadership role of police and customs and the benefits of working collaboratively is the focus of the 2010 International Law Enforcement Intellectual Property (IP) Crime Conference which opened today (October 19) in Hong Kong.

The conference is the first to be held in Asia and brings together some 500 law specialist IP crime investigators, prosecutors and private sector investigators from 48 countries. Co-hosted by INTERPOL and Hong Kong Customs in partnership with Underwriters Laboratories Inc. (UL), the three-day event (19-21 October) concentrates on collective efforts to work together to break organized crime. It will include a series of operational workshops to enable subject matter experts to discuss how all those affected by counterfeiting and piracy can better work together to break up the organized criminal gangs which manufacture and distribute fake goods on a regional and increasingly global scale. Read more here.

Related: Text of AG Holder's Remarks Before Intellectual Property Summit in China

USTR Accepts Petition Against Chinese Policies on Green Technologies but Delays Talks

(World Trade Interactive)

The Office of the U.S. Trade Representative has accepted a United Steelworkers petition and initiated a Section 301 investigation into Chinese policies on trade and investment in environmentally friendly technologies. However, USTR also said it would wait 90 days to determine whether to request dispute settlement consultations on this issue with China at the World Trade Organization. The delay suggests that there is a political dimension to the decision and leaves open the possibility that USTR could ultimately decide not to pursue the matter at all.

According to USTR, the USW petition alleges that China employs a wide range of WTO-inconsistent policies that protect and unfairly support its domestic producers of wind and solar energy products, advanced batteries, energy-efficient vehicles and other products as it seeks to become the dominant global supplier of these goods. These policies allegedly include export restraints, prohibited subsidies, discrimination against foreign companies and imported goods, technology transfer requirements and domestic subsidies causing serious prejudice to U.S. interests. USTR has now agreed to investigate whether these alleged acts, policies and practices deny U.S. rights or benefits under the General Agreement on Tariffs and Trade 1994, the WTO Subsidies and Countervailing Measures Agreement and China’s protocol of accession to the WTO.

There are several points to note about the timing and nature of USTR’s announcement, all of which should be viewed in the context of the upcoming congressional elections and the fact that trade with China has been a major campaign issue with key constituencies. Read more here.

Trade Officials Ponder China’s Rare Earth Stance

(New York Times – Keith Bradsher)

As a three-week-long Chinese suspension in exports of crucial minerals to Japan continues, American and Japanese trade officials have been considering whether to file cases against China at the World Trade Organization.

Trade lawyers say an embargo case could be brought to the WTO, although they said it might be a hard case to win because China has not acknowledged the halt in exports through any documents or public statements.

Coincidentally, Obama administration trade officials had been quietly meeting for months with executives and lawyers from a range of American industries that use rare earth elements, long before China halted shipments to Japan on Sept. 21, according to trade lawyers and Congressional and industry officials.

Many of those American industries are unhappy that China has been reducing its rare earth export quotas since 2006 and has imposed steep taxes on the exports, said Jeff Green, a Washington lobbyist for rare earth users. The export restrictions have given a competitive advantage to manufacturers in China that use rare earths to make their products, while putting foreign rivals at a disadvantage, according to a little-noticed WTO study last June. Read more here.

Chinese Exports Growth Slows

(RTT News)

China’s exports rose at a slower, although at a still marked pace in September, official figures showed on Wednesday. The slowdown in export growth dragged down the trade surplus to a five-month low.

Exports jumped 25.1% year-on-year to $145 billion, the General Administration of Customs said. This was just shy of analyst expectations for a 26% increase and comes after a 34.4% rise in the previous month.

Imports, on the other hand, climbed 24.1% to $128.1 billion, following the 35.5% increase a month ago. Economists had forecast a 25% rise.

As a result of the slowdown in exports, the trade surplus fell to a still substantial $16.9 billion from $20 billion in August. Analysts had forecast a surplus of $17.8 billion.

The large trade surplus is likely to heap more pressure on Beijing from the U.S., which runs a substnatial trade deficit with China, to let the yuan appreciate more rapidly. The U.S., which runs a huge trade deficit with China, has recently stepped up its criticism of Beijing’s exchange rate policy, claiming that the yuan is artificially undervalued to boost exports. Read more here.

Trade Negotiators Push to Liberalize Public Procurement

(New York Times – Reuters)

Trading powers are in a final push to liberalize the market for purchases by public authorities worth hundreds of billions of dollars a year, and are seeking to lock China into the global procurement system as well.

The talks are separate to the World Trade Organization’s long-running Doha round to free up global trade, but could arguably have a much bigger impact on businesses.

Government procurement has moved center stage after the economic crisis put public infrastructure spending at the heart of economic stimulus packages. At the same time “Buy American” policies in the United States and similar measures in other countries have raised fears of protectionism in the sector.

And the huge infrastructure needs and projects of emerging economies have raised the prospect of lucrative new markets opening in an area so far dominated by rich nations. Diplomats at the WTO say a new government procurement agreement (GPA) or at least its outlines, could be concluded this year and talks to bring in new members have gathered pace.

“Our objective is to wrap up the revision as soon as possible and continue to work closely with China and others as they enter the process of accession,” Robert Kasper, a U.S. trade diplomat to the WTO, said at a forum last month. Read more here.

Canada Presses China to Stop Subsidizing Exports

(CTV News)

Canada joined a growing chorus of industrialized nations calling on China to stop keeping its currency artificially weak, warning Saturday that it could endanger the global economic recovery. Finance Minister Jim Flaherty said that China's policy of keeping the value of the yuan low will hurt manufacturers in Canada as well as the United States.

"If other countries are subsidizing their exports and we're not, then we're at a competitive disadvantage," Flaherty told a media round-table during meetings of the International Monetary Fund in Washington. "We do not want to see Canada disadvantaged by other countries unfairly taking advantage of artificially inflexible currencies."

Finance ministers and central bankers from the IMF's 187 member states are in Washington this weekend to discuss a looming "currency war," an escalating economic dispute between rich nations on one side and China and developing nations on the other. Artificially manipulating currencies may endanger the fragile global economic recovery, industrialized nations have warned. Read more here.

Approaching Trade War Threatens Logistics Sector

(Transport Intelligence – Thomas Cullen)

“A currency war” is how the finance minister of Brazil described the competitive devaluation between major economies over the past year. Particular attention has been paid to the Chinese currency peg to the dollar, yet a number of nations are busy selling their own currency. Switzerland, Japan and South Korea all have huge trade surpluses yet have moved to depress the value of their currency.

This sort of behaviour has provoked the anger of the US. A bill is now moving through Congress that is designed to impose sanctions on the Chinese in order to retaliate. The US Treasury Secretary Timothy Geithner has just described China’s currency policy as a “dangerous dynamic”. Even comparative neutrals such as Dominique Strauss-Kahn at the IMF and Robert Zoellick at the World Bank have criticised the Chinese over their currency strategy and the role it plays in the huge imbalances of trade. Some form of trade conflict seems likely.

Read more here. (Subscription required.)

Trade Dispute Avoided, Innovation Accelerated

(Resource Investing – Michael Montgomery)

Tensions over rare earth policy came to a head last week in the showdown over a fishing boat captain detained by Japanese authorities. The Chinese fisherman had collided with two Japanese coast guard boats in “disputed” waters between the two nations. The Japanese arrested the boat captain and he had been awaiting trial until Chinese port authorities halted shipments of rare earth elements to Japan. Chinese officials have disputed the non-official trade restriction as simply an administrative matter carried out by customs officials. Beijing had requested the release of the boat captain, and many suspect the halting of rare earth shipments is a direct response to the diplomatic situation. Japan released the boat captain without trial, and shipments of rare earths began almost immediately thereafter.

The situation illustrates the immense power that these elements have over the world economy. While the market is small in relation to other minerals, such as iron and copper, the monopolistic power of China over this market leaves little option for countries and companies alike to give in to the whims of China. Read more here.

Europe Presses China to Alter Trade Practices

(New York Times – Reuters)

The European Union pressed China on Wednesday to amend its trade practices to stop technology theft, counterfeiting and discrimination against foreign companies, after it failed to make Beijing budge on its exchange rate.

Opening a day-long meeting with Premier Wen Jiabao of China, the president of the European Commission, José Manuel Barroso, said the commercial relationship between China and the European Union, worth 327 billion euros ($453 billion) in 2009, was vital for the global economy.

Chancellor Angela Merkel of Germany, the leader of Europe’s biggest exporting country, met Mr. Wen on Tuesday evening and pledged to work for China to be granted the European Union’s coveted “market economy” trade status by 2016. That would give Beijing better protection against European antidumping penalties – a major irritant for the Chinese. Read more here.

China Currency Bill Passes House, Senate Vote Planned for November

(World Trade Interactive)

The House of Representatives approved by a 348 to 79 vote Sept. 29 the Currency Reform for Fair Trade Act (H.R. 2378), which would allow an undervalued foreign currency to be considered a government subsidy that can be offset with countervailing duties on imports of specific goods from the offending country. A related bill in the Senate could be voted on after the congressional elections in November. The White House has not taken a position on either bill but acknowledged this week that the House action highlights the importance of this issue.

Supporters of H.R. 2378 say it will help reduce the U.S. trade deficit with China and boost domestic manufacturing employment, both issues projected to score well with voters still concerned about the struggling economy. Several key lawmakers said this week that one of the objectives of moving the bill forward is to give the Obama administration more leverage in its unilateral and multilateral efforts to convince China to let its currency appreciate. In recent weeks the president and Treasury Secretary Timothy Geithner have both pressed Chinese leaders more than ever on this issue, but Beijing has maintained its position that it will manage the yuan according to China’s interests and not outside pressure. Read more here.

WTO Raps U.S. Ban on Chinese Chicken Imports

(Reuters – Jonathan Lynn)

U.S. measures that effectively banned imports of Chinese cooked chicken broke international trade rules and caused injury to China’s economy, a World Trade Organization dispute panel said on Wednesday. The U.S. measures challenged by China were unscientific and discriminatory, the panel found.

The ruling, in one of several trade disputes between China and the United States, came as the U.S. House of Representatives prepared to vote on a bill declaring China’s undervalued currency a subsidy and clearing the way for duties to be imposed on some Chinese imports as a countermeasure. Read more here.

China’s Rare Earth Exports Back on Track

(Japan Times)

China has resumed procedures to export rare earth metals to Japan after the bilateral dispute over the Senkaku Islands reportedly halted shipments of the critical materials, trading house sources said Wednesday. A Chinese mining company has restarted applications for exports and Chinese customs authorities have confirmed that cargo will be shipped once the procedures are completed, the sources said.

Separately, Chief Cabinet Secretary Yoshito Sengoku said that China may have started trying to repair ties with Japan, but more must be done to reduce the bilateral tension. “Currently, we are not in a win-win relationship. It is probably obvious to everyone,” the government’s top spokesman said at a news conference. “However, I presume that (China) has started making efforts to bring the situation back to zero (from negative).” Read more here.

EFCA Makes Taiwan a New Gateway to China

(Lexology – Jack J.T. Huang et al., Jones Day)

On June 29, 2010, Taiwan and China signed the Economic Cooperation Framework Agreement (“ECFA”), a landmark bilateral trade agreement that will make Taiwan a new gateway to China. The ECFA, which came into effect on September 12, 2010, is the latest, and the most significant, installment in a series of cross-strait agreements signed between Taiwan and China over the past few years to foster closer economic relationships between the two sides of the Taiwan Strait.

The ECFA seeks to provide a framework for Taiwan and China to gradually reduce tariffs on goods, remove non-tariff trade barriers, open up service sectors, and lift investment restrictions, thereby promoting closer cross-strait economic cooperation and interaction. The ECFA is essentially a free trade agreement (“FTA”), encouraged by the World Trade Organization (“WTO”) to be entered into among its members.

The ECFA provides a mechanism pursuant to which Taiwan has an opportunity to be placed on par with, if not more favorably than, ASEAN and other countries having FTAs with China, with respect to exports to China. The Early Harvest List for Export Goods (Schedule 1 of the ECFA) seeks to progressively cut tariffs to zero within three years on hundreds of Taiwanese export goods to China (currently valued at US$13.84 billion per annum).

Read the complete article here.

China Slaps Anti-Dumping Duties on US Chicken Imports

(AFP)

China will levy anti-dumping duties of up to 105% on imports of US chicken products, the government said on Sunday, in a move likely to ratchet up trade tensions between the two nations.

“The US chicken industry has dumped broiler products into the Chinese market and caused substantial damage to the domestic industry,” the commerce ministry said in a statement on its website. The duties take effect on Monday, it said.

China will slap anti-dumping levies of over 50% on up to 35 US chicken broiler exporters including Tyson Foods Inc, Keystone Foods LLC, Pilgrim’s Pride Corporation and Sanderson Farms Inc, the statement said. Levies of over 105% will be placed on imported chicken broilers, a type of chicken raised specifically for meat production, from all other US producers, it said. Read more here.

Chinese Imports Didn’t Cause Job Woes: Report

(The Vancouver Sun – Paul Vieira, Postmedia News)

Cheap Chinese imports cannot be singled out as a “culprit” for employment woes in Canadian manufacturing in the last decade, says a report to be released today on the importance of trade to Canada's economy.

Research from a Toronto think-tank said data indicate a “very mild” relationship between growth in Chinese imports in a specific sector to job losses during the 2002-2008 period.

A stronger Canadian currency – which rose after a prolonged period of weakness – was likely a bigger factor in determining employment levels in manufacturing, says the report from the Institute for Competitiveness and Prosperity. Read more here.

Canadian International Trade Tribunal Looks at Imports of Chinese Steel Grating

(Canadian Press)

A Canadian trade body is looking at whether imports of steel grating from China have been illegally subsidized and are hurting the Canadian steel industry. The Canadian International Trade Tribunal announced Tuesday it has begun a preliminary injury inquiry into a complaint by Fisher & Ludlow of Burlington, Ont., that it has been hurt by dumping and subsidizing of Chinese steel.

The tribunal is expected to issue a preliminary ruling on the complaint by Dec. 20. If a final ruling affirms the complaint and finds that Canadian companies have been hurt, the federal government can impose anti-dumping and anti-subsidy duties. Dumping occurs when a product is sold below fair-market value in the target country. Read more here.