China could retaliate to US posturing as trade crisis brews

By RJ Whitehead

- Last updated on GMT

© iSTock
© iSTock
A trade dispute hovering between China and America has the potential to become a fully fledged trade war, especially while western trade ministers grapple to find ways to ward off new Chinese regulations that they say amount a fresh barrier of trade.

Price movements will be highly volatile in the short term, while the global supply and operational chain could be affected in the longer term, Rabobank has predicted in an analysis of the current trade stand-off between a newly globalist Beijing and an expectedly protectionist Washington.

As tensions grow, western companies are desperate to end the prospect of a new regulation for more intensive inspections of food imports. When this is implemented, perhaps as soon as October, exporters will be forced to employ safety protocols that are more commonly applied to higher-risk goods, like meat, dairy and perishables, across all food categories.

Under the rule, all food shipments would require foreign inspection certificates to confirm that they meet Chinese quality standards. This would even apply to low-risk goods, such as fruit juice, snacks and and wine.

Germany’s ambassador to Beijing echoed the sentiments of foreign exporters who have complained of Beijing’s use of safety rules to hamper access for some goods in violation of China’s commitment to open markets.

"It could bring down food imports quite dramatically​,” Michael Clauss said. "It often seems it is more about protecting Chinese producers than about food safety​.”

Other experts say that the new regulation would bring “unnecessary regulatory complexity​”, at a time when Beijing officials have been playing up their embrace of liberal trade.

In a bid to persuade China to adopt a more internationalist approach to inspections, western countries have arranged for Awilo Ochieng Pernet, president of the Codex council, to visit Beijing for a seminar with Chinese officials in April to explain the internationally sanctioned standards, an official told AP. 

Delegates also plan to propose alternatives to the export certificates, such as giving Beijing officials access to electronic records to track sources of shipments.

In the face of globalisation, Chinese regulators believe they need closer scrutiny of food imports as they grow in quantity.

They contend that the new inspection requirements are supported by Codex, which sets food quality standards, though it is widely considered to have most weight when used as guideline for more risky products.

Chinese officials appear to have adopted a robust defence of global enterprise as their new party line following the election of Donald Trump as American president.

This became evident in January when President Xi Jinping, speaking at an annual meeting of the world’s richest and most powerful in Davos, signalled Beijing's desire to play a bigger role on the world stage as a defender of globalisation. 

It was reinforced just last week, when vice-premier Zhang Gaoli told a forum that China opposes trade barriers and and “is willing to work with other countries to oppose various forms of trade and investment protectionism​”.

"We should unwaveringly push forward economic globalisation... We cannot stop our footsteps because of temporary difficulties​,” Zhang added, referring to concerns over week global demand for Chinese goods.  

But, struggling to cope with the prospect of growing American protectionism under a new president, China may choose to retaliate against any trade move by Washington, according to Rabobank analyst Ping Chew. This would bring significant price volatility in the short term, while the longer term would see changes in trade flows and supply chains.

Ping believes that America could choose one of a number of measures on trade with China, from a 20% border adjustment tax, to even more drastic efforts. 

If China were to retaliate along similar lines, American trade in produce including soybeans, pork, orange juice and consumer foods would be affected, even in the case of a “low-intensity​” dispute, Ping said.

Moreover, consumer food and beverage companies “could suffer even more if the dispute were to turn into an even nastier nationalistic trade war​”.

Looking at its biggest imports, if China were to halt the 34m tonnes of soybeans it received last year from America, South American growers would combine to become the sole supplier for the Chinese market.

An end to the 215,000 tonnes of American pork China imported in 2016, out of total pork-related imports of 1.62m tonnes, would lead to increased inflows through the grey channel, which already plays a key role in beef and offal shipments to China. The gap would be filled by rising imports from the EU and South America, Rabobank predicts.

This ensuing trade dispute, with its potential escalation into a downright ‘trade war’, could not only significantly disrupt Chinese-US trade and investment flows, but it could also become a major hurdle when it comes to the global movement of goods.​ 

The consequences are major in these ‘what-ifs’, but we sincerely hope calmer heads will prevail​,” Ping added.

Related topics: Policy, China, Supply chain

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Posted by Peter Schaefer,

Whery importeden information , thanks for your support

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