Refuse Trade Protectionism Promote Flow of International Capital

1. Refuse Trade Protectionism Promote Flow of International Capital • Institute of Foreign Economies, State Development and Reform Commission • Zhang Yansheng, Director / Doctorate Tutor

2. Relations between Number of Antidumping Cases Worldwide and GDP Growth (%)

3. Tendency of Antidumpting 1．Antidumping rate is growing. In the second half of 2008, a number of 15 countries staged 120 antidumping investigations, while the number for the first half of 2009 is at least 77, expecting to exceed 86, the number for the first half of 2008. Incidence of antidumping is negatively related with global economic growth. 2．Antidumping initiators radiate to developing countries. Over the years, the number of antidumping cases staged by developing countries is on the rise, increased from 69 in 1996 to 96 in 2008, where India (42) and Brazil (16) were on the top. 3．In the second half of 2008, antidumping investigations against China reached 34 cases, the most of all investigations. East Asian economics are the next, however, antidumping cases against developed countries are increasing too. In the second half of 2008, there were 11 investigations against EU, more than the 5 in the same period of 2007. 4．Steel, chemicals and other industries take up an increasing share of all antidumping investigations. In the second half of 2008, metals (e.g. steel and nonferrous metal) rank first (35.8%), chemicals rank second (18.3%), textile rank third (15.8%).

4. Numerical Changes of Global Countervailing

5. Current Evolution of Countervailing Worldwide 1．Countervailing is not yet a main approach of trade protectionism. It has been adopted at much fewer occasions than antidumping or other barriers. That countervailing has to do with governments of exporting countries compounds investigation procedure. 2．China has become a major target of countervailing. In 2008, 10 out of the 14 global countervailing cases target China while in the late of the 20th Century, India was the main target. Integrated adoption of antidumping and countervailing by developed countries against China is taking an obvious effect. 3．Countervailing is centered on metal industry. From 1995 to the end of 2008, 81 out of an aggregate 215 countervailing cases worldwide targeted steel and nonferrous metal, a ratio of 38%, while 11 out of 23 countervailing cases against China targeted steel and nonferrous metal, a ratio of 50%. 4．Of the 23 countervailing cases upon China from 1995 to 2008, 8 came from Canada, 13 came from the US, and 2 came from Australia.

6. WTO Member States Notification of Technical Trade Approaches 2001-2008

7. TBT/SPS Notification • According to Agreement on Technical Trade Barrier (TBT) and Agreement on the Application of Sanitary and Phytosanitary Measures (SPS), WTO entitles its members with the formulation and execution of technical laws and regulations, standards, qualification assessment, sanitary and phytosanitary measures (i.e. Food security and Flora and Fauna Sanitary Measures). • Technical Barriers to Trade—TBT refers to the compulsory or voluntary technical measures taken by a country or regional organizations to protect country or regional security, safeguard human health and security, protect the health and security of animals and plants, protect the environment, prevent fraud, protect quality of products, which impose barriers for the entrance of products or services from other countries or regions. • From 2001 to August 2009, the trade measures notified by WTO members reached 17529, of which TBT numbered at 9022, 51.5% of the total, and SPS numbered at 8507, 48.5% of the total.

8. Special Safeguard Measures against China • Safeguard is one of the trade relief measures, which refers to the import quota imposed by the importing countries who were damaged or threatened to damage. One is the safeguard measures represented by WTO Agreement on Safeguards, executed for all the countries exporting a certain type of products; The other is the special safeguard measures represented by the 16th article of Protocol, imposed only on China. • Different from antidumping, safeguard measures do with the imported goods under normal trade conditions, while antidumping is against the dumping products under unfair trade conditions. Safeguard measures deal with the “serious injury” caused by imports under fair trade conditions assessed at a very rigid standard, higher than the “material injury” standard, applied to conditions more rigid than antidumping. • The implementation standard of special safeguard measures is lower than safeguard measures, from “serious injury” or “threat of serious injury” down to “material injury” or “threat of material injury”. Its discrimination lies in that the special safeguard measures target only the exports of China. Its uni-directivity lies in that all the WTO members are allowed to impose the special safeguard measures on China but China is not allowed to do the same to them.

9. Features of the Crisis • In close connection with the defected global governance structure, the crisis happens under the imbalanced global economic conditions. Countries worldwide have strongly called on reforms to international monetary and financial systems. • As the source of the financial crisis, the US is affected much more than emerging economies and developing countries. The global governance that center on development rather than liberalization of trade, finance and investment, is so far an unseen issue.

10. Integration of Global Financial Market will be Adjusted • Under the current global governance structure, the more integrated is the global financial market, the more momentum is gained for developed countries to mobilize global financial resources, and the more the developed countries are capable to achieve welfare. • The global hedging mechanism and operational capability against global institutional risk should be studied and established. Financial marketization and restructuring should be pushed forward to bring about financial innovation, financial derivative market and asset securitization. Asian financial center should be developed, along with regional bond market, monetary market, derivative tool market, and wealth management market, in order to disperse the institutional risk of integration of global financial market.

11. Despite the Unrest of International Monetary System, RMB is Entering the World at a Stable Pace • At the post-crisis ear, China emphasizes its efforts on the establishment of a global coordination mechanism that would help the stability of international reserve currency. It will also appropriately decide on the responsibility to adjust global imbalance and currency valuing, to reduce negative external impact on developing countries. The establishment of Super-Sovereign Reserve Currency and Currency Supervision Authority should be explored while a framework of global financial supervision and governance system should be improved, in order to safeguard the basic right and interest of developing countries. Reforms to RMB regionalization and internationalization, structure of international balance and foreign reserve, financial derivative market and financial supervision system.

12. Changes to International Capital Flow • Over the past decade, the flow of international capital has undergone a historic ups-and-downs. International capital inflow amounted to 1491.9 billion USD in 2000, but declined to 735.1 billion USD in 2001 due to IT bubble burst, down by 50.7%. And it rebounded up to 1833.3 billion USD in 2007 and slipped by 21% in 2008 for the outbreak of the financial crisis. A drop of about 30% for this year is predicted. • The international capital first flows, in nature of development financing, from developed countries to developing countries, second, flows, in nature of investment disperse, between developed countries, and finally, flows in nature of financing for consumption and deficit in developed countries, from developing countries to developed countries. It is of great suspicion in rationale that the poor countries provide finance for the housing and social welfare of rich countries. • In the era of post-crisis, reallocation of external financial assets will forge up a new trade setup where component export is driven by external investment.

13. Global Perspective and Responsibility as a Power for China • In the post-crisis era, the global perspective and responsibility as a power will become a core capability of China. As indicated by Wolf that a key fact underlying the difference between domestic and international trade is that market belongs to no motherland that governments belong to. • Globalization overstresses trade, investment, financial liberalization and facilitation, but overlooks the possibility that global competition would leave the rich and poor more polarized. • should avoid exhausting city resources, dumping overdue products to African market, maximize domestic commercial benefits in the name of outward assistance, at the time of exploiting African energy and resources

14. China should Speed up Capital Internationalization • China should upgrade globalized operation of outward financial assets. By the end of June 2009, the foreign exchange reserve balance reached 2131.6 billion USD (over 60% of the total research of China), of which American treasury bonds amount to 801.5 billion USD, increased by 294.7 billion USD aggregately last year. This outward financial asset structure is very irrational.The next step is to push forward the internationalization of stock market, bond market, futures market, forex market and other financial market. Along with proper management and utilization of forex reserve asset, strategies of hiding forex in normal people, supporting “out-going”, promoting domestic restructuring, strengthening national soft power. Along with the improvement of currency structure of outward financial asset, new allocation of financial combination, direct investment combination and strategic resource reserve combination should be conducted.

15. Accelerate Industrial Internationalization in China • A global production system in China should be set up gradually. In 2008, foreign direct investment amounted to 52.15 billion USD. As an important part of promoting industrial internationalization, the next step including “outgoing” for a global marketing network, processing and assembly system, agricultural and mineral production bases, R&D design center, engineering contracting, logistics and transport, is an important part of strategic adjustment for future trade. • Service sector is weak in competition. Regarding the provision of intermediary value-added services for production, cross-border transport, technical trade and financial insurance are the main deficit components of trade in service, while consultation and information, accounting and law are also less competitive.

16. Thank you!