World Trade - March 2009 - (Page 17) The China Alternative Perhaps even more threatening to U.S. interests is how Beijing uses these trade deals to convince other nations that it is not only sucking away their jobs but also bringing back commerce, investment, and cheaper goods. “China is positioning itself as a trade alternative to having trade deals with U.S. or another WTO round,” says Federico Macaranas, a trade expert at the Asian Institute of Management in Manila, where China has made large investments. Even as China embraces freer trade, some of its strategies have caused concern about whether it is flouting international trade laws. By receiving protections in their home market, Chinese firms can amass enormous cash flows, which make foreign acquisitions easier. Meanwhile, in many countries where they operate China’s state-owned banks stand accused of offering low-interest soft loans to help Chinese firms enter a market, or of handing out generous financial incentives to foreign governments that give preference to Chinese firms. “China’s national champions enjoy a range of benefits from the government including information-sharing networks, domestic tax breaks, cheap land and low-interest funding from state-owned banks,” notes one comprehensive study on Chinese companies by the consulting group Accenture. Chinese automaker Chery, for one, recently inked a $1.5 billion loan package with China’s Eximbank designed to help Chery expand overseas—the loan is not to be used for business in China’s domestic market. To move up the value-added ladder, Chinese firms also have borrowed extensively from their foreign partners. Sometimes, this works well, benefiting both sides. But other times, Chinese firms simply copy the Western technology or boot out their joint venture partner and build products themselves. In recent years, for example, foreign automakers in China have launched a raft of suits against Chinese firms for infringement. General Motors sued stateowned Chery for allegedly knocking-off GM subsidiary Daewoo’s Matix compact car to build Chery’s popular QQ small car. Honda sued another Chinese car-maker, Shuanghuan Automobile, for similar alleged copying. But foreign companies who look for recourse in Chinese courts don’t find much relief. “China’s legal system seems just like a foreign legal system, but when you have any case that involves local government interests, the local officials will just tell the court how to rule,” says Clive Ansley, a lawyer who worked in China for over two decades. Perils of Free Trade Meanwhile as China prospers, in the United States many blue-collar workers (and the labor unions that represent them) increasingly feel free trade has not benefited them at all. In one recent poll by the Pew research organization, an overwhelming majority of Americans believed that trade agreements lead to job losses, while the benefits of freer trade, like lower prices for American consumers, fail to register as strongly in the public consciousness. And while in the early 1990s, the time of the signing WWW.WORLDTRADEMAG.COM 17 http://WWW.WORLDTRADEMAG.COM
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