One of the few things that US President Donald Trump has done right is to show China its place by imposing heavy tariffs on Chinese imports into the US. That these tariffs were too low and Beijing was exploiting this to the hilt was all too evident but past US administrations did nothing about it.
Not just in the US but in much of the world, the Chinese were dumping goods, a lot of them of sub-standard quality especially in the developing countries where quality checks are either non-existent or hugely deficient.
The emphasis was on price which was kept low due to economies of scale and exploitative labour practices which the Chinese establishment is infamous for.
The Modi government in India has been on a low key on Chinese dumping so as to maintain workable relationship with the government there. In the process, Indian cottage and small-scale industry has suffered grievous damage, unable to compete on price which is a major factor among Indian consumers.
If unemployment is at high levels in India it is in no small part due to Chinese goods swamping Indian goods out of the market. Many of the Chinese goods pay no import duties at all due to rampant smuggling of goods through the unofficial route.
There was the much-publicized case of Chinese toys flooding the US market some years ago which were found to be toxic and were therefore banned. They, however, passed muster in Indian and other Third World markets due to lack of stringency in tests and corruption in getting anything cleared for quality without due justification.
Little said about the crippling effects of Chinese dumping in India
The range of Chinese goods that have replaced Indian goods on shelves is mind-boggling. From electrical switches to bathroom fittings, from lighting to hardware, Chinese goods have virtually monopolised Indian markets throwing the Indian small-scale manufacturers into a tizzy. Even fire crackers and idols of Hindu gods are made in China while we express a resolve to promote ‘Make in India.’
While there is such a hue and cry over trivial things in the Opposition’s attacks on the government, there is little consciousness and little said about the crippling effects of Chinese dumping on Indian cottage and small-scale sectors. No one is indeed willing to take on the Chinese dragon, be it the ruling establishment or the Opposition parties.
And the crippling effect of US tariffs on Chinese economy
The Americans are gung ho about the crippling effect of US tariffs on the Chinese economy and of the fact that their own economic indices are looking up. Trump tweeted on August 5 that US tariffs were working ‘Big time’ and claimed that the stock market in China had crashed 27 per cent in four months.
While independent observers said this was an exaggeration, the fact remains that the Chinese economy has suffered a big blow and the market has reflected this. The yuan is down against the US dollar by 8 per cent since April and is close to its weakest in a year.
A shrinking trade surplus produced a current account deficit in the first half of 2018, China’s first such trade gap in two decades.
The Chinese have reacted with retaliatory tariffs on US goods, but since the US buys far more from China than vice versa, the US has more scope to impose tariffs.
Doubtlessly, China has been hit hard, but it is looking at ways to get even with the Americans. At the same time, Chinese operations of American businesses ranging from Apple to Starbucks are in jeopardy too with China having the potential to disturb those.
The Chinese are indeed threatening that the trade war could escalate unless the Americans pull back from their initial high tariffs on imports from China.
Will the trade war worsen or will the two powers cooperate for mutual benefit is the million dollar question today.
Meanwhile, while countries like India must encourage trade and investment through legitimate routes, India must put its foot down on dumping of Chinese goods which are crippling the small-scale sector.