Yes, lowering tariffs on automobiles in China will certainly lead to job losses in the US auto industry. I can certainly understand why the UAW leadership was all but frothing at the mouth over PNTR! Barkley Rosser -----Original Message----- From: Stephen E Philion <philion at hawaii.edu> To: pen-l at galaxy.csuchico.edu <pen-l at galaxy.csuchico.edu>; lbo-talk at lists.panix.com <lbo-talk at lists.panix.com> Date: Friday, May 26, 2000 4:29 PM Subject: China 'Short-term pain, long-term gain'
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>SCMP
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>Friday, May 26, 2000
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>PNTR VOTE
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>'Short-term pain, long-term gain'
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>WILLIAM KAZER in Shanghai
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>While Beijing has applauded its likely entry into the World Trade
>Organisation (WTO), joining the global body could contribute to slower
>economic growth, more job losses and a weaker trade position next year as
>pain offsets early gains.
>
>Economists, speaking shortly after the US House of Representatives voted to
>smooth the way for WTO accession by backing Permanent Normal Trade
>Relations (PNTR) status for the mainland, said the real benefits for
>Beijing would be substantial but would take time to emerge.
>
>"There will be big shocks to the economy next year," said Yin Xinming, an
>economist at Fudan University. "There will be more negatives in the short
>run." Other economists agreed with that view.
>
>"GDP [gross domestic product] growth could slow to seven per cent next year
>from about eight per cent this year," said Chi Lo, regional head of
>research at Standard Chartered Bank in Hong Kong. That would reflect a
>variety of factors, including weaker global economic growth as well as the
>restructuring of the mainland's inefficient state industry under pressure
>from increased competition from abroad.
>
>Beijing has been warning its state enterprises, many of which are
>overstaffed and unable to operate profitably, that they would have to
>prepare for new challenges after entry to the WTO. It has agreed to reduce
>import duties gradually and to scrap several non-tariff barriers to trade
>and investment that have long angered foreign businessmen.
>
>Import duties on cars, for example, will fall to 25 per cent by 2006 from
>80 to 100 per cent now. Agricultural duties will drop to 17.5 per cent from
>22 per cent, while a host of restrictions will be eased in areas from
>telecommunications to finance and retailing to transport.
>
>As a result, economists are predicting more mergers and closures among
>state-run companies. This was likely to mean increased layoffs, which in
>turn would drag down economic growth.
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>Mr Chi said the mainland could have a current account deficit of US$16
>billion (HK$123 billion) next year. While that would still be manageable,
>it would compare with an expected surplus of US$4 billion this year and an
>actual surplus of US$12 billion last year.
>
>A slower expansion in main markets could slow the mainland's export growth
>next year to 12 per cent from a forecast 15 per cent this year. Meanwhile,
>imports could climb by 18 per cent next year against 20 per cent this year,
>the economist said.
>
>The bright spot in the near-term economic picture is foreign direct
>investment (FDI), where a moderate upturn could be expected fairly soon. Mr
>Chi expects to see FDI rising to US$50 billion next year from US$45.6
>billion this year.
>
>Government officials have been quick to play up this aspect of the expected
>entry into the WTO. Liu Zuozhang, deputy director of foreign investment at
>the Ministry of Foreign Trade and Economic Co-operation, said accession to
>the WTO would promote foreign investment. He called this a "win-win"
situation.
>
>But more companies competing for a share of the domestic market will put
>pressure on unemployment, which officially stands at 3.1 per cent in urban
>areas but is believed to be considerably higher.
>
>"Short-term pain and long-term gain," said Merrill Lynch economist Ma
>Guonan, in a description of the overall impact of WTO entry. But he and
>other economists said Beijing still had several ways to cushion the blow
>from increased competition - and one of them was its currency.
>
>Beijing has already been testing the waters, allowing more flexibility in
>the exchange rate for the yuan, which had been held firmly at about 8.27 to
>the US dollar. Analysts said a slight weakening of the yuan could offset
>some of the pressure for more imports due to lower tariffs.
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