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US protectionism risks trade war: trade expert

(Xinhua)
Updated: 2009-09-25 15:14

The US decision to increase Chinese tire tariffs risks starting a full-scale trade war, distorts economic growth and ultimately hurts consumers, according to a US trade expert.

In an interview with Xinhua in Chicago Thursday, Marshall P. Eldred, president of Chicago-based international trading company Golden Hill Foods, said the tire decision was protectionism that could potentially have a negative impact on trade relations.

"Every action has a reaction. This could lead to further protectionism on China's part. At the very least, this sort of protectionist policy creates a tense trade environment,"he said.

Eldred has been in international trade and distribution for 20 years. His company, Golden Hill Foods, imports spices and other food ingredients from around the world, including China.

Eldred believes that trade protectionism in general distorts economic growth by supporting uncompetitive industries. "In this case, the tire tariff will have a negative impact on the auto industry as automakers seek the least expensive alternatives for inputs. Ultimately, the US consumer will suffer as they will not have access to the lowest possible price for cars," he said.

As an importer of food ingredients, Eldred is concerned that this decision may inspire more cases of US producers looking for protection against less expensive imports from China and elsewhere.

"It's a slippery slope that could lead to big increases in US protectionism. In the end, US consumers will feel it in their wallets when they realize that they can't afford to buy the same quality cars, TVs, appliances, clothing and other consumables. They will certainly let their feelings be known at the ballot box. The end result is volatility both politically and economically," he said.

Eldred said the trade dispute should be addressed and dealt with at the World Trade Organization level to prevent escalation into other sectors of the economy.

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He further pointed out that, in today's interwoven global economy, a thorough cost-benefit analysis needed to be conducted to understand what the true "downstream" effects are of punitive tariffs levied on imports to satisfy one interest group or another.

He gave an example of a handful of US tire companies operating in China now. "How does this decision affect them? How about rubber futures on the global commodity exchanges? And does this have a significant effect on raw material suppliers to related industries?" he questioned.

Eldred said US-China trade relations also had broader implications.

"Like it or not, the US and China are partners in dealing with geo-political issues around the world. Our dealings with China on the economic front have an impact on how we work together as partners on issues such as North Korea (the Democratic People's Republic of Korea), Iran and an assortment of regional conflicts," he said.

"If we are dealing with China in a way that is perceived as completely self-interested, then they will reciprocate in kind with regards to these issues," he warned.

Eldred said the Obama administration should push for the reopening of the Doha round of world trade talks. "This would show good faith in an effort to address some of the unsolved issues around global trade, particularly with respect to the developing markets' attempts to gain access to areas of the US economy previously protected."

Being in international trade for about 20 years, Eldred always has the belief that trade among countries is imperative to raising the quality of life for everyone. "Without international trade, consumers would be limited to products produced in their own countries."

"As the world continues to globalize, economies will seek the most cost-effective inputs to increase the well-being of its citizens. Trade wars distort that growth and ultimately consumers suffer," he added.