Monday, September 28, 2009

Chinese tyres vs American chicken

There’s a spat going on between the US and China that is threatening to become a trade battle, if not a war. The US imposed tariffs of 35% on Chinese automobile tyres on the grounds that imports were surging and that the domestic industry had to be protected “temporarily”. China immediately appealed to the WTO and there the matter stands now.

But China is a prickly nation. It is quick to take offence. It announced last week that its launching an investigation in American “chicken parts” being dumped in China and putting Chinese poultry farmers out of business. Of course, this was entirely unrelated to America’s action on its tyres.

Reading this made me sit up. Is America capable of exporting something that undercuts China ?? How on earth was that possible ? But it indeed does seem to be the case. The “chicken parts” in question are wings and legs. Apparently these have no use in the US – they are virtually worthless and go for 2 cents a pound. But these are delicacies in China – one of the quaint experiences of mine in China is to see elderly women go out early in the morning to buy fresh chicken legs, just as Indian women might buy milk. These “chicken parts” sell for 40 cents a pound in China. Lo and behold America is cheaper than China !

A spat is brewing and if nationalistic fever is stoked (all too easy in both the countries), this can escalate into a mini trade war. This is exactly what the world does not need today, although politically this will be, unfortunately, popular. It will be a sad day if the world’s economic direction is dictated by the likes of Rush Limbaugh and the prickly faceless mandarin in Beijing.

These are difficult times for free trade. Capitalism is on the defensive and free trade is becoming a four letter word to far too many people. But it is precisely in these recessionary times that the world needs more of free trade, not less of it. But then a free market evangelist is somewhat akin to a paedophile these days.

Whatever might be your views, surely there are more worthy causes to fight wars on than chicken feet !