Cause:

U.S. Trade Representative Ron Kirk is expected to launch a WTO case against China on Tuesday when he holds what his office called a major news conference regarding U.S.-China trade.

Kirk’s office gave no details in announcing the 9:15 a.m. EDT/1315 GMT session with reporters. But industry sources said they expected the United States and the European Union would both announce a World Trade Organization case against China over its export restrictions on raw materials.

Effect:

China will remove or reduce export taxes on a range of products – from grain and rice to metals and other materials – effective from July 1, the country’s finance ministry said. This is aimed at preventing the trade situation from deteriorating further, analysts said.

Perhaps the situation is more complex than I am portraying it. However, it certainly looks like the EU and U.S. threats were successful (at least in the short term), and an accomodation will be forthcoming.

I usually criticize saber rattling in the trade area. I think it often poisons the dialog and leads to a lot of tit-for-tat game playing. A lot of folks beg to differ, believing that the big stick is absolutely necessary in the mix of trade policy tools, and that without the threat of retaliation/legal action, protectionist policies will run amok.

Perhaps I need to rethink my peacenik tendencies.