Protectionism Projection and Writing About Trade Disputes

October 16, 2012

When we talk about international trade and investment, “protectionism” usually refers to decisions by a government that shelter a domestic enterprise or industry from foreign competition. Every country does it, either by legal or illegal means. The World Trade Organization, which has rules that mandate “national treatment” between Member States, nevertheless allows nations to get away with a great deal of protectionism. And they do so, all the time. Every single anti-dumping case is an example of protectionism.

For example, the U.S.-China dispute on tires involved a legal means of protectionism. The U.S., in response to union complaints, threw up a tariff on Chinese imports to protect local manufacturers. This was legal under a special safeguard mechanism China agreed to when it joined the WTO. This may have been legal under WTO law, but it was obviously a protectionist measure.

China has had its share of protectionism problems over the years, including the A/V products case that I’ve written so much about. That dispute was finally settled earlier this year, although no resolution on the underlying national treatment violation was ever put forward.

I like to think that when I yell “protectionism!” in a given case, I have a good reason for making that accusation. If some evidence points in that direction or if no other explanation makes sense, I’m OK with throwing out the “P” word. At the same time, I try to point out when the “protectionism” label is inappropriate. For example, earlier this year, many foreign commentators used the “P” word when iPads were taken off the shelves of stores in a couple cities in response to the trademark dispute between Apple and Proview. This was not blatant protectionism; Proview was the legal owner of the trademark, and the enforcement action was legal.

Additionally, all this writing I’ve done recently about Huawei and ZTE, where I find myself opposite a whole lot of people who are screaming about protectionism, has made me sensitive to how and when we use the term. It may even color the way I use it myself in the future. I’ve noticed that many folks, both here in China as well as abroad, have been talking about protectionism without ever justifying the charge. If I had to choose, I’d be more likely to ascribe the Huawei/ZTE report to China bashing than protectionism, but the distinction between these two things seems to be lost on some critics.

Once one starts looking for inappropriate uses of the term, it can be seen everywhere. Just this morning I was reading about failed U.S. solar firm Solyndra, which has filed an antitrust case in the U.S. against several Chinese companies. Solyndra is accusing these firms of price fixing, which Solyndra says contributed to its bankruptcy.

Let’s put aside the merits of the case. Not important to this discussion, and I do not have any facts on the underlying dispute anyway as it’s still in the early stages.

What’s more interesting is critical reaction I saw in today’s Global Times. Now, before you roll your eyes, give me a second here. Yes, Global Times has a deserved reputation for hewing to a decidedly nationalistic viewpoint, and therefore one would expect that any dispute involving a Chinese company would be treated with hostility by GT. Indeed, that is usually the case, and the pattern is followed here as well.

But it’s not the article itself that drew my attention, just a very short quote from an industry representative:

“This kind of groundless complaints[sic] from the US will not stop, since the US presidential election is still going on, and its government always would like to link its domestic social conflicts with China,” Zeng Shaojun, secretary-general of the China New Energy Chamber of Commerce, told the Global Times Monday.

“The Chinese government will take countermeasures if the US kept on igniting trade frictions, and it will benefit neither side,” Zeng said.

This is a great example of what I’ll call “protectionism projection.” My use of the term “projection” is not entirely accurate, since it is borrowed from psychology and refers to: “a psychological defense mechanism where a person subconsciously denies his or her own attributes, thoughts, and emotions, which are then ascribed to the outside world, usually to other people.” Close enough, though.

Zeng is projecting his own ideas about how trade disputes are dealt with onto this Solyndra lawsuit. If you’ll notice, he not only talks about the lawsuit, but quickly brings the U.S. government into the discussion. But although the U.S. government has indeed imposed countervailing duties on Chinese solar panels in response to an anti-dumping action, that action and the Solyndra lawsuit are completely separate.

I’m not sure Zeng understands that, nor would it surprise me if he assumed that a U.S. court action was somehow evidence of government involvement. Why? Because that’s what he would expect here at home.

You see, the belief that many lawsuits in China are political in nature, and that cases involving international trade in particular are “managed” by the government, is not limited to foreigners, but also widely held by folks who live here as well. For what it’s worth, I think this view is wrong and that the vast majority of commercial litigation cases in China are free from such influence.

However, if you do hold this viewpoint, then you may assume that litigation in other countries is similarly influenced by that government. In some countries that may be true, in others, definitely not.

Is the Solyndra lawsuit a U.S. government action? Of course not. Has the judicial process somehow been influenced by the U.S. election? Nonsense. The case was just filed, and the plaintiff has not even made it through the first round of legal challenges.

Complaining about the merits of the case is fine. Criticizing it for being yet another example of U.S. protectionism is ridiculous. At least wait for a judgment!

I think we all need to be a bit more circumspect when throwing around the word “protectionism” or, in the case of Zeng, talking about government action in trade cases.