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maltatoday WEDNESDAY 4 APRIL 2018 14 News China to respond to new US duties, tariffs with 'same scale, intensity' CHINA will respond to any tar- iffs imposed by the US against alleged violations of intellec- tual property rights with the same proportion, scale and in- tensity, said its US ambassador Cui Tiankai. Cui's comments, in an in- terview with state-run CGTN English news channel Tuesday, are the first to indicate that China will retaliate on a scale that matches US plans for ad- ditional duties on Chinese imports. The US is readying duties on $50 billion of Chi- nese products as punishment for what Washington sees as widespread violations of in- tellectual property rights. US Trade Representative Robert Lighthizer has until Friday to propose a list of Chinese prod- ucts to be targeted to compen- sate for what he said was harm caused to the US economy by China's policies. American companies doing business in China have long argued that China uses a range of tactics to force them to transfer intellectual property, and that Chinese entities en- gage in widespread theft of US trade secrets. Following an in- vestigation into China's intel- lectual property practices, the USTR said the US will "con- front China over its state-led, market-distorting" practices in these areas. "If they do we will certainly take counter measures of the same proportion and of the same scale, same intensity," Cui said in the television inter- view. He said China has made good progress strengthen- ing protection of intellectual property rights and is ready to look at cases where violations have occurred. After announcing that tar- iffs on 128 kinds of imported goods from the US would take effect on Monday, China urged trade talks with the US to pre- vent greater damage to rela- tions. The reciprocal tariffs, a response to US tariffs on met- als announced in March on national security grounds, are imposed on goods valued at about $3 billion, a tiny fraction of its US imports. Here's what a trade war looks like In a two-week span, Presi- dent Donald Trump ordered up an array of tariffs against numerous countries, blocked Chinese takeovers of US com- panies and sought new restric- tions on future Chinese invest- ment. China responded with tariffs of its own on imports of 128 US goods. Economists are warning that the world is on the verge of an all-out trade war, featuring tit-for-tat reprisals, heated rhetoric and appeals to the World Trade Organisation, which may be ill-equipped to respond. 1. What is a trade war? The dictionary says it's "an economic conflict in which countries impose import re- strictions on each other in or- der to harm each other's trade." Trump's tariffs and the threat- ened retaliation from other countries meet this definition, but so do centuries of protec- tionist skirmishes by numer- ous countries in countless sec- tors. The recent escalation is stoking fears that Trump has set off a full-blown trade war by singling China out for re- taliation for intellectual prop- erty theft. The quid-pro-quo actions by the US and China over steel tariffs, Trump's in- vocation of national security to justify some of his moves -- which could open a Pandora's Box of similar claims by other nations – and Trump's threat to further punish the EU if it imposes counter-duties also add to the trade-war atmos- pherics. 2. What happened in previous trade wars? One of the most notorious examples is the Smoot-Haw- ley Act passed by Congress in 1930 and often blamed for deepening the Great Depres- sion. The law hiked US tariffs by an average of 20 percent, initially to protect American farmers but then broadened as other industries lobbied for protections. As demand col- lapsed, countries scrambled to maintain their gold reserves by devaluing their currencies or imposing even more trade barriers. Global trade fell off a cliff. 3. Who wins in trade wars? No one, if history is any guide. When President George W. Bush raised steel tariffs in 2002, US gross domestic prod- uct declined by $30.4 million, according to the US Interna- tional Trade Commission. The US lost about 200,000 jobs, about 13,000 of which were in raw steel-making, by one esti- mate. A report by the pro-free trade Peterson Institute for International Economics esti- mated that Bush's tariffs cost about $400,000 for every steel- industry job saved. The World Trade Organisation also ruled that the Bush tariffs were il- legal. 4. What has Trump done so far? He's imposing tariffs on up to $60 billion of as-yet un- specified products imported from China in retaliation for what he calls decades of intel- lectual property theft. He im- posed tariffs of 25 percent and 10 percent, respectively, on steel and aluminum imports, which prompted China to say it could hit back with tariffs of its own. While he temporar- ily exempted allies, including the European Union, from the metals tariffs, he expects them to grant concessions to the US to maintain the exemption. 5. Why did Trump invite this fight? In a March 2 Twitter post, he declared trade wars "good, and easy to win." His focus remains on reducing the US trade defi- cit, which shows the country imports hundreds of billions of dollars more than it exports. Stepping back from trade deals like the North American Free Trade Agreement and the Trans-Pacific Partnership also appeals to Trump's base of vot- ers in America's Rust Belt. But talk of a trade war is alarming to many US business leaders, who largely support existing trade deals, and the securi- ties markets, which fear lower profits and slower economic growth if the US turns pro- tectionist and other countries retaliate. 6. Who has retaliated? China hit $3 billion of US wine, fruit, pork, steel pipe and other exports with tar- iffs on April 2. Many of the 128 products on the list originate from states that favoured Trump in the 2016 presidential election. So far, high-volume agricultural ex- ports to China, such as soy- beans, haven't been swept into the mix. An even big- ger worry for the US is that China, the US's biggest credi- tor, will scale back purchases of Treasuries in retaliation. China's ambassador to the US doesn't rule out the op- tion. Other countries haven't retaliated for the steel and aluminum tariffs, which took effect on March 23, largely because Trump temporar- ily exempted many of them. Still, the EU is unhappy and warned it will respond with its own 25 percent tariffs on $3.5 billion of American goods. Like China, the EU says it will focus particularly on products from states that are part of Trump's politi- cal base, including iconic US brands of motorcycles, blue jeans and bourbon whiskey. In turn, Trump warned that he would impose a 25 percent penalty on European car im- ports if the EU carried out its threat. 7. When does the WTO get involved? The US took the first step on March 23, filing a "request for consultations" with China at the WTO on technology li- censing. China also notified the WTO how it could respond to the steel tariffs with levies of its own. But retaliatory actions that unfold quickly can test the WTO's somewhat ponder- ous deliberative process. The arbiter of international trade disputes was born in 1995 out of a set of agreements struck by countries trying to reduce trade barriers. If a govern- ment's complaint about an- other nation's trade barriers is seen as grounded, the WTO recommends acceptable re- taliation. In the case of steel, Trump is invoking a seldom- used clause of a 1962 US law that gives him the authority to curb imports if they undermine national security. Under WTO rules, countries can take trade actions to protect "essential se- curity interests." Other nations could challenge the validity of the US use of that clause. They also could copy the US move by citing national security to block imports themselves. 8. Could tariffs backfire on the US? Yes. Take steel tariffs. Many more people are employed in industries, such as auto manu- facturing, that buy steel to make products, than in steel- making itself. Some consum- ers may also have to pay higher prices. Trade tensions could boost inflation more than de- sired by Federal Reserve policy makers, who might feel the need to raise rates more ag- gressively than planned. On the other hand, if the tariffs result in job losses and the economy slows, the Fed might want to ease the pace of rate hikes. 9. Are tariffs the only weapon in trade wars? No, there are many others. Clamping down on Chinese investments in the US, which Trump is already doing, is one example. Talking down, or manipulating by lower- ing one's currency is another. Countries through the years have used other means to keep foreign goods out and pro- tect homegrown companies, a practice known as mercantil- ism. Trump accuses China of using government subsidies to prop up its domestic industries. Some practices are overt, such as quotas, and others covert, such as unusual product speci- fications, lengthy inspections of goods at entry ports and in- tricate licensing requirements. US President Donald Trump and Chinese President Xi Jinping hold their joint press conference at the Great Hall of the People in Beijing, on Thursday, Nov. 9, 2017