Rio Tinto and China’s State Secret Law – the business bribery/state secrets nexus – expanding or contracting?

by M. Ulric Killion

Borrowing from the title of a recent New York Times article, "China widens investigation of steel industry" (Barbazo, 2009). The title and article reflect the growing (both domestic and international) concern with the ongoing investigation and detention of workers, managers and investors, in relation to the allegation that workers from Rio Tinto, an Anglo-Australian company, conspired to steal state secrets.

For those unaware of the situation that Rio Tinto and its workers find themselves in, David Barboza, in a recent New York Times article, presented a brief introduction to the pending crisis and the players involved in the controversy.

Some key points or excerpts from Barboza's New York Times article read as follows:

"SHANGHAI — The Chinese authorities have detained or questioned at least seven Chinese steel industry executives in a broadening corruption investigation connected to the detentions last week of four employees of the mining giant Rio Tinto, state-controlled news media reported Monday. The investigation, which began with accusations that the four Rio Tinto workers had conspired to steal state secrets, has rapidly widened, according to accounts on government Web sites and in Chinese news media.

It now includes accusations of widespread bribery in business dealings, as well as allegations that the four workers paid for detailed government trade and manufacturing data to give Rio Tinto executives an edge in iron ore negotiations with Chinese state-controlled steelmakers. . . Those being questioned include shippers, traders and steel-mill managers. . . .

Experts on China's large steel and iron ore industry say corrupt practices have gone on for years, including iron ore deals off the books and the exchange of confidential market data that Beijing now considers state secrets. . . Then focus shifted to Rio Tinto's part in negotiations between iron ore suppliers and Chinese steel mills over ore prices. The talks failed to yield a long-term contract, and that could force the mills to pay higher prices this year. . .

Beijing officials deny that politics is involved, and they say the case will not harm China's relations with Australia. . .

Beijing has officially said very little about the case, which is before the Ministry of State Security and therefore confidential. But facing growing concerns that the spying accusations might have been retaliatory, the government has been allowing the state-controlled media to reveal more and more details. . ." (David Barboza, China Widens Investigation of Steel Industry, NY Times, July 13, 2009).

In particular, Larry Catá Backer's articles are very insightful, while also presenting a unique perspective on the ongoing crisis of Rio Tinto and others. Backer's articles are also informative regarding not only about the current crisis of Rio Tino, but also the history and historical problems that associate with China's State Secrets Law, such as "its vagueness and broad sweep" (Backer, July 11, 2009). Then there is the problem of the state's participation in the market (Backer, July 10, 2009).

As Backer (July 10, 2009) succinctly observed:

"What makes the case interesting is the conflation of a state and market activities. When the state is participant in private market activities, actions that might be considered good or bad business practice can be transformed from economic to political criminality. The stakes become much higher for private market participants, but only in their interactions with states as private actors in markets. . .

When the character of commercial activity, even wrongly activity, changes character from an economic to a political crime, the distinction between private and public spheres is more likely to collapses. Thus, "Rio Tinto made no comment Thursday, but a day earlier, it issued a statement saying the company did not believe any of its employees in China had engaged in espionage." And that may be true enough--the actions were not directed against the state, as sovereign. But it does appear that the activity was intended to advantage Rio Tinto in its dealings with competitor enterprises in markets that touched on Chinese state economic policies affecting enterprises controlled by the state. That had the effect of transforming competitive market activity into anti state activities. That is certainly how the Chinese officially saw it" (Backer, July 10, 2009).

In this respect, the draft of the new State Secrets Law (Killion, July 4, 2009) becomes increasingly important, especially as a potential remedial or corrective remedy to the problem of the state's direct participant in the private market. The latter problem (i.e., state participation in the private market) is, actually, a remnant of the legacy of both Mao Zedong's earlier administration decentralization and Deng Xiaoping earlier regional decentralization.

This is because, "many Chinese and Western authority deem much-needed administration decentralization as not having actually occurred until after economic restructuring in 1978, which is when the 1978 Third Plenary Session of the 11^th Committee of the CCP adopted a policy of restoring the construction of a socialist legal system. However, Deng Xiaoping's regional decentralization was actually no more than a process continuing Mao's earlier administration decentralization. In this respect, Deng Xiaoping's contributions of regional decentralization and fiscal federalism to economic development may be an overstatement. Such contributions may have been attributable, simply, to the inheritance of bad aspects of Mao's decentralization. . . " (Killion, 2006).

In terms of the problem of state participation in the private market, more particularly, "A consequence of the bad aspects of what is deemed Mao's administration decentralization, which was a process continued under the reign of Deng, was actually a delay in the formation of an integrated national market. A continuing problem is that Deng's path to open market reform manifests a Chinese dual approach to development. In addition, the Deng era shared two fundamentals of both Stalin's and Mao's socialism, which were the party's monopoly of political party and dominance of state-owned enterprises (Guoyou qiye) (SOEs), such as, joint state-state enterprises (Guoyou lian ying qiye), enterprises directly under Central Government (Zhongyang zhi shu qiye), and urban collective-owned enterprises (Chengzhen jiti qiye). All of which resulted in China's dualist approach to development, with government institutions using their dual positions as regulation makers and enforcers, while also acting as economic players pursuing state opportunism. In addition, China's government continues to extend considerable effort in maintaining these SOEs" (Killion, 2006).

For these reasons, and as earlier mentioned, the new draft of China's State Secrets Law becomes increasingly important. This is because it is an importance that directly relates to the issue of whether, as a courtesy of China's new State Secrets Law, China's business bribery/state secrets nexus will, ultimately, experience an expansion or contraction, in its intended effect.

Sources:

David Barboza, China Broadens Steel Inquiry Beyond Rio Tinto, NY Times, July 13, 2009.

David Barboza, China's Detentions of Executives Rattle Investors, NY Times, July 12, 2009.

Ulric Killion, Modern Chinese Journey to the West: Economic Globalization and Dualism (2006).

M. Ulric Killion, China seeks public opinion on draft of new State Secrets Law, July 4, 2009.

Larry Catá Backer, Opening Up the Process of Reforming China's State Secrets Law, Law at the End of the Day, (July 11, 2009).

Larry Catá Backer, State Owned Enterprises and the Integrity of Private Markets and Commercial Activity: On the Arrest of the Rio Tinto Executive, Law at the End of the Day (July 10, 2009).

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

China, export restrictions, protectionism and “Buy-China” requirements

by M. Ulric Killion

Photo/Watching America citing “Buy U.S.A.” Provision makes World miss Bush (购买美国货条款让世界怀念布什), China Daily, May 24, 2009. 

On June 23, 2009, the United States and the European Union on Tuesday filed complaints with the WTO over Chinese restrictions on the export of key industrial raw materials, such as coke, bauxite, fluorspar, magnesium, silicon metal, yellow phosphorus and zinc.  

The US and EU alleged that China failed to reduce its export tariffs and raise quotas on these industrial raw materials, and that China's export restrictions created an unfair advantage for Chinese industries.  

To-date, China's response has been the following. 

As for the view from China, and according to China's Ministry of Commerce (MOC), the policy of limiting exports of these raw materials intends to protect the environment and natural resources; therefore, their policy is in accordance with the WTO rules (Bloomberg, 2009).  

On June 25, 2009, China also announced the filing of its own challenge to a US ban on the imports of Chinese poultry (WSJ, 2009). In the interim, China trade policy is also arguably titling toward greater protectionism. A result largely attributable to the new stimulus packages being put in place by many Asian economies.  

In the context of Asian economies, these are the various stimulus packages being put in place by predominantly export-dependent economies. A problem is that these stimulus packages may not be able to adequately protect Asian economies from the consequences of the fundamental shift in trading patterns underlying the current global sub-prime crisis, or simply, global financial crisis. 

Most of the stimulus packages of exporting economies generally premise on a tacit assumption that global trade will commence recovery by the third quarter of 2009; thereby, normalcy is presumed soon to follow.

Many experts would also add, as a possible tacit assumption, that many of these exporting economies will have to undergo structural readjustment. Such as those export-oriented economies that historically focus on selling to the United States and European markets, rather than Asian markets. In other words, this is a structural readjustment of the shift from focus of being an export-oriented economy to greater domestically-consuming economy.

In the era of a global post-subprime crisis, "now dominated by born-again Keynesians, deficit-funded stimulus packages are all the rage." In the context of Asian economies, this is a trend also appearing in Southeast Asia, Vietnam electing to support industry, Thailand attempting to mitigate the effects on the most vulnerable, and Singapore choosing the path of a mixture of these two methods (Washington Post, 2009).

According to Tai Hui, head of economic research for Southeast Asia at Standard Chartered Bank in Singapore, stimulus packages will work for the region's bigger economies, while probably having being less effective with the smaller economics. As for China and India, Tai Hui, thinks that stimulus packages will work well for both countries.

Then there is the issue of the growing problem or inclusion of buy-domestic provisions in the stimulus packages of both developing and developing countries. This is a problem that mostly associates with the protectionist consequences of buy-domestic provisions. 

As Daniella Markheim (2009) earlier observed, "Looming large in the stimulus package passed by the U.S. House of Representatives Wednesday--and currently under consideration in the U.S. Senate--is the expansion of 'Buy American' provisions that discriminate against foreign goods and services in U.S. government procurement." 

While the House legislation only focused on iron and steel products made in America being in public works projects that are funded by the stimulus package, notwithstanding domestic steel adding an amount great than 25 percent to project costs, the Senate, contra distinguishably, intends even more harsh restrictions, such as the banning of any imports in subsequent stimulus-funded projects. 

Markheim also rightly observed that protectionism is not the answer to American woes.

The "Buy America" rules also have international implications, especially in Sino-US trade relations. While Markheim (2009) urges the United States to lead by example, and to recognize the growing international interdependence of countries and their economies, the world judges America and its new variety of protectionist-trade policy, which is the legislative-enacted "Buy American" variety.

For instance, there are the Asian countries and economies, such as China.

Following announcement of the earlier announcement of the "Buy America" provision, on February 9, 2009, China's MOC publicly announced, "China won't resort to trade protectionism with a plan similar to "Buy America" that bans foreign products in domestic stimulus projects."

China earlier appeared to be taking the lead and attempting to set an example for global trade, while the United States appeared to be leaning toward protectionist-trade policy and barriers; a proclivity for which the untold consequences have yet to run.

For instance, since February 2009, there appears to be a China policy shift on the issue of buy-domestic provisions, which is a policy shift that might evidence growing protectionism.

As protectionism remains a persistent problem in global trade, there is now the growing concern with China electing to employ buy-domestic provisions. These growing concerns, more particularly, address the July 2009 inclusion into China's stimulus package of "Buy China" requirements.

The problems are obvious and succinctly stated by one economist as: "These require recipients of money from China's mammoth fiscal expansion to choose domestic suppliers 'unless products or services cannot be obtained in reasonable commercial conditions in China'. This sounds like out-and-out protectionism. But America, which included similar "Buy America" provisions in its own stimulus bill, may find it hard to raise a stink" (China Economics Blog, 2009).

Sources:

Johnson, Tim. 2009. Washington Post, S.E. Asia Faces Long-Term Trade Shift, Washington Post Foreign Service, February 7; Page A10.

Markheim, Daniella. 2009. Buy American Hurts America, WebMemo #2256, January 30.

WTO looking closely at Chinese trade restrictions, China Economics Blog, July 2, 2009.

Xinhua, 2009, China not to practice "Buy China", February 9.

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

China seeks public opinion on draft of new State Secrets Law

by M. Ulric Killion

Photo/Vanderbilt Business » Fall 2010 Inside Business » Trade Secrets.

In a move toward what is no less than a possible greater transparency in the mainland, China's government has made available to the public its "People's Republic of China State Secrets Law (Revised Draft)" [保守国家秘密法(修订草案)向社会公开征集意见], and is seeking public opinions on the new draft of the State Secrets Law. 

Chinese citizens are instructed that they can log on directly to the National People's Congress Network at www.npc.gov.cn and submit their opinions regarding the draft or they can submit their opinions by mail to the following address: NPC Standing Committee (West Xicheng District, Beijing on the 23rd Lane, Postcode: 100805). The cut-off date for submitting opinions is July 31, 2009. 

The text of the public notice reads as follows:

保守国家秘密法(修订草案)向社会公开征集意见
 

新华网消息 日前，《中华人民共和国保守国家秘密法(修订草案)》在中国人大网全文公布，向社会公开征集意见。

中国人大网的消息说，十一届全国人大常委会第九次会议初次审议了《中华人民共和国保守国家秘密法(修订草案)》。现将《 中华人民共和国保守国家秘密法(修订草案)》及草案说明在中国人大网公布，向社会公开征集意见。社会各界群众可以直接登录中国人大网(www.npc.gov.cn)提出意见，也可以将意见寄送全国人大常委会法制工作委员会(北京市西城区西交民巷23号，邮编：100805，信封上请注明保守国家秘密法修订草案征集意见)。意见征集截止日期：2009年7月31日。

Source (来源): 保守国家秘密法(修订草案)向社会公开征集意见, 2009年07月01日, 新华网.

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

US, Europe charge China with WTO violations

by M. Ulric Killion 

US Trade Representative Ron Kirk speaks about trade between the U.S. and China at a news conference in Washington, D.C., U.S., on Tuesday, June 23, 2009. 

The United States and the European Union on Tuesday filed complaints with the WTO over Chinese restrictions on the export of key industrial raw materials, such as coke, bauxite, fluorspar, magnesium, silicon metal, yellow phosphorus and zinc. 

The response from Kirk is that: "China's policies on these raw materials put a giant thumb on the scale in favor of Chinese producers," and "It's our job to make sure we remove that thumb" (Bloomberg, 2009). (WSJ: Bloomberg News/Landov). 

The two countries, the US and EU, allege that China failed to reduce its export tariffs and raise quotas on these industrial raw materials, and that China's export restrictions created an unfair advantage for Chinese industries. All of this, as alleged by both the US and EU, distorted world competition, thereby violating the WTO rules.

"U.S. steelmakers and unions complain that cheap government loans, tax rebates and grants give Chinese manufacturers an unfair advantage" (Bloomberg, 2009). "USTR officials told reporters that the two complaints filed separately by the EU and the U.S. highlight the importance of this dispute" (WSJ, 2009).

According to China's Ministry of Commerce, the policy of limiting exports of these raw materials aims to protect the environment and natural resources and therefore "is in accordance with WTO rules" (Bloomberg, 2009). In the interim, as the Wall Street Journal (WSJ, 2009) reported, on Wednesday, China also announced the filing of its own challenge to a US ban on the imports of Chinese poultry.

Both the US and European Commission are formally seeking consultations with China. Given the WTO's dispute settlement procedures, should these talks fail, the next step would be to request a WTO panel to hear the complaint after 60 days.

In addition, the critical importance of this particular trade dispute is that it is the first case initiated under the Obama administration, which could potentially affect Sino-US trade relations. [US Trade Representative Kirk] "said it does seem somewhat 'counterintuitive' that the Obama administration's first WTO complaint involves allegations that China isn't exporting enough" (WSJ, 2009).

Sources:

China Defends Curb on Exports, WSJ, June 24, 2009.

US, EU file WTO case over Chinese raw materials, Agencies, June 24, 2009.

China Says Raw-Material Export Limits Meet WTO Rules, Update 2, Bloomberg, June 24, 2009.

U.S., Europe File Trade Complaint Against China, WSJ, June 24, 2009.

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

New China Decree mandates PCs with "Green Dam-Youth Escort" software

by M. Ulric Killion   

The Public Debate and Responses 

As of July 1, 2009, according to a new decree, all computers sold in China will be shipped with "Green Dam-Youth Escort" software, which blocks access to contraband websites. China's Ministry of Industry and Information Technology says the new decree intends to protect young people from "harmful" content such as pornography.

However, Beijing's history of censoring a broad range of web content has raised concern among foreign industry officials and in Washington that the new effort could increase government control over Chinese cyberspace.

It is noteworthy that earlier in June, Microsoft's Bing, Live.com, Hotmail, and other Internet services were blocked, though temporarily, for customers in China (Lefkow, 2009; Blanchard and Hornby, 2009). The reason cited for the Internet services being blocked by most China observers was the 20th Anniversary of Tiananmen and the June 4th suppression of the pro-democracy movement in Beijing.

The response from Microsoft to the earlier June blocking of Internet services follows. According to Microsoft director of public affairs Kevin Kutz, "We are reaching out to the government to understand this decision and find a way to move forward." Further Kutz said, "Microsoft is committed to helping advance the free flow of information, and is committed to encouraging transparency, due process and rule of law when it comes to Internet governance" (Lefkow, 2009; Blanchard and Hornby, 2009).

Conversely, other groups such as Reporters Without Borders (RWB) and China's foreign correspondents' association did, of course, more harshly criticize the blocking of Internet services. Moreover, the US government has even suggested that China by requiring PC makers by mandate, or decree, to install this variety of Internet filtering on new PCs may violate China's trade commitments.

 

Blocking software: Customers use computers at an internet cafe in Shanghai (Bloomberg).

The Decree and its Enforceability 

The notice, The Wall Street Journal reports, could also force PC manufacturers to choose between refusing a government order in a major market or opening themselves to charges of abetting censorship (Eisenman, 2009). 

In addition, China's history of censoring a broad range of web content is raising concerns among some foreign industry officials. The US government perceives potential problem of the new decree as significantly increasing government control over Internet access in Mainland China. "Industry executives also warn that the software could cause PCs in China to malfunction, and could make them more vulnerable to hacking (WSJ, 2009).  

The Wall Street Journal (Chao, PC firms face China decree) reports: "We are studying the new rule to assess its impact," said Susan Stevenson, spokeswoman for the US Embassy in Beijing. "We would view any attempt to restrict the free flow of information with great concern and as incompatible with China's aspirations to build a modern, information-based economy and society." . . . The software's Chinese name is "Green Dam-Youth Escort". The word "green" in Chinese is used to describe web-surfing free from pornography and other illicit content. 

Further, the Wall Street Journal (Chao, PC firms face China decree) reported that "the rule was outlined in a notice that was issued by China's Ministry of Industry and Information Technology on May 19 but that hasn't yet been reported. The notice, a copy of which was seen by The Wall Street Journal, says PC makers must ship PCs to be sold in China as of July 1 with the Green Dam software "preloaded".  

The notice says the software must either be preinstalled on the hard drive or enclosed on a compact disc. It says PC producers will be required to report to the government how many PCs they have shipped with the software.

It is unclear how the Chinese government might enforce the new rule. Although the notice doesn't mention any punitive action, fear of consequences if PC makers don't comply could be enough to ensure their compliance" (Chao, PC firms face China decree). 

The Chinese Netizen Community 

The greater issue of the new decree, more importantly, is that it will ultimately affect Internet use in the mainland, which, according to the latest statistics from China's Information Technology Industry, as of the first quarter of 2009, is about 316 million Internet users in China (Xinhua, 2009). The consequences of the new decree have yet to unfold, especially as concerns the Chinese netizen community and how wide or narrow the girth, or reach, of the new decree in censoring Internet services.

As Bryan Zhang, founder of Jinhui, observed, "Some computers sold in China already come with parental-control software, but it isn't government-mandated" (Choa, China Squeezes PC Makers, 2009). However, the "Green Dam-Youth Escort" software, as Zhang explained, would problematically allow the blocking of other types of content, as well as the collection of private user data (Choa, China Squeezes PC Makers).

Sources:

Chris Lefkow, China blocks websites ahead of Tiananmen anniversary, June 2, 2009, AFP.

Ben Blanchard and Lucy Hornby, China ups security ahead of Tiananmen anniversary, June 2, 2009. Reuters.

Joshua Eisenman, Editor, China Reform Monitor No. 767, June 24, 2009.

Loretta Chao, PC firms face China decree, Wall Street Journal, June 8, 2009.

Loretta Chao, China Squeezes PC Makers, Wall Street Journal, June 8, 2009.

"网络民意"在争议声中推进中国公民权利保障, 新华网, 2009年06月24日 ["Web people" in the controversy to promote the protection of the rights of Chinese citizens, Xinhua, June 24, 2009].

 Copyright © Protected - All Rights Reserved M. Ulric Killion, 2009.

ITC rules on China tire imports - finds import surge (dumping) in US

by M. Ulric Killion 

In Beijing, according to a government spokesman, "China "deeply regrets" about the affirmative determination made by the US International Trade Commission (ITC) on China safeguard investigation involving certain passenger vehicles and light truck tires" (Xinhua, 2009). The ITC "found certain passenger vehicles and light truck tires from China are being imported to the United States in such increased quantities or under such conditions as to cause or threaten to cause market disruption to the domestic producers of like or competitive products."

According to Yao Jian, the spokesman for the Ministry of Commerce (MOC), "The ITC's decision is "not objective", and is "against the World Trade Organization (WTO) regulations. Lots of evidence have proved that the Chinese-made tires did not cause direct competition with the US products. Restriction of the Chinese imports can not fix the structural problem in the US, he said. We have noted the US tire makers did not claim such disruptions. The US Tire Industry Association, which representing all segments of the tire industry, also opposed to limit Chinese tire imports, said Yao. We hope the US authority could consider the overall interests of the two sides and think twice before the final rule, he said. As a result of the affirmative determination, ITC will consider the issue of remedy, and send its report to the US President and the US Trade Representative by July 9" (Xinhua, 2009).

Many in China perceive the ITC decision as evidence of growing domestic protectionist policies, especially in the United States. In Washington, on June 2, 2009, the ITC hearing commences. It is a case filed by the United Steelworkers (USW) Union, which alleges that an increase in Chinese tire imports has cost 7,000 US jobs. In response, the USW wants the Obama Administration to more than halve the number of imports from 46 million units last year to 21 million. The USW also wants the Obama administration to employ section 421 of the Trade Law, which requires the ultimate approval or rejection of the president even after a ruling of the US International Trade Commission (Zhu, 2009).

Dealers are negotiating beside a tire model at an auto part exhibition in Shanghai, May 21, 2008. [Asianewsphoto].

A problem is that the administration of President Obama has sent mixed signals on the critical issue of Sino-US trade. For instance, there is Secretary of State Hillary Clinton encouraging China to continue to buy US debt, while US Treasury secretary Timothy Geithner accused China of currency manipulation, though the US immediately and officially withdraws his comment, and the appointment of Ron Kirk as the new US trade representative, who announced that he did not come to the job with deal fever. More particularly, while Kirk supported international trade in a broad sense, "he has also made comments suggesting that protectionism might not be so bad after all" (Abrams, 2009). The problems of US protectionist policy may become more of a reality with the passage of time for proponents of Buy American provisions.

These problems directly associate with the U.S. bailout and its potentiality for protectionist consequences. As Daniella Markheim (2009) earlier observed, "Looming large in the stimulus package passed by the U.S. House of Representatives Wednesday--and currently under consideration in the U.S. Senate--is the expansion of 'Buy American' provisions that discriminate against foreign goods and services in U.S. government procurement." 

While the House legislation only focused on iron and steel products made in America being in public works projects that are funded by the stimulus package, notwithstanding domestic steel adding an amount great than 25 percent to project costs, the Senate, contra distinguishably, intends even more harsh restrictions, such as the banning of any imports in subsequent stimulus-funded projects. Protectionism, as Markheim rightly observed, is not the answer to American woes.

Nonetheless, there are many groups in the US pushing the Obama administration to use the economic crisis as an excuse to resort to trade protectionism (Zhu, 2009).

The USW (2009) announced that they are pleased that ITC has moved forward on the union's Section 421 petition, ruling by a 4-2 vote that a surge of low-priced consumer tires from China is harming the domestic industry," an import surge they alleged has caused "major job losses and plant closures in the United States."

According to the USW (2009): "Our domestic industries cannot survive unless our government enforces the trade laws designed to curb and dissuade anti-competitive practices that cause market disruptions," said USW International President Leo W. Gerard. "We anticipate the remedies that will be delivered to President Obama will allow the time necessary to rebuild the U.S. tire industry."

On April 20, 2009, The USW filed its petition with the ITC. The petition sought relief under Section 421 of the Trade Act of 1974. More particularly, Section 421 is a temporary country-specific safeguard that China agreed to as part of its bilateral trade negotiations with the United States leading to its 2001 WTO membership.

"The USW petition claimed that imports of consumer tires from China increased from 2004 to 2008 by 215 percent in volume and 295 percent by value. In 2008, China exported nearly 46 million consumer tires with a value of more than $1.7 billion to the U.S., making it the largest source of consumer tire imports. While imports nearly tripled by volume during the surge period, domestic production of consumer tires declined by more than 25 percent. During this period, nearly 5,100 U.S. tire workers have lost their jobs as a result of massive erosion in the domestic production that coincided with the massive increases in imports of consumer tires from China. About 3,000 more jobs are slated to be lost by year's end as three plants are threatened to close. Whether the remedies will be established at a sufficient level to save these jobs and plants is a question that the USW and others await the answer. To combat this egregious trend, the USW believes that the government should impose an import quota on China of 21 million consumer tires used on passenger cars, light trucks, minivans and sport utility vehicles per year. This would return Chinese tire imports to a 2005 level and allow for an increase of five percent per year over a three-year period. 'We anticipate that the final decisions on remedies will improve domestic job security, increase production and sales, and allow for investment in capital equipment to better compete in the global market for the long term,' said Tom Conway, USW International Vice President" (USW, 2009).

Sources:

China regrets US rule on tire imports, Xinhua, June 20, 2009.

Alec Zhu, Sino-US trade ties face a tough tire test, China Daily, June 9, 2009.

Jim Abrams, Former Dallas Mayor Ron Kirk confirmed as US trade representative, AP, March 18, 2009, (Chicago Tribune).

Markheim, Daniella. 2009. Buy American Hurts America, Heritage Foundation, WebMemo #2256.

USW Lauds ITC Vote Affirming China Tire Import Surge, United Steelworkers (USW), June 19, 2009. 

Copyright © Protected - All Rights Reserved M. Ulric Killion, 2010.

Foreign investment in China falls for eight straight months

China's Ministry of Commerce (MOC) announced that, as of May 2009, the amount of used foreign direct investment (FDI) fell 20.4 percent year on year in the first five months in China. The figure from January to May stood at US$34.05 billion, said MOC spokesman Yao Jian. In May alone, the investment dropped 17.8 percent to US$6.38 billion, the eighth straight monthly fall, Yao told reporters Monday" (Xinhua, 2009).

According to China's Ministry of Commerce, FDI in China actually fell in May for the eighth straight month as the global economic crisis battered trade and corporate finance (Agencies, 2009).

China ministry spokesman Yao Jian said this is the "first time since the 1998 Asian financial crisis that three top investment indicators - actual foreign direct investment, contractual foreign investment and new approved foreign companies - all declined." Yao Jian is specifically referring to FDI, which in May totaled $6.4 billion, but was down 17.8 percent from the same month last year, while the number of new approved foreign companies reached 1,649, down 32 percent year-on-year.

China is a top destination for investment but companies have canceled or postponed spending on factories and other assets due to weakening trade and the global financial turmoil. Foreign direct investment last year rose 23.6 percent from 2007 to $92.4 billion, though growth began to weaken toward the end of the year (Agencies, 2009).

In terms of attracting both foreign direct investment and aid, the problem is China's historical, pursuit of an export-based growth intended to conquer distant markets. This is because, in the context of China, the political economy forces driving both economic growth and regional economic integration have been resource endowments and differing developmental levels (foreign capital and technology, and domestic land and labor) in pursuit of export-based growth. Francois Gipouloux (1998), when describing the spatial effects of FDI in China during the late 1990s, observes of this phenomenon, "The massive re-locations that took place all through the 1990s, first in ASEAN countries and then in the Chinese coastal areas, resulted in a manufacturing crescent, the vocation of which was to reach out to the world and conquer distant markets."

A problem for China is that a falling rate of FDI, now eight straight months, may challenge China's ability to sustain economic growth, especially high growth rates. The falling rate of FDI in China also presents other issues. Such as whether China's declining FDI is also attributable to the now seeming trend of both developed and developing economics to engage protectionist trade policies.

Sources:

Used FDI down 20.4% in first five months in China, Xinhua, June 15, 2009.

Foreign investment in China falls 17.8%, Agencies, June 15, 2009.

Francois Gipoulous, Integration or Disintegration? The Spatial Effects of Foreign Direct Investment in China, China Perspective, May-June 1998.

Copyright © Protected - All Rights Reserved M. Ulric Killion.

Admadinejad's landslide victory triggers street riots in Tehran

On June 12, 2009, Presidential candidate Mirhossein Mousavi flashes a victory sign after casting his vote during the Iranian presidential election in southern Tehran June 12, 2009 [Agencies].

Iran's President and presidential candidate for Iranian election Mahmoud Ahmadinejad holds his passport up as he arrives to cast his ballot during Iranian presidential election in Tehran June 12, 2009 [Agencies].

On the day of elections, Iran's interior ministry said that President Admadinejah had taken a commanding lead with nearly 70 percent of all votes counted. However, his rival, Presidential candidate Mirhossein Mousavi, still countered that he was the clear victor.

At the close of the day, and post election, what is now deemed in Tehran a controversial election, prompted rioting in the streets.

"Opponents of Mahmoud Ahmadinejad clashed with police in the heart of Iran's capital Saturday, pelting them with rocks and setting fires in the worst unrest in Tehran in a decade. They accused the hard-line president of using fraud to steal election victory from his reformist rival. The brazen and angry confrontations — including stunning scenes of masked rioters tangling with black-clad police — pushed the self-styled reformist movement closer to a possible moment of truth: Whether to continue defying Iran's powerful security forces or, as they often have before, retreat into quiet dismay and frustration over losing more ground to the Islamic establishment." (AP, 2009).

The Iranian government on Saturday declared victory for President Mahmoud Ahmadinejad in the nation's hotly-disputed presidential election, triggering mass opposition protests.

The response from the U.S. government was a refusal to accept President Ahmadinejad's claim of a landslide re-election victory. In the interim, the official position of the United States, though past Iranian elections were deemed fair, is that it will explore allegations of election fraud. Accordingly, U.S. Secretary of State Hillary Rodham Clinton announced that she hopes "the outcome reflects the 'genuine will and desire' of Iranian voters. At a joint appearance with Clinton, Canadian Foreign Affairs Minister Lawrence Cannon said his country was 'deeply concerned' by reports of irregularities in the election" (AP, 2009).

From the U.S. perspective, no doubt a primary concern was the loss of a potential presidency in Mirhossein Mousavi, which could have served to present a more pro-American government as opposed to the presidency of Mahmoud Ahmadinejad.

Sources:

Iran's Ahmadinejad, rival both claim election win, (Agencies/Xinhua), June 13, 2009.

Ali Akbar Dareini, Disputed Iran Election Prompts Rioting, June 13, 2009.