China

Message to Chinese Government:  Find Other Markets

U.S. officials told their Chinese counterparts last week to reduce their emphasis on exports to the U.S.  At last week’s annual Strategic and Economic Dialogue in Washington, Secretary of State Hillary Clinton and Secretary of the Treasury Tim Geithner told Chinese State Councilor Dai Bingguo and Vice Premier Wang Qishan that Chinese needs to build its own internal consumer market and not rely so heavily on the U.S. export market. The very clear message was that the U.S. economy was not going to rebound quickly, or as significantly, as in the past, and that China needed to find other markets if it wants to sustain its growth.  U.S. officials also pressed Chinese officials to revise their monetary policy and allow a free float of the yuan. This latter message has been communicated through both the Bush and Clinton administrations, with very little success.  A very limited float was allowed by the Chinese in 2007.

The Chinese, in turn, who hold more than $2 trillion in U.S. notes, urged U.S. officials to reduce their budget deficit to keep the dollar stable and to reduce the risk of inflation.  The Chinese are probably justified in their concern in that one theory justifying the tremendous debt load that the U.S. has been assuming, is that 4% inflation a year will eventually cut away at the size/value of the deficit.  The theory holds that $10 trillion is valued at $5 trillion after 10 plus years of inflation.  (It seems to me that the theory ignores paying interest on the debt for 10 years.  But that’s Washington!)

The joint economic fact sheet released after the two day meeting dealt with more technical issues such as proposed changes in China’s status with the World Trade Organization, giving China market economy status in U.S. trade cases, and China liberalizing consumer finance internally.  Many of the issues are more “inside baseball” type trade and economic issues, than generally policy issues.  However, according to pre and post meeting reports, a key message to China was that it should not rely wholly on the U.S. to sustain its manufacturing base.

India

Talks Begin on U.S.-India Bilateral Investment Treaty

Talks on a proposed bilateral investment treaty (“BIT”) between the U.S. and India will get underway on August 11th.  However, neither side is terribly optimistic about substantial progress being made.  Apparently, as a starting point, both sides have their own model BITs and will insist on using their model.  One of the goals for the U.S. is to provide U.S. investors in India with greater rights (read that as protection for investments, I think).  However, the India model BIT does not provide for such protection.

We are at least several years away from a bilateral investment treaty with India. We will continue to report about this important development in future trade updates.

U.S. Trade Representative

Kirk Signals Desire to Resolve Trucking Dispute, Not Fight Mexican Tariffs

In a July letter to House Foreign Affairs Subcommittee Chairman Brad Sherman (D-CA), U.S. Trade Representative Ron Kirk stated:

“…Even if the United States were successful in challenging the level of retaliation, the likely result would only be a reduction, not a removal, of Mexico’s trade sanctions…And our goal is to have the sanctions lifted in their entirety.”

This statement strongly suggests that the U.S. is not going to challenge the legitimacy of the tariffs, but rather will focus on a new Mexican trucking pilot program.   As we reported earlier this summer, a set of principles has been sent by the U.S. Department of Transportation to The White House.  However, no further action has been taken since that time.

In the interim, U.S. exporters of many products, including certain writing instrument categories, are stuck paying ad valorem tariffs of 10% to 40%.

U.S. Department of Commerce/International Trade Administration

International Trade Administration Announces Final Results in Antidumping Duty Review for Certain Cased Pencils from the People’s Republic of China

In July, the International Trade Administration of the U.S. Department of Commerce (“ITA”) announced the final dumping margins for exporters of certain cased pencils from China.  The final margins for the period December 1, 2006 through November 30, 2007 are as follows:

China First Pencil Company, Ltd.                            26.32%
(which includes its affiliates China First Pencil Fang Zheng Co., Shanghai
 First Writing Instrument Co., Ltd., and Shanghai Great Wall Pencil Co. Ltd.)

Shanghai Three Star Stationery Industry Corp.                    60.91%

Shandong Rongxin Import & Export Co., Ltd.                    11.48%

Orient International Holding Shanghai Foreign Trade Co., Ltd.            32.90%

PRC-wide Entity                                  114.90%

ITA also rescinded the review as to Beijing Dixon Stationery Company Ltd., because it had no shipments during the review period

These new rates will be assessed on importers after publication of this notice in the Federal Register.  As of this date, the notice has not been published in the Register.  If you imported pencils from these companies, and have already paid duty, you will be reassessed  by Customs and Border Patrol at this new duty rate.    WIMA will provide periodic reports on this issue to its members.