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China’s Unethical Trade Practices Hurting India

Updated: December 24, 2011 10:51 am

Is there any country in the world whose balance of trade is heavily tilted in its favour with almost all of its trading partners? The right answer would be the People’s Republic of China (PRC) that has overtaken Japan as the world’s second biggest economy after America. Rightly, the US President Barack Obama did not mince words on the sidelines of the recently held ASEAN summit in Bali when he warned Beijing on its unethical trade and currency practices. The Middle Kingdom for almost previous three decades has kept the value of the yuan or renminbi artificially down to further speed up the country’s rapid export growth. No wonder, its currency is 40 per cent undervalued. The Chinese in particular proved that an undervalued currency can supercharge a country’s export sector and transform trade deficits into huge surpluses.

It is an open secret that the PRC, at times by unfair means, has over the years feverishly worked and attained the status of the global factory. The country’s rise from a backward third world entity to its present nouveau riche state has been made possible by a cheap and large labour force, massive exports patronised by huge government subsidies as well as by policy of discrimination against imports, especially of the finished goods. It is beyond one’s imagination how the communist giant mass produces and then floods global markets with cheap but low-quality goods churned out by its notoriously polluting manufacturing hubs. Such is the reputation of globally dumped Chinese goods that many a shop in India selling made-in-China electronic and electric items often displays cautions telling the customers on non-availability of warranty as well as guarantee on these items.

However, there still are many thrifty buyers who prefer to take home China-made items because these are cheap. The same may be true of a class of buyers in the US and the EU too. This may be deduced from the Hollywood picture, ‘127 Hours’ that carries a slight against quality of Chinese products. In the movie, the main character Aaron Ralston’s right arm gets trapped under a heavy boulder in a cave while hiking in the desert in the Utah Canyons. After having tried to free his arm for terrible five days, he desperately tries to self-amputate it with a knife. His lament—he is carrying a cheap made-in-China multi-tool in stead of Swiss army knives—amply conveys the message.

During the Second World War years, Earnest Hemingway was serving in China, which at that juncture of history reeled under the Japanese aggression as well as an intense civil war between the nationalist and communist forces. Once tired and exhausted, he felt like drinking which made him buy three bottles of whisky from a Chinese liquor shop. But when he opened the bottles, to his utter disappointment these contained water, coloured with boiled tea leaves. To this day, Chinese, off and on keep repeating such counterfeit practices. This incident to a great extent explains China’s unethical trade motto which obviously is—flood the global markets with cheap low quality goods and fast multiply your earnings by hook or by crook. This is amply corroborated by two advisories displayed on the website of the Indian embassy in Beijing highlighting several modus operandi adopted by the Chinese companies to dupe Indian traders. There are alarming incidents of Indian firms being cheated by their Chinese counterparts. The embassy has received about seventy complaints so far this year.

Having mass-produced low quality products, the People’s Republic has been dumping the goods in the global markets while it has implemented domestic policies discriminating against imports. This is despite the fact that such practice is not permitted by the World Trade Organisation. When the countries concerned approach the W T O for anti-dumping duties, Chinese cleverly find other ways to sidestep these obstacles through vile means. For instance, Mexico which sought remedy from the WTO later found out that ninety percent of 11 million garments that entered Mexico from Malaysia had in fact originated from China. Hence, it is no wonder China’s balance of trade is always its favour.

Ninety percent of goods made in China are believed to lack high quality. Moreover, there are reports of poisonous chemicals used in plastic toys and other items as well as tainted products in the food chain. The Middle Kingdom has apparently specialised in the art of counterfeiting and piracy. Beijing counterfeits the US and western products such as glue, aircraft spares, auto parts, computer software, music, laptops, telecom parts, cell phones and so on. Last year, the country abruptly banned export of rare earth metals having applications in magnets, lasers, fibre optics, computer disc drives, fluorescent lamps, rechargeable batteries, computer memory chips, X-ray tubes and liquid-crystal displays of televisions and computer monitors. Since the processing of rare earths creates toxic byproducts, production has mostly shifted to China because of lower costs and the country’s record of lax environmental hazards.

India runs a huge trade deficit of $20 billion with China out of a total estimated yearly bilateral trade volume of roughly $70 billion. The two way annual trade is proposed to be augmented to $100 billion which is bound to further tilt the trade balance in China’s favour. However, the PRC has so far turned a deaf ear to New Delhi’s requests to address the bilateral trade imbalance. Beijing also has raised barriers to IT software and pharmaceuticals exports from India. However, it sells power and telecom equipment to India in addition to a variety of cheap electronic goods and other consumer items which has unfairly hurt India’s industries and employment scenario. Such is the level of China’s counterfeit industry that a few years back, Chinese were detected exporting spurious medicines to some African countries with made-in-India label.

There is a saying that everything is fair in love and war but the scheming Chinese seem to have revised the saying to their advantage. For them everything happens to be fair in love, war and of course the trade. China has accumulated trillions of dollars as trade surplus through questionably dubious ways. With ample amassed easy money, the autocratic regime in Beijing is not only furiously building up formidable military sinews, offensive missile power capable of launching nuclear weapons, PLA controlled space programmes, extensive civil as well as military infrastructure but also displaying aggressive stance by engineering land and sea border disputes with several neighbouring countries. Such a belligerent duplicity definitely does not augur well for regional and world peace.

By NK Pant

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