Foreign Trade Barriers: China

This paper focuses on the analysis of the foreign trade barriers in particular import barriers implemented by China with the aim to defend its national manufacturers from the inflow of foreign goods and services. According to the Office of the United States Trade Representatives (61) in 2001 as not yet a member of the WTO Chinese foreign trade policy was characterized by a strict restriction of import through the implementation of high taxes and establishment of high tariffs system, quotas, trading rights restriction and other measures of nontariff regulation of import volumes. However, starting 2002 China made significant mitigation in trading policy reducing tariff rates, enlarging the number of products that could be imported without quotas, providing trade permissions to increased number of Chinese business entities to obtain trading rights, improving the system of licensing. But one cannot ignore the fact that China still refuses to open some industries for the foreign trade in the form of refusal to give trading rights to the enterprises representing them.

Nontariff barriers are most commonly the reasons why foreign traders could not import their goods and services in China. These nontariff barriers include high entry thresholds in the banking sector, telecommunications and insurance, unwarranted inspection of imported agricultural goods, and various not always eligible phytosanitary and sanitary requirements. Another important aspect that is pointed by the foreign traders is the discrimination in the value-added tax collection. Many importers argue that the value-added tax varies greatly from 5 percent to 17 percent on the particular goods. However, value added tax that they pay at the border is not always paid by the domestic entrepreneurs.

As it is stated in the article written by Roberts (n.p.) “to a growing number of business observers, the recurring humbling of Western businesses is symptomatic of a new protectionism, often emanating from local officials, aimed squarely at foreign investors across China”. Such a foreign trade policy is partially caused by the slowing of the economic development after the world financial crisis and cutthroat competition that worsens the positions of the national market players. Chinese brands are also hurt therefore Chinese local authorities try to defend domestic manufacturers applying different discrimination tools. In a service sector, China focuses on the licensing requirements slowing down the licensing review process in parallel.

China’s local officials impose huge penalties on foreign companies in particular world known retailers and world leaders in consumer goods sale for alleged violations that were considered previously immaterial. Unilever paid $308,000 fine, Gucci, KFC (fast food giant), Wal Mart were also fined for misleading prices, quality of goods sold and abuse made by their employees. Wal Mart was even forced to close 13 stores temporarily and to pay $573,000 fine. Foreign multinational holdings as well as middle size companies argue that it becomes more difficult to obtain permissions for trade in China whereas their capital is no more in such a demand, as it was earlier. However, it is noteworthy that local authorities accuse retailers in quality rules violations, price fraud or some misconduct in the products marking, but at the same time, they pretend not to notice such violations from their local businesses.

It is considered that China became influential player at the world market and it becomes a perceived threat for the economic giant such as the United States or the countries-members of the European Union to conduct business on the equal basis. Therefore, it is a core task for the international policymakers to continue the negotiations with China with the aim to reduce the level of protectionism in the country if China aims to establish a long-term relationship with outside countries.