If the rosy forecast for global economic growth this year is to materialize, the policymakers of major economies must avoid increased protectionism.
Financial chiefs attending the meeting of the Group of Seven (G7) industrial nations expressed their confidence in continuous expansion of the world economy with a decline in the risks of expensive energy coupled with inflation.
Despite the sound conditions, simmering trade tensions between major economies still threaten to ruin prospects for robust global growth in 2007.
The US government complaint against China filed early this month with the World Trade Organization is a case in point. The widening trade imbalance between the two countries represents one of the thorniest problems the two sides must promptly deal with.
China's ballooning trade surplus has pushed up the country's foreign exchange reserves to pump more money into the market, despite efforts at macroeconomic control. Reliance on rapid growth of exports has also hindered restructuring in some industries that are heavy polluters or energy consumers.
Major factors in the United States' soaring trade deficit are high spending and low saving. So far the growth of the US economy has remained robust despite the rising budgetary and trade deficits. But no country can sustain these twin deficits for long.
Obviously, in their own interest, both China and the United States need to take measures to pursue balanced trade growth.
Chinese policymakers have responded to last year's giant trade surplus with a slew of policies. These include giving tax rebates on imported parts and materials and raising tariff rates for some steel product exports.
Because the one-week Spring Festival fell in January last year but comes in February this year, China registered a 30.5-percent growth of trade volume in the first month of 2007. But China's efforts to balance trade growth are credible and are expected to take effect soon.
Yet, instead of concentrating on its own domestic factors, the United States seems to have mistakenly focused on exports from China as the cause of the US trade imbalance.
It may be easy for US policymakers to blame Chinese enterprises for their country's trade imbalance. But that does not go to the root of the problem. It will even plague global growth if a new protectionism is allowed to prevail.
(China Daily February 13, 2007)
