Sewing Discord

How serious is the U.S.-China trade spat? With a U.S. election looming and the American economy making a tentative recovery, it could turn much worse—more for political than economic reasons. Last week, after Washington announced plans to slap quotas on imports of Chinese bras, nightgowns and knitwear, Beijing was quick to fire back. It postponed a delegation that was going to the U.S. to buy commodities, and the U.S. ambassador in Beijing was twice summoned for official chidings. An editorial in the China Daily derided "the cheap political points the Bush Administration scored by touting trade protectionism."

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Will domestic American politics turn this skirmish into an all-out trade war? The U.S. faces an expected $130 billion trade deficit with China this year. Protectionists in the U.S. Congress have already floated a bill to end permanent normal trade relations. "This really boils down to jobs," says Pennsylvania Congressman Phil English, a supporter of the legislation. "China's unfair trade practices are causing real pain in the U.S." Last week, Beijing announced it might raise tariffs on unspecified American products if Washington doesn't back down on the steel-import tariffs imposed in March 2002. And it quickly announced it would consider lodging a formal complaint with the World Trade Organization (WTO) over the bra and nightgown controls.

Still, the textile row is relatively small change: in the first nine months of the year, China exported only about $500 million of the targeted items to the U.S. But when China joined the WTO in December 2001, it thought the days of bilateral trade fights were ending. In recent weeks, the Chinese government has been countering American complaints that it keeps its currency undervalued to promote exports by buying some $6 billion worth of American goods. But even a December visit by Premier Wen Jiabao to Washington for talks with President George W. Bush is unlikely to settle a spat rooted as much in domestic politics as international trade.