Sino-US trade is dealt a blow by tariffs on wind towers(2)

Concerned about the faltering economic recovery, U.S. President Barack Obama pledged to revive the country's manufacturing capability. Critics say the United States' shifting its attention back to the healthy development of its domestic economy would inevitably bring about competition with other countries. Once the competition intensifies, protectionist sentiments could make foreign product makers suffer increasing friction.

"By supporting manufacturing, Obama is trying to create jobs and promote exports, which may bring about competition with export-oriented emerging economies such as China. Obama's reindustrialization policy thus spurs its latest trade protectionism," Chen said to Beijing Review.

However, Tao said whereas emerging economies have established a complete manufacturing production chain under globalization and have advantages in labor costs, the United States will have a hard time restoring its manufacturing base and getting jobs back from those emerging countries.

With the U.S. presidential election drawing nearer, both Democratic candidate Obama and Republican candidate Mitt Romney are attempting to win votes by blaming China for U.S. domestic problems.

"Both parties target China during their election campaigns. In their speeches, Romney and Obama have been trying to outflank each other by appearing more aggressive toward Chinese economic policies," said Tao. "There is, in fact, a big trade imbalance between China and the United States, but the causes are complicated. Made-in-China products have strong international competitiveness, which could partly explain the discrepancy."

Manufacturing woes

Besides the comparative manufacturing advantage of China, fierce competition among Chinese exporters also drove down the prices of Chinese export products.

"Among the 22 targeted product categories, some are in the renewable energy industry such as solar cells and wind-turbine towers. The renewable energy industry should be a hi-tech industry. Many Chinese enterprises, however, have made it a low-end one," Chen said.

Some of the new energy enterprises in China do not possess the core technologies of their products and are engaged in assembling the products with materials supplied by clients, taking advantage of low Chinese labor costs. In addition, those enterprises try to expand their exports at any price.

"Cutthroat competition among those enterprises is commonplace—and it's gotten really bad," said Chen. "They sell hi-tech products at low prices. It doesn't produce much in profits but gives the world an impression of dumping."

Chen added that manufacturing industries like solar cells result in high pollution and high energy consumption. While developed countries enjoy new energy products made in China, the pollution is left behind in China.

However, the rapid increase of Sino-U.S. trade is irreversible. In the first half of 2012, the growth of Sino-U.S. trade was far more rapid than that of China with other economies, Tao said.

"It is understandable that bilateral trade friction is intensifying, because our trade volume keeps increasing. But all the problems should be settled under the rules of the WTO, so that trade disputes do not turn into a trade war that benefits neither side," Chen said.

According to Chen, Beijing and Washington are considering a new trade dispute settlement mechanism. It requires all trade disagreements to be settled between local governments or enterprises themselves, which will help prevent growing trade friction from adversely affecting the two countries' cooperation.