New U.S. Law Constricts Chinese Trade on IT Products

Chicago's Chinatown

Chicago’s Chinatown

Chicago’s Chinatown is rich in culture and is diverse in products to purchase. China was the United States’ largest supplier of goods imports in 2011, totaling near $400 billion in sales, according to the Office of the U.S. Trade Representative.

Just January alone, China imported more than $37 million worth of goods to the United States, according to the United States Census Bureau.

Their import sales to the U.S. are up 290 percent since 2001 and imports from China accounted for 18.1 percent of overall U.S. imports in 2010.

Chicago’s Chinatown whole sale and retail shop, Gifts R Us, sells a variety of Chinese made products, but store manager, Yat Wong, said only five percent are imported from China.

Two stores down from Wong’s store is Pacific Furniture Inc., on the corner of Cermak and Wentworth, whose manager said roughly 90 percent of their items are imported from China. Furniture and bedding is one of the largest categories of imports from China, taking in $20 billion in sales.

Spices imported from China

Spices imported from China

U.S. imports of agricultural products from China totaled $4.0 billion in 2011, the 5th largest supplier of these imports. Leading categories include: processed fruit and vegetables ($949 million), fruit and vegetable juices ($559 million), snack foods (including chocolate) ($203 million) and spices ($123 million).

Machinery and Electrical machinery are the top two import categories, bringing $194 billion in import sales into the U.S. combined, according to the Office of the U.S. Trade Representative.

The U.S. imports about $129 billion worth of “advanced technology products” from China, according to a May 2012 report by the U.S. Congressional Research Service.

China expressed opposition over the weekend towards a new cyber-espionage rule, which will limit imports of Chinese-made information technology products to the United States, according to state reports over the weekend.

Spices, sauces and canned good imported from China

Spices, sauces and canned good imported from China

Due to growing pressure between the two countries after accusations that China was hacking U.S. companies and government agencies, a new provision in a funding bill, signed into law on Thursday, requires NASA, as well as the Justice and Commerce Departments, to seek approval from federal law enforcement officials before buying information technology systems from China, according to Reuters.

“This will directly impact partnerships of Chinese enterprises and American business as they conduct regular trade,” the article in the official People’s Daily said, quoting Shen Danyang, the commerce ministry spokesman.

“This abuse of so-called national security measures is unfair to Chinese enterprises, and extends the discriminatory practice of presumption of guilt,” Shen said. “This severely damages mutual trust between the U.S. and China.”

China joined the World Trade Organization (WTO) in 2001; their entry has benefited coastal cities and nations alike.

Imported teas from China

Imported teas from China

Technology security lawyer Stewart Baker wrote in a blog post this week that China could claim that the United States is violating World Trade Organization rules.

“China has spent years trying to curtail its own purchases of IT from outside its borders, but that won’t stop it from calling the bill protectionist and claiming a violation of US WTO obligations,” Baker said. “Legally, China may have trouble making such a claim stick. China has not signed on to the WTO’s government procurement code; it is just an observer.”

The provision signed by the President could lead to trouble with the World Trade Organization, Baker said in his blog post. Countries outside of China where companies like Lenovo and Huawei have IT products made could challenge the new law in the WTO.

The WTO Director General, Pascal Lamy, told CNBC that the new leadership in China seems to be going in the right direction in improving market access to China.

Traditional Chinese silk caps

Traditional Chinese silk caps

“What I heard the new Chinese leadership saying is that we want to keep China opening its market, we want to keep internationalizing the Chinese economy,” Lamy said.

However, Chinese representatives are cautious to unite in these measures since European counties and the U.S. are “adopting increasingly harsh trade relief measures on China’s exports” according to Chinese officials.

“China must remain alert to the intensity, measures and involved industrial sectors concerning trade restrictions on China,” said Yi Xiaozhun, permanent representative of China to the WTO, to Xinhua News Agency.

Over half of the world’s countervailing measures are directed against China, and 70 percent of U.S. countervailing measures is aimed at China, Yi claims.

The Ministry of Commerce has insisted that the imposition of anti-subsidy countervailing duties against a non-market economy, such as China, is in violation of WTO rules. In its on-going disputes with the U.S., China has already established, in December last year, a WTO Dispute Settlement Body to examine its complaint that U.S. anti-dumping and anti-subsidy countervailing duties measures are being applied simultaneously to some 30 products, or $7.2 billion of its exports to the U.S., according to Tax News.

Spices imported from China

Spices imported from China

What does all of this mean for Chicago’s Chinatown and their imports from China? If such an action was taken by the U.S. Trade Representative’s office, then duties could be imposed on Chinese goods; meaning a tax associated with the purchase of the product from abroad, according to Illinois’ Department of Commerce and Economic Opportunity.

Halfway down Chinatown’s avenue is a small antique furniture store, Oriental Art Imports. A gray haired man can hardly be recognized behind the cashiers counter, standing only a foot taller than it.

“The entire store is filled with Chinese imports,” store manager, Wei Long said. “Through the years of importing products from China, the entire store is now filled with antiques from China and other Asian countries.”

Imports ranging from glass tables, to statues of Buddha, to hand carved dragon figurines, even Bronze long swords. Long described them as “Jian” and “Dao” types of swords.

“Jian swords are dual edged and Dao are single edged,” Long explained.

Products like the swords are hard to import Long alleged, citing that many are made counterfeit in China and then imported to the U.S. and sold with the assumption they are the “real Jian and Dao types.”

Handcrafted arts imported from China

Handcrafted arts imported from China

Chicago’s Chinatown will see a large ripple of affects in its store due to this new bill. Store owners will face higher taxes on their imports. Information technology products made and distributed by China will be limited and hard to import under these new limitations.

2012 was the 18th consecutive year in which the mechanical and electronic sector has been China’s number-one exporter in trade volume.

(Photos by Katherine Iorio)

Handcrafted figurines imported from China

Handcrafted figurines imported from Chin


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