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II) Negative Effects
1. The PSSMs may injure and threaten to injure Chinese domestic industry. The PSSMs were first designed to protect the importing (applying) countries’ domestic industry, which, on the other hand, may threaten or injure China’s domestic industry. The application of PSSMs will reduce the market share and production of Chinese products and thus a chain reaction may result so as to injure the whole industry. China has a competitive edge in exports of textiles, but the existence and application of PSSMs and quota limits have actually impeded the better development of its textile industry.
2. The export of relevant products may be affected which may result in reduction of the profits of enterprises. The application of PSSMs may directly lead to sharp limitations to the export of Chinese products, which may reduce the profits of the enterprise as a result. The enterprises will then be faced up with four options: to stop their exports to the applying country, to adopt measures to cope with the PSSMs, to seek to develop new markets or to increase the technical content and added values of the export products. Whatever measures adopted, the affected enterprises will directly or indirectly suffer heavy losses as a result of the huge increase of their production costs caused thereby.
3. The PSSMs constitute damage to fair competition and set back the process of economic development. Trade liberalization and fair competition have long been recognized as a major principle of international trade.The provision and the application of PSSMs have violated the above-mentioned principle and are no good in creating a fair and competitive context for international trade. On the other hand, the PSSMs are designed to aim at Chinese export of products and exert negative effects on China’s economic growth, and with the increase of its economic influence on the world economy, affect the stability and development of the world economy.
V. China’s Countermeasures
The PSSMs provision is very unfair to China and in a sense is “a complete implantation of Section 406 of the Trade Act of the United States”, (Han Xiuli, 2004b) a violation to the fair and liberal trade principle, yet it is also “an option made by China under the premise of balancing advantages and disadvantages”. (Wu Yong, Zhao Baili, 2004) Also, China sought to accede to the WTO based on the consideration of a long-term strategy. Thus I do not think it is advisable to “to cancel or void” the provision of PSSMs only based on the presumption that the provision “was a commitment made under the condition of coerced and limited will”. (Han Xiuli, 2004b) As a political power and a rising economic power, China should create an image of “self committed and rule observing” on the international arena. Under such a premise, China can take positive counter-measures to avoid or reduce the application of and to prevent the abuse of PSSMs in order to protect its trade interests.
I) Macroscopic Measures
The WTO is an intergovernmental organization dealing with issues involving international trade, thus its rules are firstly binding upon governments. Therefore, the Chinese government should take positive measures from macroscopic perspectives to cope with PSSMs investigations against Chinese products.
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