As a response to the U.S. tariff increase on Chinese tire imports, China announced an anti-dumping and anti-subsidy probe into imports of some U.S. auto products and chicken meat on September 13. (See P.12 for details) This retaliatory measure is not aimed at a trade war with the United States, but to check protectionist inclinations of trade partners and hence create a more stable and predictable environment for international trade, Mei Xinyu, an associate research fellow with the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, said in an article he wrote for Beijing Review. Edited excerpts follow:

We should have retaliatory trade measures as one effective weapon in fighting against trade protectionism. In history, China, as the biggest victim of international trade protectionism, has seldom resorted to retaliatory trade measures or other anti-sanction measures to counteract unfair treatment from trade partners. Take the Sino-

U.S. trade relationship for instance. Despite the many sanctions and trade disputes the United States has had with China since the Shanghai Communiqué reopened bilateral trade relationship in 1972, China has until now taken only one retaliatory action on the U.S. side when the latter began restricting Chinese textile imports in January 1983.

This tolerance of China, however, has been sending the wrong signal to its trade partners. Many protectionists justified their actions by asking "why not," since China didn't decrease, but instead increased its imports upon the trade partners' restrictions on Chinese imports. If the public sentiment in trade partners turns around because such protectionist measures risk a lose-lose situation, the above-mentioned moral hazards of protectionists will be effectively curbed and the protectionist force will win a smaller audience and have its influence crippled.

For efficiency's sake, while choosing the target for retaliatory measures, China should give priority to countries that have a say in international trade rules because this will effectively deter protectionist moves from other trade partners.

It is both necessary and pressing for China to contain the protectionist force worldwide because China has to show overseas investors its determination and ability in protecting the legitimate interests of China-based manufacturing. Only by doing so can China win the trust and faith of investors who plan to transfer their production capacity, especially advanced manufacturing, to China. This will help China to take advantage of the financial crisis to optimize and upgrade its manufacturing sector.

In this round of anti-dumping and anti-subsidy probes, China has followed the proportionality principle in WTO retaliation rules, which requires only retaliation equal to the amount of the benefits lost. Still, I think this principle is open to discussion because the key of trade retaliations is to make the partner realize its gains are not worth the losses it suffers from a retaliatory move. The proportionality principle based on amount-measured benefits or losses will work if both parties enjoy comparable economic strength. If not, I recommend the number of affected employees represent a gauge for trade retaliations, otherwise it cannot deter protectionism effectively.

Retaliatory trade measures, in the narrowest sense, refer to those actions related to imports and exports. In a broader sense, they include financial, fiscal and other measures. In its first trade dispute with the Obama administration, China has adopted measures limited to international trade. In fact, China can choose among a wide range of retaliatory measures including financial ones, because many countries now rely on China to weather through the current recession.