Tristram Hunt: Trade cannot always be free if it is at our country's expense
LAST Thursday, after months of clandestine horse-trading, the Communist Party of China unveiled the new seven-man Politburo Standing Committee.
At its helm is Xi Jinping, the man with the daunting task of governing one billion people and marshalling the emergence of a superpower.
However, there is no rest for those at the top.
Moments after Xi, pictured below, was unveiled, the European Commission imposed anti-dumping tariffs on Chinese imports of ceramic tableware and kitchenware – including porcelain, earthenware, and stoneware.
With Chinese exports of ceramics being valued by the EU at some 728 million euros, this is big news for Stoke-on-Trent's pottery industry.
Tariffs are charged to the producer of the imported goods.
Every manufacturer must assign a 'declared value' to their products and tariffs are levied as a percentage of this value.
Their goal is to protect domestic markets from products being unfairly undercut by foreign competitors. It is this notion of 'protection' that gives its name to an economic philosophy advocating tariffs and strong regulation of global trade: protectionism.
But while protectionism can help to boost domestic production it is often bad news for the consumer.
Because protectionism is about controlling and maintaining prices, it means the price of goods can be more expensive than might be the case in a 'free trade' system.
Perhaps more than any country in the world, Britain has tended to come down on the side of free trade. Ever since Robert Peel repealed the protectionist Corn Laws in 1846, Britain has been an aggressive advocate for free trade.
With the 'Common Market' as its founding principle, free trade is hardwired into the ethos of the EU too.
Therefore the decision to impose tariffs, which ranged between 17.6 per cent and 31.2 per cent for goods from Chinese companies that co-operated with the Commission's prior investigation (58.8 per cent for those which did not), will not have been taken lightly.
Indeed, 14 of the 27 member states, including the UK, voted against the planned measures at a meeting of trade specialists in October.
Yet the Commission decided to press ahead. Come 15 May, 2013, they could even become permanent. Flying in the face of member state opinion is a highly unusual move. But for the strength of our ceramics industry, it is the right one.
This will not please everyone. One problem with protectionism is that it often sparks 'trade wars' as countries impose retaliating tit-for-tat tariffs. Whoever casts the first stone is usually irrelevant in such races to the bottom, because everybody loses.
Furthermore, blank imports from China make up a significant amount of produce for some of our leading ceramics firms – which decorate the ware in Stoke.
While we obviously want to prioritise goods manufactured in Stoke-on-Trent – those that can faithfully bear the 'Made in Staffordshire' backstamp – we do have to be careful about threatening the competitiveness of firms that operate here.
And there is nothing intrinsically wrong with Chinese goods making up part of our ceramics supply.
Yet there does seem to be incontrovertible evidence that China is engaging in what is called 'dumping' – a practice which involves flooding competitors' markets with subsidised products at prices less than would be charged to domestic markets.
The idea is that by weakening the competitiveness of your competitors' industries, you strengthen the comparative advantage of your own in the long-term.
The European Commission is convinced China is doing this for tableware and kitchenware.
Stories abound of Chinese plants not having to pay for energy, land or machinery costs.
In truth they do have form. Tariffs of up to 77 per cent have been in place since March for Chinese imports in ceramic floor-tiles.
In September, Barack Obama accused China of fixing the price of its car exports – usually by subsiding energy or plant costs – to weaken U.S. manufacturers.
And countries such as Columbia, Indonesia and Egypt have already imposed anti-dumping measures for Chinese ceramics, at far higher rates than the EU.
Clearly 'dumping' is unfair to Staffordshire-based ceramic manufacturers. And if European rules prevent states from subsidising firms in the Common Market, why should they not try to protect our competitiveness?
It is this sentiment that supports the Commission's argument that far from acting against Common Market principles, they are actually trying to preserve them.
It is bad enough trying to compete with Chinese labour and energy costs as it is, without various Chinese regions further skewing the playing field. We should both welcome the elevation of Xi Jinping and support the Commission's interim decision. A harmonious relationship with the incoming Chinese leadership should be firm but respectful – and should begin with truly fair trade.