BEIJING: The latest petition from five U.S. labor unions requesting the Biden Administration to review China’s so-called subsidies for its shipbuilders has prompted a backlash from China, calling the move ill-founded and hazardous.
Under a so-called section 301 case, the unions urged the Office of the U.S. Trade Representative to take measures, including the imposition of port fees on Chinese-built ships that dock at U.S. ports, despite there being no such precedent, and the creation of a fund with contributions from the aforementioned fees to help the domestic industry and its workers compete.
ILL-FOUNDED ACCUSATIONS
Chinese legal and industrial experts view the petition as a choreographed move aimed at seeking “remedies” for an industry on the decline, in total disregard of the real causes of the decline, including the evolving global comparative advantages and the lack of skilled U.S. workers.
Employment of marine engineers and naval architects is projected to show “little or no change” from 2022 to 2032 in the United States, according to the U.S. Bureau of Labor Statistics. However, such jobs are expanding in countries including the Republic of Korea and China.
Sun Lei, senior partner with Dentons, said that the current global share of the U.S. shipbuilding industry has declined drastically, but no causal link can be established between the decline and China’s industrial policies or subsidies.
After looking into this petition, Sun said that the goal of the U.S. domestic industry may not be to impose tariffs or other taxation measures on China’s shipping services or ships, but to urge the U.S. government to increase policy and subsidy support for its domestic shipping and shipbuilding industries.
“I understand there is a need on the U.S. side to adjust its supply chain, but I think the Americans know clearly that it’s unrealistic to bring the whole supply chain back,” he said. “The problems concerning supply chains need to be solved with all relevant countries, such as the Republic of Korea (another shipbuilding giant).”
China’s Ministry of Commerce (MOC) on Thursday voiced resolute opposition to the move, saying this unilateral trade protectionism in the shipbuilding sector ignores World Trade Organization (WTO) rules.
Noting that the U.S. side blames China for its own industrial development problems in the absence of any factual basis, the MOC said that the accusations against China are “totally untenable.”
MOC Spokesperson He Yadong told reporters that China pays close attention to this matter and will take all necessary measures to firmly defend its legitimate rights and interests.
Loud objections were also voiced on social media platforms, with some comments on China’s Weibo describing the unions’ demand of a port fee on Chinese-built ships that dock at U.S. ports as like robbery.
One comment on X stated, “The United States don’t get to be No. 1 forever &always &it’s not necessarily bad for you to not be.” Some have indicated politics at play in an election year in the United States, while others expressed deep worries over the move’s potentially hazardous impact on global trade.
Liu Cungen, professor with Shanghai Jiaotong University, attributed the rapid growth of China’s shipbuilding industry to the country’s technological progress and complete industrial chain.
Cui Fan, professor with the School of International Trade and Economics at the Beijing-based University of International Business and Economics, said that the growth of China’s shipbuilding sector was the natural result of China’s comparative advantages formed along with the development of global industries over the past decades.
“The production cycle of the shipbuilding industry is long, and it takes a long time for ship businesses to recover costs. In this case, all shipbuilding countries have used export credit measures to a certain extent, which are also allowed by the WTO,” Cui was quoted as saying by Yicai, a Shanghai-based business and financial media outlet.
CONCERNS OF HAZARDOUS IMPACT
In an era of increasing uncertainties, experts say, the world’s major shipbuilding countries should strengthen solidarity and maintain healthy competition among shipbuilding enterprises, instead of trying to hold back others’ development. If the measures are introduced, future orders for new ships will be hit, while freight forwarders will also be greatly affected, experts warn.
In October 2023, a shipbuilding leaders’ summit in Yantai, east China’s Shandong Province, brought together representatives from Japan, Europe, China, the Republic of Korea and the United States. The meeting issued a statement asserting that, faced with multiple challenges and opportunities, all parties believed that the world’s major shipbuilding countries should strengthen unity and deepen the sustainable development of the world’s shipbuilding industry. It also called for maintaining fair and healthy competition among shipbuilding enterprises.
Sun Lei said that from the supply side, companies in the upstream of the supply chain are closely related to the shipping industry. “From the demand side, for those export companies that rely on Chinese-made ships for international trade, trade remedy measures may lead to an increase in transportation costs and affect the competitiveness of products in the international market, especially the U.S. market.”
In the view of experts, the shipbuilding industry needs more cooperation from major shipbuilding countries to cope with challenges such as economic uncertainties, environmental regulations, technical rules and maritime safety.
