Additional Coverage:
- Chinese companies could lose a tried and true method for skirting US tariffs, the head of the Council on Foreign Relations says (newsbreak.com)
Local Think Tank Chief Warns of Increased Scrutiny for Chinese Firms Operating Abroad
A leading think tank expert suggests that Chinese companies operating in other countries to avoid US tariffs may soon face increased scrutiny. The focus may shift from where goods are produced to who owns the companies producing them.
Michael Froman, president of the Council on Foreign Relations, speaking at the World Economic Forum in Davos, Switzerland, indicated a potential shift in how governments approach international trade. Instead of focusing on the “rules of origin”—where a product comes from—the emphasis could switch to “rules of ownership.”
This change would mean that even if Chinese companies move production to countries like Mexico or Indonesia, they could still face trade barriers if found to be circumventing US tariffs. Froman, a former US Trade Representative, argued that this new form of protectionism could block companies violating rules or dodging tariffs from accessing the American market.
This potential shift comes amid concerns about Chinese companies relocating production to avoid tariffs implemented during the Trump administration and exacerbated by pandemic-related disruptions. Mexico, a major auto manufacturing hub, has become a popular destination for Chinese companies seeking access to the US market.
The West has long been critical of China’s overproduction of goods, which has impacted global markets. Some experts argue that China floods markets with excessive supply, undercutting competitors. China, however, views these concerns as protectionist attempts to stifle its economic growth.
Froman noted that the West had previously warned China about the potential consequences of its protectionist policies and excessive industry subsidies. He suggested that the current shift in the international trade environment is a direct result of China’s continued practices.