Tennis vs. football

As many readers know, I have long argued that much of the global discussion of free trade and free trade agreements is beside the point because the discussants are talking about vastly different things. I have tried to make this point by saying that America is playing tennis while some others such as China are playing football.

Frequently the U.S. tennis players complain that the Chinese ( or Japanese, or South Koreans, or others as the case may be) are not playing "fair." There is a demand to "get tough" and to file unfair trade complaints in the World Trade Organization (WTO) or to pursue some legalistic procedure in the U.S. dispute resolution mechanisms. I have always been skeptical of the value of such actions because of my view that the actions are based on the premise that all the players are playing the  same game when in fact they aren’t.

Recently the Wall Street Journal reported that China’s Ambassador to the EU is claiming that "it makes sense" for China’s airlines to buy Boeing jetliners rather than European Airbuses as long as the EU persists with its plans to impose a charge for greenhouse gas emissions from planes in European air space. In the same article, the head of Airbus confirms that China is withholding final approval on contracts for 45 Airbuses.

This is not free-trade tennis. This is football. In tennis, the decision on contracts to buy airplanes would be up to the airlines concerned not the government. But in this case, China’s Ambassador said: "their (the Chinese airlines) decision will be influenced by the position of the central government." In tennis, decisions on emissions taxes are not trade issues per se and are not linked to aircraft private company aircraft procurement decisions. In football they are.

Now, here’s the interesting thing. The Chinese aren’t playing football unfairly. They’ve made it clear that they are linking the two issues and have given warning. Nor have they obviously transgressed any WTO rules. The Ambassador didn’t say Beijing was ordering Chinese airlines not to buy Airbuses. He just said it made sense to him that the airlines might go for Boeing instead. He also said he thought the airlines would be influenced by the government’s views but what does he really know about how airline executives think. He’s only an ambassador after all. This is really football as it’s played at the highest level.

Let’s look at another example. U.S. solar panel makers have filed an anti-dumping case against heavily subsidized Chinese manufacturers and exporters that is currently being adjudicated. While the United States imports a lot of solar panels from China it remains a major exporter to China of the polysilicon from which the panels are made. In another football move, Beijing is now threatening to impose anti-dumping duties on imports of U.S. polysilicon( which had never been an issue before the solar panel complaint) in an obvious effort to pressure the U.S. government not to go ahead with the anti-dumping duties on solar panels.

This is not really a matter of fair or unfair. It really is a matter of two different games being played under the pretense that everyone is playing the same game. We really need to get this straightened out. It could easily explode into something a lot less fun than a game. We must recognize that we have many different trade regimes and not just one and that each needs its own sets of rules and procedures.