China Trade Through Lens of Local Mall

Why charges of prison-made products and overt piracy aren't likely to stem the flow of US-Chinese trade

A Decade ago, it was "Made in Japan" that scared Americans. Today, it's "Made in China" that's raising eyebrows.

So many of its goods are flowing into the United States - from toys and shoes to handbags and electronics - that China has become one of America's biggest trading partners. But it's also America's biggest bugaboo. Tensions over US criticisms of China's human-rights and intellectual-property policies are raising the specter of a trade war.

In Washington, President Clinton has already signaled his decision to extend China's most-favored-nation (MFN) trade status, allowing Chinese imports into the US with only modest tariffs. China's MFN status has vocal opponents on both sides of the aisle in Congress, but it is expected to stand when it comes to a vote in coming months.

But behind the political rhetoric, American and Chinese businesses have quietly built ties over the years, making the US-Chinese relationship difficult to unravel. In a trade war, both sides would lose economically. American companies would likely sell less fertilizer, fewer aircraft, and commodities to China. China would send fewer Chinese toys, shoes, and garments over here. For American consumers, that could lead to price hikes and shortages of some products, at least in the short term.

US stores, Chinese toys

A recent walk through a suburban Pittsburgh mall shows just how intertwined the world's largest and third-largest economies have become.

On the second floor of the South Hills Village Mall, the Kay-Bee Toy & Hobby Shop does a brisk business with harried parents and supercharged children. Displayed near the front is the $6.99 Teddy Precious Jr. stuffed bear. To the right lie the $7.99 Battle Ravaged Spider-Man and the $4.99 MacGregor Mighty Mitt. All were made in China. In fact, it's a minor challenge to find something not manufactured there.

Remember the Mighty Morphin Power Rangers, the Mutant Ninja Turtles, and the Cabbage Patch Dolls? They were all made in China. Even some Barbie dolls continue to be manufactured there, Nearly 1 of every 2 toys sold in America comes from China.

Across the way from the toy store, Foot Locker is displaying the new $75 Nike Air Slant. Like many of the athletic shoes in the store, its tag says: "Made in China." At the mall's Sears store, clerks have displayed Chinese-made work gloves and Cuisinart food processors.

Need a handbag? Kaufmann's, a regional department-store chain, sells a $30 taupe model from Sereta. Sereta may sound Italian, but its construction is all Chinese. Last year, the US imported $45.6 billion worth of Chinese goods - up nearly 50 percent from the figure in 1993.

These imports are nearly four times the value of goods that the US sends to China. The biggest US exports are fertilizer, aircraft, cotton, and other farm commodities.

Two political programs jeopardize this growing trade. First, continued allegations of China's human-rights violations and its recent threats toward Taiwan have riled both liberals and conservatives in Congress. Several argue the US should withdraw China from its list of most favored nations. That would sharply increase the tariffs on Chinese imports.

Such a move is considered unlikely, because of Mr. Clinton's June 3 announcement that he would extend the privileges, an idea also backed by Republican leaders Bob Dole and House Speaker Newt Gingrich. But US and Chinese firms face a second, more serious threat. The White House is threatening to impose tariffs on some $3 billion worth of Chinese imports, unless the two sides can strike a deal by June 17.

The reason, according to the administration, is that China has failed to live up to its 1995 pledge to crack down on Chinese factories that turn out illegal copies of US software, compact discs, and videos. The tariffs are a way to force China to act. China threatens to retaliate with trade measures of its own.

The US tariffs, if imposed, would have direct and indirect effects. In some cases, US retailers would have to raise prices to cover the increased costs of getting their goods elsewhere, according to the National Retail Federation. Children's bicycles would cost anywhere from 8 percent to 29 percent more; the price of telephone answering machines would rise 31 percent.

Such a bargain

Some Chinese goods are so inexpensive or they're unavailable elsewhere that US retailers would pay the stiff duties to keep their shelves stocked. The practice would double the cost of a Chinese-made phone. Silk prices might go higher.

Because China exports the bulk of the world's silk garments, its production couldn't be replicated elsewhere quickly. John Jeffery, president of WinterSilks Inc. in Middleton, Wis., estimates the price of long silk underwear in his catalogue would boost the price from $25 to $50 or $60. The price hikes would shrink sales by three-quarters, he says.

This is not the first time the US and China have rattled sabers over a trade dispute. But "I think the situation is different this time," Mr. Jeffery says. "There's very much a distinct chance that these things will go into effect on June 17."

Other US businesses selling Chinese goods would not feel the direct effects of a tariff. Shoes are an example. China makes 3 out of every 5 pairs of nonrubber shoes sold in the US, but that sector is not targeted. China also makes half of the world's toys and last year exported $5.4 billion worth of them into the US, but no tariffs are planned.

Still, even these manufacturers worry about the tariffs. "What we're afraid of is that even though we're not on the list [of proposed duties], if we had to impose sanctions, the Chinese would retaliate and we could be on the slippery slope of another cold war with another country," says David Miller, president of the Toy Manufacturers of America, based in New York. "And that frightens."

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