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Commentary: Whoever starts a trade war swallows a bitter pill


Trade frictions are inevitable in today's increasingly intertwined world. But failing to properly handle or even attempting to upgrade them will do no good to all parties involved, and often the initiator bears the cost of a "trade war."

Not long after the European Union (EU) brought its biggest ever trade case against China over solar products, China's Ministry of Commerce said Thursday it will launch an anti-dumping probe into imports of EU-made polysilicon, a material used in solar equipment manufacturing.

The ministry also pledged to evaluate its earlier countervailing investigation into polysilicon imported from the United States and the Republic of Korea, a move seen as the latest response to the U.S. decision last month to impose heavy tariffs on Chinese solar panels.

China imported 9,300 tonnes of polysilicon from the EU in the first half of 2012, an increase of 30.8 percent from a year earlier. However, the average price dropped 47.5 percent year-on-year.

China's counteractions came as no surprise since it voiced strong opposition to the EU and U.S. treatment of Chinese products. Also, major solar product manufacturers in the country requested support.

If China's probe, expected to be finished within a year, leads to decisions to impose anti-dumping duties on EU and U.S.-made products, it is the solar industries in the two economies that will have to bear the costs.

Decision-makers in the EU and the U.S., two of the largest economies in the world, should learn to work on the root causes of their economic downturns and trade deficits.

European and American manufacturers can only gain a competitive edge over their Chinese counterparts by further raising product quality and improving production methods to offset disadvantages in the cost of labor, raw materials, and logistics.

The EU and the U.S. should realize that trade deficits, while putting pressure on their domestic job market, also benefits consumers by providing more choice of cheaper goods.

Similarly, customs penalties against imported goods are, at best, a double-edged sword. It is true that it can generate instant returns in tax revenues and boost domestic manufacturing, but at the same time it costs consumers more desirable commodities and the domestic industries motives for improvement.

It is also worth pointing out that responsible parties should not take advantage of trade issues to serve political aims.

In the latest U.S. presidential candidates' debate, both Barack Obama and Mitt Romney attacked China for imbalances in trade. It is not difficult to see why, as by doing so both of them tried to secure some credit for the good of their own careers.

Although governments bear the responsibility of protecting the rights of domestic businesses, when it comes to economy and trade, it is wise for them to follow the rules of the market. Otherwise, they will get more losses than gains. 

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