Not So Free Trade a Problem in China

Sometimes it's hard to change the way a company - or in this case, a 
country - does business. The Chinese government has gone to great pains to 
ensure that companies from other countries do not move in and take over its 
business and industry. It's hard to make lollipops in China without having 
a joint venture with a Chinese firm, one that is usually void of any 
technology and financially distressed. Admitting China to the World Trade 
Organization was supposed to change much of this and open up China's 
markets to other trading countries.

That's not what's happening. A report in Bloomberg News reveals that there 
are more than 2,700 vehicles imported from the U.S., Japan, Korea and other 
countries sitting on a parking lot at the Tianjin Free Trade Zone. The 
reason they are sitting there is because there are no import licenses to 
allow their entry and sale in the country. Import licenses must be 
purchased from the government. For years, however, the government has 
turned its head at importers who import vehicles illegally with false 
licenses. The government didn't enforce the more than two-decade-old 
license rules because there were not that many vehicles being imported.

However, following China's ascension to the WTO, automakers saw an 
opportunity to compete in China and began importing vehicles, many of them 
through the Tianjin Port, where 50% of China's vehicle imports enter the 
country. Recognizing the stiffer competition, Chinese authorities cracked 
down on the importers using illegal licenses and thus there is no one 
capable of taking delivery of the vehicles.

Sales of imported cars are reported to have surged in the first few months 
of this year following China's admission to the WTO. Sales in the last two 
months since Chinese authorities cracked down on the illegal licenses have 
dropped substantially. Automakers report that there is no end in sight to 
the artificial trade restriction.