The Analysis Of Tbt On China's Wood Trade With Game Theory And Strategy

China's foreign trade has been developed by leaps and bounds in recent years, and thus is challenged by increasing trade disputes and frictions. The total export value of China's major forest products in 2009 was 34.59 billion USD and China has replaced Italy, the traditional largest furniture exporting country to be the Top 1 in the world. The rapid increase of forest product yields leads to the surplus supplies compared with the demands, so the international market is needed for making up the gap. However, USA, EU and other economies are affected by the negative impacts of the recent economic crisis and witness a depressed economic situation, which caused the shrinking of the demands of the export market. In order to protect their own trades, the trade protectionism is rising all over the world and the non-tariff barriers mainly being technical barriers to trade (TBT) are extensively used, whose applicable scope has been enlarged. Characterized by its concealment, TBT has been used by developed countries and has affected China's trade of wood and wood-based products. USA and EU are two important export markets of China's forest products, contributing 40% to the total export value of China's forest products. USA, EU and some other countries have set TBT against the increasingly developed wood trade of China, especially the furnishing industry, in the name of forest resource conservation and combating illegal logging, which has caused heavy losses for Chinese furnishing businesses. However, TBT in the form of green barriers, legal barriers and others has not aroused sufficient awareness of the academia.Any one country's adoption or rejection of setting TBT is a dualism. It will protect the country's industry and resources but also leads to the negative impacts such as the revenge of the imposed country. Similarly, as an imposed country, no matter it chooses to"fight"or to improve its technology to meet the requirements of the setting country, it will cause the negative impacts of increasing the costs of exported products and reducing their competitiveness. Besides, if it chooses to improve the technology, it will benefit the country in improving the forest management. Because of the dualism, it is rational to apply the game analysis to study on the TBT in wood trade. Based on the real picture of China's wood trade, the present paper therefore applies the game theory, WTO rules and theories and policies of international trade to study the TBT threatening China's wood exports and trade. Through the game analysis of the TBT facing two countries, the paper arrives at the factors needed to be taken into account when either country works out their strategic options and relevant conclusions and hereby provides the strategic suggestions for China to address the TBT set by USA.Game theory attempts to mathematically capture behavior in strategic situations, in which an individual's success in making choices depends on the choices of others. It mainly considers the prediction and actual behaviors of the individuals involved in the game and studies on their optimal strategies. Any one country is faced with the dilemma between free trade and protectionism in the international trade. It is also Nash equilibrium between the free trade and trade barriers, which results in a trade war damaging both sides because they adopt the uncooperative game strategies. The paper studies on how to apply the game analysis in the TBT threatening China in her wood trade. It reaches the following factor needed to be considered when China adopts strategies: (1) in case of unreasonable TBT, efforts should be made to"fight"against it, namely appealing to WTO or requiring for economic arbitration, and the condition to choose such strategy is that the probability of winning is bigger; and (2) in case of reasonable TBT,"improvement"should be the better option, i.e. gradually enhancing the country's own forest management and using approaches e.g. forest certification to ensure the legality of wood sources so as to strengthen the competitiveness of exported products and reduce conflicts caused by TBT. In addition to the above two strategic options, based on the most representative model of"prisoners'dilemma"in the game theory, no matter the TBT imposed on other country is reasonable or not, both countries will suffer losses under gaming for many times, so only the cooperation is the best option for both countries. However, there should be corresponding references as the precondition of all strategic options: rationality probability of setting TBT, probability of winning the fight, costs for improving technology, etc.