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Tu Xinquan: Overview and outlook of China-US trade friction

2019-05-14

Editor’s note: Despite many headwinds and obstacles, the next round of trade negotiation will be put into schedule. How will China-US economic ties develop in the future? Chongyang Institute for Financial Studies at Renmin University of China (RDCY) invited Tu Xinyuan who assumes dean of WTO Research Institute of University of International Business and Economics (UIBE), to outline a development trend of China-US relations in the future.



The history of China-US relation: transition from ideology to pragmatical consideration


If we look back the history of the past 70 years, , we may find that America treats China in an ideological way instead of pragmatic consideration especially from 1949 to 1972. As Soviet confronts with America, America is used to considering Socialist countries in terms of its understanding of Soviet which is its rivalry. In 1970s. To deal with threats from Soviet in cold war, Americans chose China as partner and put pragmatic practice at the first place. Then profound changes have taken place in many fields including politics, economy and culture. It is actually out of pursuits of mutual cooperation.


As China grows, Americans start worrying and cautioning. Trump took the office by claiming that He will make America great again by throwing China down in economic relation. Some people may argue that such change happens overnight. In fact, it is not. It undergoes a process of chronic accumulation, and finally emerge after 2017. America and China share a weaker foundation of mutual benefits and interests, which is attributable to undermined wills of US government to cooperate with China, thus triggering the trade war.


Economic and trade problems are more vital to the relation


Before 1972 China and America shared no economic connection. After establishing diplomatic ties, trade between China and America boosted. China has gained tremendous achievements after joining WTO, which was beyond expectation of America. American business circles appealed to administration to take punitive measures and set rules for China. They want to reap benefits from a huge market of 1.3 billion population, and restrain China’s national strength. Americans thought they would enjoy trade surplus against China but the fact is on the contrary.


Trump administration treats China in a pragmatic manner


From American perspective, America has consumed a lot of efforts to increase its exports and failed to attain its goal. Then US resorted to anti-dumping and anti-subsidy measures to curb China’s enterprises. systems competition has come into people’s sight as Obama administration conflicts with China.


At present, there is a competition concerning both systems and interests. America worries the issue whether China will surpass America in next several years. A falling power is very dangerous. It will spare no efforts to deter emerging one and balk at no costs.


Review of trade frictions of China and US in a year


Trump ascended to the presidency, which is an accident for all people. We analyzed and thought there would be some risks but bilateral relation could stay immune. China and America once carried out several high-level meetings . Personally, I think, Trump didn’t put trade at the priority at that moment. He wanted to solve problems of taxes cut, medical reform and other respects and had no energy to consider trade. The relations between two countries turned sour suddenly in 2018 because of the trade friction and the hawkish power of the US government didn’t show satisfaction with the results of negotiation.


Trump wants to decrease Chinese exports rather than has China increase its imports


We made promise in 2017 that we would purchase more American commodities, and intended to take such action in following negotiation. However, it didn’t work. We were aware of the fact that Americans wanted to curb our industry and weaken our strength. Consequently, it aims to decrease our exports rather than increase your imports. It is no easy thing to talk with Trump. We need to take strong countermeasures to retaliate so that American government can be sober-minded that China will not bend to its threats.


The China-us trade issue is actually an executive-end issue rather than a targeted policy set up by the US side measures against China 301. As you probably know, the main reason why the United States used the 301 measure instead of the WTO or other measures this time is because the 301 measure has been effective in the past. Building on the absolute advantage of the United States over other countries, these countries are highly dependent on the United States, or the United States has a market advantage.


But there is a big difference this time, because it is not about exports, it is about China's so-called intellectual property rights, innovation policies and so on. More people start worrying China's technological catch-up. The United States has used technology as its biggest tool or weapon, because he knows that if he imposes tariffs on you, you can retaliate, and if the tariffs hurt you, he will strengthen his efforts. He wants to close or minimize the spillover of American technology to China. So, in terms of the future, we must be more self-reliant in technology, which is the last thing we can do.


It is indeed an objective fact that the us trade deficit in goods is expanding. Because the U.S. dollar has become a hard currency, it is more and more convenient for American companies to invest abroad. These two changes are also important factors in the growing us trade deficit. First, from the perspective of domestic affordability, second, American enterprises began to invest more and more abroad, which led to the transfer of production capacity, which led to the reduction of exports and the increase of imports. The form of American enterprises participating in economic globalization is no longer American production for export, but local production and local sales.



Disruptive reforms of America in WTO


America wants to maintain its edge over other nations as superpower has the privilege to force others to accept your requirements. America is used to hegemony and neglects multi-lateralism. Unilateralism is the best choice for America to bring its force in to full play.


It is obvious that China doesn’t violate rules of WTO. But America insists on that viewpoint and American government doesn’t acknowledge the role of China’s market economy with local features. In this connection, Trump wants to set new rules to limit China’s strength.


How can China respond to such threats?


America is dissatisfied with the results of negotiation and Trump aims to reshape value chains of the world. He doesn’t care how to cement enterprises’ competitiveness in China’s market. He wants all American investors to withdraw from China. We should nor worry and be pessimistic. China can’t be isolated as long as we never close our gate. We just do what we think is right and maintain spaces of maneuver.

Key Words: China   US   trade   RDCY   

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