The Trade War Unilaterally Provoked by US is Unpopular – Equality, Mutual Benefit and Win-Win Cooperation is the Right Choice
Chinese Embassy, Nuku’alofa, 24/06/2019
It is well known that, ever since took office, the new US administration has been trumpeting the so-called “America First” policy, regularly wielded tariffs as a “big stick” and coerced other countries into accepting its demands, and provoke frequent economic and trade frictions with its major trading partners.
Since the August 2017, by turning a blind eye to the nature of the economic structure and the stage of development in China and the US, as well as the reality of the international industrial division of labor, the US falsely accused that China’s “unfair” and “non-reciprocal” trade policies have created huge trade deficit in bilateral commercial exchanges. It has backtracked during the past multiple rounds of China-US economic and trade consultations, imposed additional tariffs and investment restrictions on China and provoked economic and trade frictions between the two countries.
As the primary rule-maker of the world trade rules, the US has enjoyed the high-qualified and inexpensive services and products provided by the other countries for quite a long time. Ironically, it now depicts itself as a “victim” of the international trade. In fact, no matter in global trade or China-US bilateral trade, the US is the biggest winner rather than victim. The US industries, consumers and economists are crystal clear about this.
First, the huge trade deficit of US is not caused by China and will not end by China. Stephen Roach, an US scholar, has pointed out that in 2018, trade deficits exist between US and the other 102 countries which shows the extremely insufficient domestic reserves of the US. And this is due to the hasty approval of budget deficit by the congress and decision makers. More scholars point out that the domestic inequality of US originates from its wrong policy and should not blame economic globalization. Over consumption, insufficient reserve and huge financial deficit are the fundamental reasons for the trade deficit.
Second, the US dollar acts as the main payment method of international trade and the reserve money. By taking advantage of the trade deficit and the dollar recycling through government bond purchase, the US have harvested a great amount of cheap capital and invested them to the high-tech and other areas, making it the biggest beneficiary of the economic globalization. At present, the annual sales revenue of the US companies in China amounts to 700 billion USD, and the profit exceeds 50 billion USD. This is a good reflection of US sharing the opportunity and progress brought by China’s development.
The cheap commodity price of US is famous around the world. For years, when central banks of many countries are busy curbing inflation, the inflation rate of the US is always kept below the target of 2%. It is the trade with China that brings cheap and high quality Chinese products to millions of US households, and brings great benefits to the US consumers.
Third, the trade deficit between US and China has been grossly overestimated. A joint research by the Chinese and US commerce ministries, the trade deficit of US has usually been over estimated by 20%. The main part of China-US trade is processing trade. China imports the components and parts from other countries, processes them and then exports the finished product to the US. Trade deficit caused by those exports should not be count on China. Besides, the surplus enjoyed by US in service trade has always been ignored. Combine the up mentioned factors together, the deficit would decrease greatly. China never pursue surplus, and sincerely hope to expand our import of competitive US products. According to analysis by some US agencies, if the US lifts its limits on the export of civil high-tech products to China, the deficit would be decreased by 35%. Refuse to export its own superior products is also an important reason for the trade deficit of US.
The so-called trade deficit with China caused job-losing in the US manufacturing industry is also groundless. The mainstream explains by US academia for the past year is: The job-losing in manufacturing industry originates in the restructuring of its economy. With automatic production and manufacturing robots, the productivity of manufacturing industry has improved a lot. Trade will lead to the elimination and transfer of disadvantaged industries, but will also bring the expansion of advantaged industries, which would result in the realization of industry upgrading and adjusting. Scholars from California University find that, rather than losing jobs in trade, the US has harvest much more highly-paid jobs.
By using “being taken advantage of in trade with China” as an excuse, the US unilaterally provoked trade frictions, and failed to keep faith in economic and trade consultations. It breaks its own words said last second in the following second, and plays fast and loose constantly. The trade bullying and protectionism adopted by the US are unpopular and go against the trend of the times. Rather than helping the US to be “great again”, they have disturbed global industrial chain and supply chain, damaged multilateral trade system, threatened the world economy development and brought serious harm to the benefits of both China and US as well as people around the world. US economists point out that, the additions tariffs have already caused US consumers and importers to lose 4.4 billion USD per month. International organizations such as World Bank and IMF have all cut their estimates of the world economic growth of the year 2019. Besides China, more and more economies such as EU and India have also adopted countermeasures and slap retaliatory tariffs.
As the two largest economies in the world, it is only natural for China and the US to have different view from time to time on economic and trade cooperation as well as other fronts. However, the two sides should properly manage and deal with these differences in a responsible manner. International trade must be rule-based instead of power-based. The two sides should resolve the issues in good faith through credible negotiation and consultation based on mutual respect, equality and mutual benefit. Mutual respect means that each side should respect fully the other’s social institutions, economic system, development path and rights, core interests and major concerns. And one shall never challenge the other’s red line and sacrifice the other’s sovereignty and development right for its own selfish good. Equality and mutual benefit means that the two sides should ensure the consultations operate on an equal footing rather than unilateral coercion, that the results are mutually beneficial. Any unilaterally benefited agreement reached through intimidation and coercion will be unsustainable and hard to implement.
Good faith and credibility are the basis of consultation. Any successful consultation requires both parties to work towards the same direction, and create favorable conditions and atmosphere. In order to achieve a win-win result that would satisfy both sides, the Chinese government has engaged in the past 11 rounds of high-level economic and trade consultation with utmost credibility and the greatest sincerity, which is witnessed by the whole world.
With regards to the China-US economic and trade frictions, China is willing work toward a mutual beneficial agreement through cooperation. However, cooperation must be based on principles and bottom lines shall never be touched upon in consultation. China will not back down on major issues of principle. China doesn’t want a trade war, but is not afraid of one and will fight one when necessary. This position has never changed since the very beginning.
In a highly integrated world economy, the trade war unilaterally initiated by the US will definitely brings harm to the whole world. No country could stay out of it. Tonga’s economy highly depends on the international market, and will inevitably suffer from multiple negative impacts from the trade war. China and Tonga share mutual interests in safeguarding open world economy, upholding multilateral trade system, as well as eliminating the uncertainty of the world economy development. We hope Tongan friends from all walks of life could bear a full knowledge of the serious harm that could be caused by the US behavior, voice your concern and support for open world economy, multilateral trading system and multilateralism, and join hands with China to protect the healthy and steady development of world economy.
© Acting Ambassador Mr. YANG Zhaohui