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Rational understanding of the current Sino US trade friction
- Aug 29, 2018 -

Sino US economic and trade relations have always been the "ballast stone" and "stabilizer" of the relations between the two great powers of China and the United States. But since this year, the United States has adopted unilateralist measures to provoke a trade war, resulting in the escalation of trade friction and disputes between China and the United States. In March this year, the United States produced the so-called 301 investigation report. In July 6th, the United States, despite all opposition, imposed a 25% tariff on China's $34 billion export to the US. In August 23rd, the United States imposed additional tariffs on another 16 billion US dollars in Chinese exports to the US. In order to safeguard legitimate rights and interests, the Chinese government took corresponding counteraction measures in time. The unilateral initiation of trade war by the United States not only seriously threatens Sino-US bilateral economic and trade relations, but also has a negative impact on the world economy. How to understand the current Sino-US trade frictions? How to deal with the United States to provoke a trade war? These issues have aroused public concern.

Sino US economic and trade cooperation is both beneficial and damaging.

Since the establishment of diplomatic relations between China and the United States in 1979, bilateral relations have developed in an all-round way and economic and trade cooperation has been advancing rapidly. A trade pattern of complementary advantages, mutual benefit and mutual benefit has been formed. In essence, Sino-US economic and trade relations are mutually beneficial and win-win. The common interests far outweigh the differences. The two sides benefit from each other while the struggle hurts each other. The stability of Sino US economic and trade relations is not only related to the interests of China and the United States, but also to the development of the world.

Sino US economic and trade cooperation is comprehensive. First of all, China and the United States are important partners in cargo trade. The United States is China's largest export market and the sixth largest importer of goods. Its exports to the United States account for 19% of China's total exports. Sino US bilateral trade in goods amounted to US $583 billion 700 million in 2017, 233 times that of the two countries in 1979. China is the fastest growing market for US exports. According to United Nations statistics, US exports to China in 2017 were $129.9 billion, up 557% from 2001, much higher than the 112% increase in US exports to the world. The United States exports 62 percent of soybeans, 25 percent of aircraft, 17 percent of cars, 15 percent of integrated circuits and 14 percent of cotton to the Chinese market. Secondly, the role of service trade in bilateral economic and trade cooperation is increasing. According to US statistics, bilateral trade in services between China and the United States increased from $24.94 billion in 2007 to $75.05 billion in 2017. Among them, US exports to China increased from US $13 billion 140 million to US $57 billion 630 million, an increase of 3.4 times. The United States is China's second largest service trading partner, and China is the second largest export market in the United States. Thirdly, the scale of investment between China and the United States is huge. By the end of 2017, US direct investment in China had accumulated more than US$83 billion, with about 68,000 US-funded enterprises in China. China's investment in the US is about $67 billion. In addition, China has invested heavily in U.S. financial assets and holds more than $1 trillion of U.S. Treasury bonds, making it the largest holder of U.S. Treasury bonds.

Sino US economic and trade cooperation is mutually beneficial. The reciprocity of Sino US economic and trade cooperation is reflected in many aspects. First of all, bilateral economic and trade cooperation has provided huge opportunities for both enterprises. The two sides share their market opportunities through exports or investments. China has a surplus of about 270000000000 US dollars in the Sino US trade in goods. The United States has a large surplus in the field of Sino-US trade in services, with a surplus of about $55 billion in 2016. Many US funded enterprises enter China through investing in China instead of exporting. According to the Bureau of Economic Analysis, U.S. companies'sales in China in 2015 were $481.4 billion, which was $455.8 billion higher than the $25.6 billion sales of Chinese companies in the United States. Therefore, from the perspective of using the other side's market opportunities, the two sides benefit from a general balance. Second, bilateral economic and trade cooperation has created a large number of employment opportunities for both countries. The U.S. -China Trade Commission estimates that exports and two-way investments to China in 2015 supported 2.6 million U.S. jobs.  According to relevant research, imported goods from China create about 4 million jobs in the downstream industry chain. As China's labor productivity is much lower than that of the United States, more jobs are created through economic and trade cooperation with the United States. According to research estimates, exports of goods to the United States have created about 17.5 million jobs for China. Taking into account the difference in the total population between the two countries, the two sides are basically benefiting in terms of employment. Thirdly, Sino-US bilateral economic and trade cooperation promotes the upgrading of the industrial structure of the two countries, and provides higher cost-effective goods and services for consumers of the two countries, increasing consumer welfare.

The United States attributed the imbalance of Sino-US trade in goods to "China's unfair practices", and accordingly believed that the United States "lost money" in bilateral economic and trade cooperation. This is a one-sided understanding. The low savings rate and the high government deficit are the macroeconomic reasons for the overall trade deficit in the United States. In other words, the overall U.S. trade deficit is caused by its internal economic structure problems, regardless of whether there is China in its trading partners, its overall trade deficit is bound to be. The current imbalance between China and the United States is a reflection of the comparative advantage and international division of labor. Another reason that can not be ignored is that the long-term restrictions imposed by the United States on the export of high-tech products to China have weakened the competitiveness of U.S. products in the Chinese market to a certain extent: the proportion of U.S. products in the import market of high-tech products in China has dropped from 16.7% in 2001 to 8.2% in 2016, reaching $227 billion in China. Of the chip imports, US products accounted for only 4%. In addition, there are some problems in the statistical methods of the United States, which leads to the obvious overestimation of bilateral trade imbalance in goods. In fact, China has not deliberately pursued the trade surplus. In recent years, the balance of payments in current account has basically been balanced.

The real reason why the United States launched a trade war

Sino-US economic and trade cooperation has a wide range of contents and a deep blend of interests. It is unavoidable that there will be various economic and trade frictions. However, such frictions in the past have not affected the overall situation of Sino-US economic and trade cooperation. In recent years, both sides have their respective concerns in economic and trade cooperation. China is concerned that the United States will fulfill its obligations under Article 15 of the WTO Protocol (to completely stop the use of "substitute countries" in anti-dumping investigations against China), restrict the export of high-tech to China, abuse of trade remedies and discriminate against Chinese enterprises'investment in the United States, etc. The problem. The US side is concerned about trade deficit, protection of intellectual property rights, overcapacity, and industrial policies. In the past, the two countries responded to each other's concerns through negotiation and consultation, resolved economic and trade frictions, and promoted bilateral economic and trade cooperation. This time, however, the United States abandoned the cooperation agreement reached between the two sides, reversed its course and adopted unilateral measures, flagrantly launched the largest trade war ever, and threatened to continue to expand the scope and scope of tax increases. Without a winner, the trade war will have an impact on both sides'exports and employment. It will also increase the production and living costs of enterprises and consumers on both sides. It will also impact the normal operation of global production value chains and have a far-reaching negative impact on the multilateral trading system. Then why should the United States launch a trade war when it knows it has to pay such a price?

Interest blackmail. Forcing trading partners to open their markets and transfer economic benefits through trade wars or the threat of trade wars is a common trick of the United States, which has been used by many countries in the past. Although the United States has made great economic benefits from bilateral cooperation between China and the United States, some politicians in the United States view bilateral economic and trade cooperation as a zero-sum game, blaming internal problems such as the widening domestic income gap on "China's seizure of employment opportunities" and trade deficits caused by internal structural problems such as low savings rates. Blame China's policy and think that the US side has suffered losses. In recent years, the United States has shifted from advocating "free trade" to protectionism, disregarding the WTO's authorization principle for developing countries, misinterpreting "reciprocal opening" and unreasonably demanding that tariffs on each specific product and investment access in each industry should be exactly the same as the United States, bringing the vast number of developing countries into disregard. Placed in a very unfavorable trade position. In resolving Sino-US economic and trade issues, the United States has ignored China's great sincerity, abandoned the consensus reached by both sides and unilaterally launched a trade war. Its direct motive is to force China to further expand market access to the United States in terms of trade and investment, increase purchases of American products, so that the United States can obtain more economy. Interests and transfer domestic conflicts abroad.

Strategic containment. After the Second World War, the United States became the dominant country in the western world. After the Cold War, the United States became the only superpower in the world with its technological, economic, military and financial strength far ahead of other countries. In order to maintain its world hegemony, the United States has been guarding against any possible catching up with the state. The Soviet Union and Japan had been curbed by the United States. With the rapid development of China's economy and the rise of its overall national strength, the US has changed its perception and mood towards China and redefined Sino-US relations. The 2018 edition of the U.S. Defense Strategy Report states that "strategic competition between countries is now the primary issue of U.S. national security" and defines China as a long-term "strategic competitor" of the United States. The report also proposes that economic security is the foundation of national security and national security. On August 13, 2018, the President of the United States signed the Defense Authorization Act of FY2019, which contains two important bills: the Export Control Reform Act and the Foreign Investment Risk Review Modernization Act, further strengthening the restrictions on high-tech exports and preventing foreign enterprises from acquiring technology through investment. Therefore, trade war is not only a means for the United States to gain more economic benefits, but also an important means for the United States to contain China. The US tariff increase of $50 billion on China's exports, mainly aimed at the high-tech areas contained in Made in China 2025, reflects the US intention to curb China's technological catch-up.

Mode suppression. From the perspective of safeguarding its global hegemony, the United States blames China's development model. The United States slanders China's development model as "state capitalism", unjustifiably accuses China of having compulsory technology transfer requirements for foreign-invested enterprises, China's support for enterprises to "go out" is a government action to acquire advanced technology, the Chinese government supports the network to steal US trade secrets and intellectual property rights, and indiscriminately criticizes China's implementation. Industrial policy. In fact, since the founding of the United States, the United States has been implementing industrial policies in essence. Hamilton, the first U.S. Treasury Secretary, proposed a plan to promote the development of manufacturing industry, which was the beginning of infant industry protection policy. In recent years, the U.S. government has still issued a large number of industrial policies, such as the "Revitalizing the U.S. Manufacturing Framework" (2009), the "Advanced Manufacturing National Strategic Plan" (2012), the "National Manufacturing Innovation Network (NNMI) Project Strategic Plan" (2016), and so on. While pursuing its own industrial policy, it blames other countries for their normal industrial policies, which reflects the hegemonic mentality of the United States. In the international economic field, the United States puts domestic law above international law, not through the dispute settlement mechanism of the World Trade Organization, but through unilateralism measures to deal with Sino-US economic and trade disputes, flagrantly violating the rules of the World Trade Organization to impose tariffs. The United States intends to obstruct the appointment of new judges to the Appellate Body of the World Trade Organization and affect the normal functioning of the World Trade Organization. Despite China's commitment to WTO entry, its adherence to the rules of the multilateral economic and trade system and its efforts to promote trade and investment liberalization and facilitation, the United States called China a "revisionist" of international rules, challenging the US-led international economic and trade system. To this end, the United States launched a trade war in the implementation of public opinion warfare, tariff warfare, science and technology warfare and other combined boxing, the motivation is to stigmatize China's development model through public opinion warfare, through tariff warfare, science and technology warfare and other coerced China to change the original development model.

It is not difficult to see that the US side's motives for launching a trade war are pluralistic, the reasons are unfair, the actions are not in conformity with the rules of the World Trade Organization, and the influence is harsh and far-reaching.

Properly cope with Sino US trade frictions

Proper handling of Sino US trade frictions is related to the overall situation of China's reform, development and stability. Under the strong leadership of the Party Central Committee with Comrade Xi Jinping as its core, we should maintain strategic determination and strategic endurance, unite the whole country with one mind, further strengthen the cohesion of the Chinese nation, turn pressure into motive force, give full play to China's institutional, industrial and market advantages, and resolutely safeguard national interests. We will strive to maintain the international environment for national development, unswervingly promote reform and opening up, and push China's comprehensive national strength to a new level.

From the overall situation of safeguarding the country's development environment, we should deal with Sino US trade frictions. As the United States defines China as a "strategic competitor", Sino US relations will undergo profound adjustment. As two great powers, Sino-US cooperation and competition are normal. Cooperation does not mean that there is no contradiction and competition does not mean that there is a full-scale war. We must throw away illusions and resolute challenges; we must remain rational and strive to maintain overall stability. We should fully understand the complexity of Sino-US trade frictions, adhere to the principle of "being rational, advantageous and modest", and adhere to the principle of "not willing to fight, not afraid to fight and having to fight if necessary". China insists on not shooting the first shot, but in response to the unilateral initiation of trade war by the United States, it is bound to take counter-measures of reciprocity and resort to the dispute settlement mechanism of the World Trade Organization. It is not enough to safeguard national dignity and the interests of the people, the principles of free trade and the multilateral trading system, and the common interests of all countries in the world. At the same time, China is willing to respond to each other's concerns through equal negotiations, tap the potential of bilateral economic and trade cooperation, establish institutional arrangements for bilateral economic and trade cooperation, and promote the stable development of bilateral economic and trade cooperation as long as the United States abandons its wrong position and actions to provoke a trade war and upholds equal treatment and keeps its promise.

Comprehensive measures should be taken to deal with short-term shocks. The adverse impact of Sino US trade friction on China's macro economy is limited. According to a number of institutions, the United States imposes a 25% tariff on our $50 billion imports, which will affect China's GDP growth rate of about 0.1 percentage points. However, adverse effects may spread through multiple areas in anticipation of change. Therefore, we must attach great importance to comprehensive measures and properly cope with them. Firstly, we should do a good job in the relief work of export-hindered enterprises, help them turn to domestic sales or export to other countries'markets, and strengthen the relief, training and transfer of laid-off workers. Second, effective measures should be taken to encourage enterprises to adjust their import structure, increase imports from substitute countries, ensure stable supply in the domestic market, and prevent the prices of individual commodities from rising sharply. Third, we should do a good job in stabilizing employment, finance, foreign trade, foreign investment, investment and expectations, maintain stable macroeconomic growth and financial market stability, and guard against and resolve major risks.

Maintain strategic determination and do your job well. The key to dealing with the US's provocation of a trade war is not to be disturbed by the other side, to maintain strategic strength and to avoid subversive mistakes. The Soviet Union was dragged into the arms race in the cold war, and Japan's bubble economy in the trade war. The lessons learned are not far away and profound. We must absorb the lessons of other countries, maintain our strategic determination, and do our best around the goal of building a socialist modernization power in an all-round way. Firstly, we should take economic construction as the center, concentrate on development, constantly enhance our comprehensive national strength and constantly improve people's lives. Second, we should strengthen the direction of reform of the socialist market economy, accelerate and deepen reform in an all-round way, constantly improve the socialist system with Chinese characteristics, and promote the modernization of the state governance system and governance capacity. The three is to enhance innovation capability. We should firmly grasp the strategic opportunities of the new technological revolution, speed up technological catch-up, strengthen research and development of cutting-edge technologies, upgrade traditional industries with new technologies, vigorously develop new industries and accelerate the realization of high-quality development. Four, we must continue opening wider to the outside world. Docking high standards of international economic and trade rules, building a new open economic system, creating a new pattern of comprehensive opening up, enhancing the international competitiveness of industries and the status of international division of labor, and building a trade power. Vigorously advocate free trade and safeguard the authority of the multilateral trading system. We should actively promote the strategy of free trade area and promote the construction of "one belt and one road". We should fulfill the responsibilities of major powers that are compatible with our own strength and stage of development, uphold the concept of a common human destiny, and make new contributions to building a world of lasting peace, universal security, common prosperity, openness, tolerance and cleanliness and beauty.