Cooperation is the only correct choice for China and the U.S. to resolve trade disputes
Recently, the trade frictions and economic and trade consultations between China and the United States have received high attention from the international community. On June 2, the Chinese government published a white paper entitled “China’s Position on the China-U.S. Economic and Trade Consultations”, which comprehensively introduced the ins and outs of Sino-U.S. trade frictions and the basic situation of China-U.S. economic and trade consultations, and clarified the Chinese government’s principled stand on Sino-U.S. economic and trade consultations. This is the second time that the Chinese government has published a white paper on Sino-U.S. economic and trade issues since the Chinese side issued the White Paper on the facts of China-U.S. trade friction and China’s position in September 2018. China’s position and determination are consistent and upright. Here, I would like to share relevant content of the white paper with friends from all walks of life in The Bahamas.
First of all, the white paper comprehensively introduces the causes of Sino-U.S. economic and trade frictions and the facts of bilateral consultations. Trumpeting “America First”, the current U.S. administration has adopted a series of unilateral and protectionist measures, regularly wielded tariffs as a “big stick” and coerced other countries into accepting its demands. The U.S. has initiated frequent investigations under the long-unused Sections 201 and 232 against its main trading partners, causing disruption to the global economic and trade landscape.
Turning a blind eye to the nature of the economic structure and the stage of development in China and the U.S., as well as the reality of the international industrial division of labor, the U.S. takes its trade deficit with China as “being taken advantage of”, adopts economic and trade restrictions such as increasing tariffs and restricting investment, and provokes Sino-U.S. economic and trade friction.
Since February 2018, the U.S. and China held several rounds of high-level economic and trade consultations, characterized by in-depth exchanges of views on trade imbalance among other major issues. The two sides made substantial progress in those consultations. However, on March 22, 2018, the U.S. government unveiled the so-called report on Section 301 investigation of China, falsely accusing China of “IP theft” and “forced technology transfer”, and subsequently announced an additional tariff of 25 percent on US$50 billion of Chinese exports to the U.S.
In order to show the greatest sincerity, the Chinese team and the U.S. team subsequently continued consultations. China and the United States issued a joint statement on May 19, 2018, agreeing to refrain from fighting a trade war. On May 29, 2018, despite the opposition of its domestic business community and the general public, the U.S. administration tore up the consensus just 10 days after the joint statement, announcing the resumption of the tariff program.
From December 2018 to April 2019, based on the important consensus reached by the two heads of state, the Chinese and American teams had conducted several rounds of high-level consultations and the two countries had reached consensus on most of the issues. But the U.S. government resorted to intimidation and coercion, maintained the additional tariffs imposed since the friction began, and insisted on including mandatory requirements concerning China’s sovereign affairs in the deal, which only served to delay the resolution of remaining differences. Therefore, all setbacks of the Sino-U.S. economic and trade negotiations are the result of a U.S. breach of consensus and commitments, and backtracking. The U.S. government should bear the sole and entire responsibility for this severe setback to the China-U.S. economic and trade consultations.
Second, the white paper reveals that the economic and trade friction provoked by the U.S. damages the interests of both countries and of the wider world. The tariff measures imposed by the U.S. harm others and are of no benefit to itself, impeding two-way trade and investment cooperation and undermining market confidence and economic stability in the two countries and globally. The U.S. tariff measures led to a decrease in the volume of China’s export to the U.S., and U.S. exports to China have dropped for eight months in a row. The uncertainty brought by U.S.-China economic and trade friction made companies in both countries more hesitant about investing.
With the outlook for China-U.S. trade friction unclear, the WTO has lowered its forecast for global trade growth in 2019 from 3.7 percent to 2.6 percent. International organizations such as the World Bank and the International Monetary Fund have lowered their expectations for world economic growth in 2019. The tariff measures have not boosted American economic growth. Instead, they have done serious harm to the U.S. economy.
First, the tariff measures have significantly increased production costs for U.S. companies. Many American manufacturers depend on China’s raw materials and intermediary goods. As it is hard for them to find good alternative suppliers in the short term, they will have to bear the costs of the tariff hikes. Second, the tariff measures lead to domestic price hikes in the U.S. According to research by the U.S. National Retail Federation, the 25 percent additional tariffs on furniture alone will cost the U.S. consumer an additional US$4.6 billion per year. Third, the tariff measures have an impact on U.S. economic growth and people’s livelihoods. According to a research report in February 2019 by Trade Partnership, an American think-tank, if the U.S. imposes 25 percent additional tariffs on all imported Chinese goods, U.S. GDP would decrease by 1.01 percent, with 2.16 million job losses and an additional annual burden of US$2,294 on a family of four. Fourth, the tariff measures lead to barriers to U.S. exports to China. The 2019 State Export Report, published by the U.S.-China Business Council on May 1, 2019, stated that in 2018, when economic and trade friction worsened, only 16 states increased their goods exports to China. Thirty-four states exported fewer goods to China. Under tariff measures, exports of American agricultural produce to China decreased by 33.1 percent year-on-year, including a 50 percent drop in soybeans. U.S. businesses are worried that they might lose the Chinese market, which they have been cultivating for nearly 40 years.
Third, the white paper clarifies the Chinese government’s principled position on Sino-U.S. economic and trade consultations. China is always committed to credible consultations based on equality and mutual benefit. The Chinese government rejects the idea that threats of a trade war and continuous tariff hikes can ever help resolve trade and economic issues. Guided by a spirit of mutual respect, equality and mutual benefit, the two countries should push forward consultations based on good faith and credibility in a bid to address issues. During consultations, a country’s sovereignty and dignity must be respected, and any agreement reached by the two sides must be based on equality and mutual benefit. Concerning their differences and frictions on the economic and trade front, China is willing to work together with the U.S. to find solutions, and to reach a mutually beneficial and win-win agreement. However, cooperation has to be based on principles. There are bottom lines in consultations. China will not compromise on major issues of principle. China does not want a trade war, but it is not afraid of one and it will fight one if necessary. China’s position on this has never changed.
The China-U.S. commercial relationship serves as both the ballast and the propeller of the overall bilateral relationship. The trade in goods between China and the U.S. grew from less than US$2.5 billion in 1979 when the two countries forged diplomatic ties to US$633.5 billion in 2018, a 252-fold increase. According to the U.S. Department of Commerce, in 2018 China was the largest trading partner of the U.S., its third largest export market, and its largest source of imports.
China is the key export market for U.S. airplanes, soybeans, automobiles, integrated circuits and cotton. During the 10 years from 2009 to 2018, China was one of the fastest growing export markets for American goods, with an annual average increase of 6.3 percent and an aggregate growth of 73.2 percent, higher than the average growth of 56.9 percent represented by other regions in the world. Sino-U.S. economic and trade cooperation has brought tangible benefits to the two countries and their peoples. The facts show that for China and the United States, as the two largest economies in the world, cooperation serves the interests of the two countries, but conflict can only hurt both. The bilateral economic and trade relations are related to the fundamental interests of the two peoples and to the global economic prosperity and stability.
Cooperation is the only correct choice for China and the U.S. and win-win is the only path to a better future. Undoubtedly, if only the U.S. could pull in the same direction with China, resolving disputes and conflicts on the trade and economic front through dialogue and consultation, then can we conform to the expectations of the countries of the world and enhance the well-being of China and the United States and the people of the world.
• Huang Qinguo is ambassador of the People’s Republic of China to the Commonwealth of The Bahamas.