Talk? The Door is Open; Fight? We Fight to the End!

道可特法视界第1217篇原创文章

China has a large population, rich labor resources with low labor costs, while the United States is with larger land and fewer people, developed cultivated land resource and its land costs are relatively low. In China, the per capita education level and scientific and technological development level lag behind those of the United States. Therefore, since ancient times, the most developed industries in China have been traditional labor-intensive industries, while the United States has developed capital-intensive industries into one of the most important industrial types within their territory. Nowadays, China's exports to the United States are mainly electronics and labor-intensive light industrial products, a lot of which are from U.S. manufacturers that send raw materials to China for low-cost assembly. The biggest categories of China’s imports from U. S. are mainly large-scale means of transportation, high-tech products, as well as agricultural products. As the resources between the two countries are highly complementary with each other, it is reasonable and feasible for the two countries to establish and maintain a sound long-term economic and trade relations. Given the current worldwide positions held by China and the United States, it is with no doubt that the relations between the two are the largest bilateral relations in the world, and of course its status and changes will not only affect the domestic economy of the two countries, but also will have an important influence on the whole world economy. However, along with the rapid development of the trade and investment between the two countries, China's trade surplus with the United States continues to expand, and more serious trade imbalances between the two have led to more and more disputes in their economic and trade relations.

We may easily infer from relevant state statistics that the United States has been enduring a large amount of trade deficit for more than a decade. After President Donald Trump took the office in 2017, in order to achieve his goals of reducing the trade deficit and creating more jobs for the citizens of the United States, China has been listed as the primary target enemy of Trump’s protectionist, and the Sino-US trade friction therefore started upgrading.

On March 23, 2018, the United States announced to levy 50 billion USD tariffs on goods imported from China, and on the same day, China announced to stop tariffs concessions on certain goods in response to Section 232 Investigation launched by the U.S, and on April 2, 2018, China decided to increase tariff rate on 128 products imported from the U.S. in retaliation to the U.S.; On April 4, 2018, the U.S. issued a list of products advising on imposing additional tariffs on products imported from China, and China in response imposed higher tariffs on products with the same amount; On April 17, the U.S. started anti-dumping and countervailing investigations on steel made products with China origin, and China in turn took anti-dumping measures toward broomcorn products imported from the U.S.; On June 15, 2018, the U.S. announced to impose 25% tariffs on 50 billion USD products imported from China, and China, on the next day, responded to impose the same tariff rate on the same amount of products imported from the U.S..

By now, China and the United States have already held eleven rounds of consultations and negotiations on China-US friction matters. Although the two sides have made some progresses in discussing the texts of bilateral agreements on transfer of technology, protection of intellectual property rights, non-tariff measures, services, agriculture and trade balance issues, final and complete resolution on economic and trade relations between China and the United States is still pending for further consultation, and the Trump Administration is still slapping higher tariffs on goods imported from China. Right after the 11th round of consultation, the U.S. announced to raise the tariffs rate from 10% to 25% on 200 billion USD products imported from China.

We believe that an all-out trade war between China and the U.S. will definitely threaten and damage the prosperity of the world economy. Just as President Xi Jinping stressed in his talks with President Trump, “we have a thousand reasons to maintain good relations with the United States, and there is no reason to break the relationship between China and the United States.” Cooperation is the only right choice between the two countries. If Trump remains unilaterally determined to pursue a trade war against China in the future, it will only have a huge negative impact on the US economy, and it will be contrary to his oath of office for increasing employment and welfare for the American society.

There is a well-known saying after Trump came to power in 2017 that “the greatest certainty in Trump’s administration has been his personal uncertainty.” Except from the above mentioned accusations, there are still abound crazy ideas and misconceptions held by Trump Administration in many different fields. Facing enormous uncertainty during Trump's presidency, China should still be prepared ahead of schedule with a feasible plan to deal with any potential escalation of trade frictions and even the trade war. China should take multiple approaches simultaneously to solve the trade imbalance between China and the United States rather than simply replying on reducing exports or the appreciation of the RMB. China should pay equal attention to internal and external reforms in its future economic development.

At present, China is in the 13th Five-Year Plan period. According to the Circular of the Ministry of Commerce on Issuing the 13th Five-Year Plan for the Development of Foreign Trade, during the period of the 13th Five-Year Plan, China shall take the promotion of the supply-side structural reform as main line, and push forward "The Belt and Road" initiative to lead opening up, vigorously implement the strategy for optimizing imports and exports, speed up the transformation of development modes of foreign trade, adjust structure and change momentums, consolidate and enhance traditional competitive edges of foreign trade, foster new competitive edges of foreign trade centering on technologies, standards, brands, quality and services, advance the change of foreign trade to high quality and favorable prices as well as optimized imports and exports. Recognize that the innovation is the first driving force in leading development, and as such innovation must be put at the core position of the development of foreign trade. Speaking of China’s internal deepening reform, the traditional low-end labor-intensive industries shall be gradually reduced by outsourcing to regions with lower labor costs such as the Africa and South-East Asia. The proportion of capital-intensive industry shall be increased by utilizing the labor force saved by outsourcing the traditional industries. Also, the production advantage and the output quantity shall both be improved. As well as maintaining the status of the world’s manufacturing factory, China shall improve the production efficiency and product quality so as to upgrade the manufacturing industry. Besides, due to the increasing household income, China is becoming a super international consumer market which drives the rise of service industries. Furthermore, the proportion of processing trade will keep dropping and will be step-by-step withdrawal from the historical stage.

Whether or not China may maintain its own trade balance is the key problem for China to ensure the undefeated position in the trade frictions with the United States. China should strive to establish and maintain regional trade relations, for example, speed up the consultation and negotiation on the Regional Comprehensive Economic Partnership (the “RCEP”) , well enforcing “The Belt and Road” Initiative, through which China may increase foreign direct investment, realize the win-win economic situation between China and other countries, enlarge the scale of infrastructure construction and export market of financial industry and strengthen the political, economic and cultural relations between China and other countries.

By simultaneously deepening the internal reform and opening up, China may get rid of certain excessive trade dependence on the United States and may effectively counteract the external challenges raised unilaterally by the United States and strive for a sustainable, stable and healthy development environment for the domestic economy.

The Chinese anchorman in the CCTV News stated that “No matter what the next step will be taken by the U.S., either talk or fight, China is well prepared and ready for it”. In a famous American movie, Thor, god Odin once said, “A wise king never seeks out war, but he must always be ready for it”. Referring these words to comment on what the Trump Administration has done, it is rather ironic, isn’t it?! We wish that the Trump Administration may be of the same common sense, and the economic and trade teams of both countries will be able to work together to reach a mutually beneficial and win-win agreement. 

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