Shaping post-election US-China commercial diplomacy
- By Zhang Lijuan
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E-mail China.org.cn, November 5, 2012
Undoubtedly, both new administrations will have to face the same challenge—economic uncertainty. Both nations will struggle to address slow GDP growth, a slump in exports, and high unemployment.
Today's global economy is highly integrated, so fighting alone and unilaterally will not solve either nation's economic problems. Due to the increasing trade and economic interdependence, restrictions on imports will have as many ill effects in each domestic market as in the exporting partner's market. As Gary Hufbauer, a well-known economist from the Peterson Institute for International Economics, has argued, the US tire tariff against China saved a maximum of 1,200 jobs, but at a cost to the US economy of around 2,531 jobs. One obvious danger of accumulating trade restrictions against China is that US consumers and businesses will suffer either by higher consumer prices or fewer business opportunities. From a global perspective, restrictive trade measures on China will neither bring China to a level playing field nor credit US leadership for ensuring free and open trade.
In the coming era, both Washington and Beijing have serious work to do. The US trade deficit is not an isolated issue and it is not going to be solved through trade restrictions against a single country like China. The US must seek a new economic model where it can downsize its fiscal deficit. Additionally, The US should work towards more trade-in services with China and provide technical assistance to China. In this way, both sides can build a high level policy regime based more and more on enhanced trade-in services.
To benefit from China's fast growing economy, containment is not a smart diplomacy option for the US. Instead, engagement should be actively promoted. China's holding of US treasury bonds contribute greatly to the US economy. If Chinese investment is welcomed in the US, the US economy will enjoy further stimulation as well.
For China, open trade requires a strategic trade policy with appropriate guidelines. For further development, China desperately needs an effective framework to improve transparency to gain international trust and market confidence. For decades China has promoted trade at the expense of cheap labor. When facing trade restrictions from its trading partners, China must realize its essential defect is not the cheap "China price," but the weakness of its institutions. For the past 30 years, China has won a small percentage of antidumping and countervailing cases prosecuted by the US and the EU. This is worth pondering. Without a sound trade policy regime and institutional support, Chinese businesses will continue to pay such penalties as they pursue further globalization.
In conclusion, we have every reason to expect that both new administrations will work together. Mutual cooperation is essential to promote economic statecrafts that foster trade expansion, provide leadership in multilateral trade negotiations, advance open trade as a way to counter slow global economic growth, and integrate the world's two largest economies.
The author is a columnist with China.org.cn. For more information please visit: http://www.china.org.cn/opinion/zhanglijuan.htm
Opinion articles reflect the views of their authors, not necessarily those of China.org.cn.
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