Promote trade for shared prosperity
- By Zhang Lijuan
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E-mail China.org.cn, April 8, 2017
U.S. trade policy toward China has been a political issue in the U.S. for decades. Historically, being tough on China has been a consistent argument for winning local and national elections. Many politicians still use anti-Chinese trade policy proposals as a means to win elections.
This is not surprising as U.S. presidents, from Reagan to Obama, committed to impose tougher trade sanctions against China during their election campaigns. However, none of them followed through as much as they promised in their campaigns. The truth is, soon after these presidents were sworn into office, they all became painfully aware of how complicated and intertwined trade relations with China are. They learned quickly the large Chinese economy, with increasing bilateral trade and global influences, has many aspects that demand deliberate and careful consideration.
In general, U.S. presidents do not agree with each other on most trade policy perspectives, but with regard to China, it becomes more and more obvious that to deal with China successfully, the U.S. must pursue a strategy of working with China. As stated by the former Secretary of State Henry Paulson, "[On] every major economic, political, and security issue, the path that China chooses will affect the United States' ability to achieve its goals. This will also be true under the next U.S. administration."
The current U.S.-China trade deficit should be carefully examined. Today, more than ever, we live in a totally different world than before. Today's trade structure is not the same as it was during the 1940s through the 1970s, when trade in manufactured goods dominated the world trade structure. It is now a world in which trade in services, dynamics of trade balance and terms of trade have increasingly imposed larger influences on the global economy.
Certainly, the U.S.-China trade imbalance is an issue, but it deserves mutual understanding. It is necessary to diagnose the causes and effects of the U.S. trade deficit with China. In particular, under the comprehensive Global Value Chains (GVCs) scenario, the statistical methodology itself may have caused unwarranted exaggerations of the U.S. trade deficit with China.
Indeed, a fair share of "Made in America" has been included in "Made in China" exports to the United States, because large foreign value-added but limited Chinese value-added goods through assembly lines in China often bears the "Made in China" label. Therefore, it is short-sighted and inappropriate to engage in trade talks that only spotlight the large U.S. trade deficit with China.
Trade is not a zero-sum game between two trading partners. Trade imbalance data neither tells much about the economic benefits of trade nor tells much about the health of an economy. Without consideration of GVCs, trade numbers can easily mislead and under estimate the benefits from bilateral trade. In fact, American economists have widely recognized that cheap Chinese imports have contributed greatly to keep U.S. inflation low, yet significant ignorance of such facts persists within the U.S. public at large.
Today's globalization is the result of industrialization and digitalization, and further globalization should be seen as an inevitable trend. No one can stop it and no one should try to stop it. A rational choice should be made to deal with it and to adjust domestic economic policies to conform to present global realities.
To a large extent, trade and economic interdependence between the United States and China has become the foundation for policy-makers from both nations. The U.S.-China bilateral trade relationship is not only important for desirable global economic development, but also for both U.S. and China internally.
Domestically, China and the U.S. face the same economic challenges: job creation, income disparity, and growth imbalances. The solution is not to impose sanctions on trading partners and fight against globalization. Instead, each nation must focus on making domestic economic policies that are truly advantageous to respective domestic stakeholders and developing sustainable strategic long-term plans for the future.
Currently, the Chinese government is making great efforts to further increase its people's living standards while the U.S. government is hoping to create more jobs and to reduce income gaps between its rich and poor. Both governments share the same economic goals. China also pledges to continue to embrace open trade and promote trade; such government initiative serves the shared prosperity between U.S. and China.
Forty-five years ago, during his ice-breaking visit to China, President Richard Nixon asked three straightforward questions: What do they (China) want? What do we (U.S.) want? And what do we both want?
Today, the same set of questions requires new answers. After decades of mutual understanding and fast growing people-to-people exchanges between the two largest economies, it is true that American and Chinese businesses compete in the global markets. But it is also true that each side has a huge stake in the other's economic prosperity. We have every reason to believe that the U.S.-China trade and economic relationships will continue to improve and to expand for the sake of the shared interests of the two great nations.
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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