On July 20, The United States threatened to impose tariffs on all US$500 billion worth of Chinese imports. Earlier on July 6, the U.S. announced to impose 25 percent tariffs on US$34 billion worth of Chinese goods. On July 11, the U.S. further escalated by announcing a tariff list of Chinese products worth US$200 billion. Where the trade war waged by the U.S. against China is heading to? The world is wondering. China’s position regarding the trade war willfully ignited by the U.S. remains firm and clear. China doesn’t want a trade war, but is not afraid of and will fight one when necessary. Threats and intimidation will never work on China. China is capable of and confident in safeguarding the interests of the Chinese people. The U.S. should be advised to remain calm and handle the relevant issue with a rational attitude. Trade bullying will only backfire.
The main criticism that the U.S. makes against China centers around the trade deficit America runs with China. However, when it comes to trade, imbalance does not mean unfairness as the flow of trade is determined by the market. China has never deliberately sought a trade surplus. Having a trade deficit does not mean the U.S. is “losing”. It is an erroneous accusation that China has been long engaging in unfair trade practices which have benefited itself and shortchanged the United States.
Let me take the daily Apple here. When an iPhone assembled in China arrives in the U.S., it is recorded as an import at its factory cost of about US$240, which is added to the U.S.-China trade deficit by the U.S. side. China, however, earns just about US$8.46, or 3.6 percent of the total factory cost or less than 1 percent of the value in terms of retail price in the transaction, while most of the profits go straight to the coffers of Apple Inc. and high-tech enterprises of other countries on relevant industrial supply chains.
Or take the Made-in-China suit. When China exports a US$450 worth of business suit to the U.S., China gets 5 percent of the profit while the U.S. gets 84 percent.
Can these figures be cited to prove that the U.S. is shortchanged in its trade deals with China and China is playing a zero-sum game here with the U.S.?
The main reasons for the deficits do not lie on the Chinese side. Generally, they result from how resources are allocated in an interconnected global economy and are natural reflections of the global value chain and international division of labour. In particular, there are certain factors inevitably lead to trade deficits. The savings rate in the U.S. remains too low while consumption rate remains too high. The U.S. dollar serves as the international reserve currency. And, the U. S. government imposes restrictions on high-tech exports to China.
The United States has further accused China of so-called “theft of intellectual property” and “forced technology transfer,” charges which are neither fair nor objective.
The Chinese government has codified a robust IPR protection legal system, including setting up IPR courts and dedicated tribunals that enhance the dominant role of the judiciary in IPR protection. Meanwhile, in 2017 the intellectual property royalties paid by China reached US$28.6 billion, a 15-fold increase from 2001 when it joined the WTO, running a deficit of more than US$20 billion. US$7.13 billion went to the US with a yearly increase of 14 percent. More importantly, China is emerging as a leader in global innovation and brand-building. According to the latest Global Innovation Index (GII) released by the WIPO, China has been the only mid-income economy on the list of the world’s 20 most innovative economies. The growth miracle of China’s economic development has never been achieved by stealing from anyone, and never will be.
The accusation of “forced technology transfer” is also pointless and groundless. China does not have laws and policies that compel foreign companies to transfer technology to Chinese companies when investing in China. When it comes to technology or any other cooperation between Chinese and foreign companies, it is purely a matter of voluntary contracts. One is willing to buy, and the other is willing to sell, which is mutually beneficial.
In the world of today, all countries have been economically integrated into the global industrial and value chain to varying degrees. 40 percent of China’s commodity exports and two thirds of its high-tech exports are manufactured by foreign enterprises in China. We are all interdependent and our interests are closely intertwined. Clinging to the outdated zero-sum game mindset and willfully provoking a trade war will harm the interests of not only the two parties involved but also all other parties in the global industrial chain. It will produce no winners.
By launching a trade war not only with China, but also with the world, the United States is dragging the world economy into a treacherous zone. The trade war dampens the growth momentum of global trade. The trade war shakes everyone’s confidence in the world economy. The trade war jeopardizes the well-being of all mankind. Last but not least, initiating a trade war to serve domestic political needs and selfish interests is a typical act of unilateralism and zero-sum game. It marks a full-blown regression of international rules and global governance since the end of the Second World War, which, if unchecked, will cut so deep to the world economy that everybody should be alarmed by this. The U.S. is firing at the whole world as well as itself, and will only end up hurting itself and the world.
President of the European Council Donald Tusk, who just wrapped up the 20th China-EU Summit in Beijing, said in June that the rules-based international system is under threat, and to everyone’s surprise, the threat comes from no one but the U.S. who built up this system. Many prominent international economists including President Adam Posen of the US Peterson Institute for International Economics also publicly said that today’s US government constitutes the biggest threat to the current world economic order.
China has never imposed unilateral measures on others, nor has it acted against the basics of the WTO, namely free and open trade, non-discrimination, tariff constraints and special and differential treatment, and China has not the slightest intention of doing these things in the future.
Openness brings progress. China will continue to press ahead with trade reform and opening up its markets, and work with the rest of the world to uphold free trade and the multilateral trading system. President Xi Jinping announced four major initiatives to further open the Chinese market at the Boao Forum for Asia Annual Conference in April. Subsequently, the Chinese government introduced specific measures, including drastically reducing tariffs on a range of imported goods. Tariffs on 1,500 types of consumer goods have been lowered considerably. The import tariff on automobiles has been cut from 25 percent to 15 percent. The revised negative list for foreign investment released late June substantially eased market access restrictions for foreign investors. In November, China will host the ever first China International Import Expo in Shanghai. China will only become more and more open.
China is willing to work together with Nigeria to further open our respective markets to each other, uphold the multilateral trading system and oppose acts of unilateralism, in a bid to safeguard the common interests of human development and prosperity.
– Dr Pingjian is Ambassador of China to Nigeria
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