China-US Trade Imbalance: Who Should Make more Effort?
By Huo Jianguo
The first round of the China-US comprehensive economic dialogue began in Washington DC, USA on 19th July, attended by a delegation led by China’s vice premier Wang Yang. The meeting has attracted considerable attention from many observers in both countries.
During the dialogue, both sides discussed the issues of China-US trade and investment, the 100-day and the one-year economic plan for cooperation, global economy and governance, macro-economic policies, and the financial and agriculture sectors.
Since the meeting between the Chinese and US presidents at Mar-a-Lago, the two countries have been involved in the intense work of implementing the 100-day economic plan. By 16th July, the measures of the plan had been gradually put into practice.
However, in the context of the stresses and disputes between China and the US, the 100-day economic plan is far from sufficient to fully tackle the problems they face. But it is showed that both sides’ will to solve them. This has strengthened confidence in the development of the China-US economic relationship.
This new round of economic dialogue is more targeted on the design and arrangements for comprehensive cooperation between China and the US.
Difference of opinion on trade imbalance
The US has tended to see the trade imbalance with China as a major problem in the China-US relationship. Public opinion in the US criticizes the trade imbalance between the two countries, and sees china’s steel exports as a particular problem.
China believes that one of the most serious discrepancies between China and US lies in the striking difference in their understanding and interpretation of the issue of trade imbalance. This difference makes it very difficult to reach an agreement on addressing the issue.
China regards the essence of the imbalance as a manifestation of the differences between the two countries’ economic structures and their phases of economic development, which accords with rules of international trade and market competition. Thus it is irrational and unrealistic to tackle the problem solely by expanding imports from the US and reducing exports to the US.
China and the US should adopt an objective attitude and engage in deeper negotiations over the trade imbalance issue, so as to adopt consistent tactics and reach an agreement through joint efforts that will gradually ease the tension or achieve a basic bilateral trade balance. This would be a realistic and effective approach to achieving mutual benefits for the economic development of both sides.
The key to the issue is to take account of the overall trade balance and the long-term interests of both sides.
The attitude of both sides to cooperation on this issue can set the foundations for mutually beneficial win-win cooperation between China and the US, and also make proactive contribution to the balanced development of the global economy.
Mutual benefit and win-win
During the meeting，both sides agreed to maintain constructive cooperation to narrow the trade deficit. Also the two countries discussed the one-year economic plan for cooperation, consented to cooperate in the fields of macro-economy, finance, trade, investment, global economic governance and others, and committee to striving for early results.
Objectively, China and the US can realize mutually beneficial win-win cooperation in several fields.
- China can moderately expand the import of agricultural products from US. At the same time we expect the US to ease restrictions over the import of certain agricultural products from China. The agreement on beef and chicken in the 100-day economic plan is a good example of a win-win outcome.
- We expect the US to ease restrictions over the export of high-tech products to China soon, so that China can continue to expand the import of high-tech products from the US.
- China can increase investment in the US to ease the trade imbalance, but the US needs to resume negotiations on the BIT (Bilateral Investment Treaty) with China, and ratify the accord as soon as possible.
- China is open to the idea of expanding imports of petroleum, natural gas and other energy products from the US. This kind of cooperation will encourage an overall balance of interests on both sides under the framework of mutual benefit and win-win.
- China will also consider speeding up the opening of its service industries, and welcome US investors to China.
Steel overcapacity is a global issue
The US is concerned about the influence of steel production on trade. They cannot simply attribute this to China’s steel overcapacity.
The US has taken a series of anti-dumping and anti-subsidy measures towards Chinese steel products in recent years, and the duties imposed by way of these two measures have been increasing dramatically – some now exceed 500% – which has led to a breakdown in the export of steel products to the US. These measures are extreme by the standards of world trade history, and are typical of measures designed for trade protectionism. The US needs to recognize that steel overcapacity is a global issue.
Dogged by the global economic recession, steel capacity in all major countries is experiencing difficulties. However, adjustments made to tackle overcapacity should not result in excessive trade restrictions.
The steel products exported from China are in a different quality class compared with those from western countries. While China exports a proportion of its products, it also needs to import a certain quantity of high-end products from the US.
If both sides begin to place restrictions on imports, it will only intensify the difficulties the steel industry is now facing, and there will be a spillover impact on employment.
To solve this problem, it is necessary to arrange global negotiations over the production and trade of steel products, to explore effective means to reduce capacity, and to maintain a trade balance.
The recent launch of a US national security probe on steel imports has already sounded an alarm bell to the countries involved. We believe that if the US adopts measures that go against WTO rules, certain countries will group together to resist its protectionism so as to defend the authority of the WTO and the legal rights of those involved.
Even though, certain consensus on the understanding of the issues remains unchanged, both sides had made an open dialogue and had listened to each other’s opinions and reasons. From the same staring point of settling issues， and on the basis of giving consideration on the pursuits and the acceptance of both sides, a good start has attained, laying a good foundation for the healthy and stable development of China-US trade and investment.
(China Society for World Trade Organization Studies, vice-president Huo Jianguo)