Several issues that need to be further clarified about Sino-US trade frictions (Part I)
Chinese Embassy in the Philippines, Qing Yuan (The Philippine Star) - June 21, 2019 - 12:00am

Over the past year, the US government has unilaterally provoked and escalated economic and trade frictions with China, bringing negative impact on the bilateral economic and trade relations and the development of the global economy. During this rare dispute, voices from home and abroad have made a lot of statements, making the cause and facts clearer. China-US economic and trade friction involves a lot of issues and it needs further clarification. The Chinese believe in truth and are not afraid of clarification.

1. Is the Sino-US trade relationship a ‘zero-sum game’?

Some people in the US stirred up economic and trade friction with China for the one straightforward reason: they believed the US has lost profit during Sino-US trade, while China has benefited greatly from it, making its development a threat to the US’ economic security, and even national security. This view, which is full of Cold War bias, reflects the hegemony and ‘zero-sum game’ thinking. Is Sino-US economic and trade relations a ‘zero-sum’ or win-win game? The answer is clear, both in theory and in practice.

During international economic cooperation, the trade relations are based on mutual beneficial exchange, rather than a ‘zero-sum game’ which one side benefits and the other loses. International trade can lead to the optimized allocation of global resources, the common development of all economies involved and the common progress of human society. The history of international trade and the trade between China and the US has proved that such practice is effective, and such practical experience has long been the basic principle of international economic study. Since the establishment of diplomatic relations between the two countries, bilateral trade in goods increased 252-fold, from less than $2.5 billion to $633.5 billion between 1979 and 2018.

In the past 40 years, two-way investment has grown from almost zero to over $160 billion, making the two countries a vital investment partner for each other. The history of Sino-US economic and trade relations proves that both countries have benefited in industrial development and optimization. The trade relations created a situation in which both parties won rather than one in which China progressed and the US lost out.

International trade as a whole can enhance the interest of participating parties, while the distribution of profit may vary from country to country. The international theory for value proves that in the global market, the value of commodity is decided by the necessary labor hours. While the exchange is made based on the international value system, the party with higher production efficiency will gain more advantage and gain more profit.

The exchanges are constantly repeated between countries at the larger scale, but the profits of both sides may not necessarily the same. It goes without saying that US companies gain more profits through the international value chain since they are more efficient in production. In foreign trade, there was a saying that China needs to export hundreds of millions of shirts to equal the value of a Boeing airplane from the US. Such examples, shocking as they may seem, are reflections of the laws of trade.

For a long time, the US has had a monopoly position in currency, technology, market and even industry standards, thus it has gained profits higher than the normal level. US families and companies have also therefore benefited greatly from the valuable products from developing countries such as China. Of course, China has also benefited from Sino-US economic and trade through the hard work of its people, not because of ripping off the benefit from the US. At the same time, China is at the middle and lower end while the US is positioned higher in the global value chain. China has paid a greater price during the trade.

So why do some people in the US insist that the US has lost profit while ignoring the facts? The root lies in the hegemony and the ‘zero-sum game’ thinking. After World War II, the US has surpassed its European counterparts and became the center of the capitalistic world system, and after the Cold War, it further became the world’s unprecedented sole superpower. The hegemonic thinking was rooted deeply in their mindset. From the hegemonistic point of view, China’s gain in any aspect was regarded as damage to the US’ benefit, and China’s progress in any field was seen as a threat to the US. In their opinion, it would only be fair and safe if China is locked in the dependent position to the US and at the lower end of the value chain. Thus, the US can forever be in a monopoly position with huge profits guaranteed. Once there, it raises the possibility of fair competition between the US and China, even through it’s fair and mutually beneficial, it will fail to meet its hegemonic goal.

Under such ridiculous zero-sum game thinking, how could it be possible to build a normal Sino-US trade relationship?

2. Is US’ insistence of ‘fair trade’ really fair?

Some people in the US accused China of adopting an unfair and unequal trade policy, which has led to the US’s trade deficit with China. They tried to grab fair trade as a way to keep the moral high ground in public opinion. However, what is ‘fair trade’? Fairness is a matter of history. In international trade, due to the difference in the stages of development, specific conditions and interests from different countries, in order to make trade happen smoothly, the international community has formed trade rules through negotiations on an equal footing. That is to say, what is fair or not is not something one particular country can define. And the rules should not be altered to meet one particular country’s interest. Rather, they should be made through equal negotiation.

To achieve fair trade, countries need to uphold the principle of mutual benefits and equal talks while respecting the spirit of contracts.

The ‘fair trade’ some people in the US emphasized is not based on the international ruling but the premise of ‘America First’ in order to secure its own interest. The so-called ‘equal’ opening-up means that every country needs to comply the exact same standard — tariff and the industrial market entry  permit — as the US. Such ‘absolutely fair’ only seems fair on the surface. It ignores the developing countries’ right to develop, and is highly unfair.

The ‘equal’ opening stressed by some people in the US is no more than rhetorical. Throughout the history of the US, some in the US have always applied double standards on the issue of openness: when the country needs capital, they will use protectionism and interfere in other countries; while they own an obvious competitive edge, they demand other countries to open their market with no condition and push free trade for its own benefit. When its competitiveness gradually loses as some developing country catches up, they again deploy trade protectionism tactics.

On one hand, the US uses free trade as a tool to take advantages of its monopoly capital from the countries of latter development in order to secure its monopoly position in the market, technology and so on. On the other hand, they adopt protectionism and hegemonic measures to suppress other countries — whether it’s state-owned or private. They proclaim such economic hegemony logic as the orthodox ideology and treat the advantages of competitors as “heresy.” Friedrich List, a representative of the German Historical School, mocked such tricks as being like the use of a ladder: when someone has reached the peak, he would gradually kick the ladder away in case others follow him. It is the exact essence of the double standard some people in the US are applying.

For a long time, there has been serious unfairness in international trade, mainly caused by the US and other developed countries, which use their monopolistic power in science and technology to gain resource, labor and products from developing countries at a low cost. While the US is gaining huge profits through unfair international trade, developing countries have suffered greatly. Yet some people in the US are complaining about the unfairness in the trade — is this justice or hegemony?

Looking back, some in the US have put ‘unfair’ hats on competitors at various times. When the EU’s power was on the rise, it was seen as an unfair competitor; the same happened to Japan, and now China is the unfair competitor for the US. It is worth noting that some people in the US are defining ‘fairness’ and ‘unfairness’ totally based on their own profits. It is highly unilateral and self-interested. ‘Unfair trade’ has become a universal tool for some in the US to promote hegemonism.

The rules of the World Trade Organization were made upon the mutual agreement of all participating economies. Whenever friction happens, it should be resolved within the framework of the WTO, which is a fundamental principle for safeguarding international economic and trade relations. The US, as one of the founding members of the WTO, should comply with such a fundamental principle. However, some people in the US refuse to do so. Instead, it ignores the WTO to implement its trade bullying measures and provoke trade friction. Such behavior will never bring fair trade. If they really have the sincerity to solve trade friction, they should think if the trade fairness they address is really fair, take down the self-made ‘fair-trade’ fence and seek practical solutions with other countries through negotiation on equal footing.

3. Will unilateralism work?

Holding the mindset of ‘America First,’ some people in the US who worship unilateralism put domestic law above international law, and use unilateral measures to suppress other countries and provoke economic and trade frictions. On the other hand, they publicly stand against globalization and ignore the multilateral rules and the multilateral trading system by withdrawing from the Joint Comprehensive Plan of Action or Iran Nuclear Deal, the Paris Agreement on climate change, UNESCO, and the United Nations Human Rights Council, etc… Their unilateralist behaviors and the slogan of ‘America First’ have become a set of inherently self-consistent logic.

On the surface, the promotion of unilateralism seems identical to anti-globalization and isolationism. However, this is only on one side. More importantly, some people in the United States pursue unilateralism because multilateralism of equal cooperation does not conform to their strategy of ‘America First’ and intention of hegemonic dominance. Therefore, they are aggressively making unilateral actions and suppressing other countries in international competitions in order to keep ‘America First’ and prevent other countries from catching up. John  Bolton, a national security adviser to President Trump, has said that, “if I were doing the Security Council today, I’d have one permanent member, the United States, because that’s the real reflection of the distribution of power in the world.”

The statement is a real reflection of US intention of hegemonic dominance of the world.

In today’s world, the science and technology revolution and productivity growth have deepened the international division of labor. The socialization of production has become more extensive and deeper than ever before. Economic globalization has also grown to be an irresistible trend, which has accelerated the globalization of trade, investment, and the mobility of factors of productions. The world is seeing increasing cooperation and communications, and competition among various countries. No country can dominate in the world market when rejecting competition or seeking monopoly. That is an objective law of economics that no one can break.

With increasing interactions and dependence among countries and the rise of emerging markets and developing countries, global powers have undergone great changes. The multi-polarization of the world and the democratization of international relations have become irreversible trends of the times. The idea of monopolizing international affairs has lagged behind the times, and such actions are doomed to fail. As to global communications, countries should uphold the principle of equal talks and decisions shall be made after negotiation. Any country that prioritizes its benefits, breaks international laws, and suppresses other countries is also doomed to fail.

Pursuing unilateralism and hegemony will not work. This is the basic consensus of the international community and many Americans are aware of it. In the beginning of this century, a famous American international political scholar predicted that on some day, the US will seem invincible, but it’s never like the same one day after. The rise of other countries, the eroding of US power, and its unilateral approach of internationalism will make it a short-lived superpower. Riding the tide of economic globalization, a country will see greater opportunities of development only by adhering to openness and cooperation.

4.Will it be a solution by pursuing technological hegemony?

Science and technology are the crystallization of human civilization and the commonwealth of human society. However, some Americans will prefer to pursue a technological monopoly. To maintain its hegemonic position in the economic and technological fields, the US government has long imposed high-tech export controls on China.

During the trade friction, the US government has abused the state power to block Chinese tech companies on the grounds of national security, suppress the development of China’s high-tech industries and squeeze its high-tech products market. This attempt at technological hegemony will in no way succeed.

Science and technology are primary productive forces. The scientific and technological strength largely determines the economic strength and international competitiveness of a country, the changes in the balance of political and economic power in the world, and the future and destiny of all nations. As science and technology play such an important role, the hegemonic thinking, monopoly practices and double standards of some people in the US have been vividly demonstrated in the field.

In an essay, geopolitical expert Adam Garrie portrays the mentality of some Americans. Pressing on with such a zero-sum mentality, China is criticized when it allegedly innovates too little, while China is equally criticized and subjected to protectionist tariffs when it innovates too much. This attitude of hypocrisy on the part of the US belies a narrow and selfish mentality that does not allow for the phenomenon of shared success on the win-win model.

Some Americans’ purpose is nothing more than to permanently exclude China from the forefront of technological innovation and let China accept the exploitation of US monopolistic capital.

However, this is only the wishful thinking of hegemonists. In the era of economic globalization, countries worldwide have become more interconnected and interdependent in terms of technological activities. The advancement of science and technology has largely become the result of the participation of all nations. Especially buoyed by rapid development of information network technology, the exchanges and communication of science and technology have reached an unprecedented level in terms of the scope, speed and scale.

As economic globalization has picked up speed, the spread of science and technology has gradually intensified. As countries worldwide have conducted frequent exchange in the field of technology, transnational joint research has become common today, and the global application of technological innovation will be the future.

Promoting technological innovation and advancement is the legitimate pursuit of every country. Enhanced cooperation and interactions in technologies is a key driving force for the advancement of human society.

In order to better meet the people’s growing needs for a better life and to benefit people at home and abroad, more efforts are needed to make a big push to promote technological innovation and advancement, enhance technological cooperation and oppose technological hegemony. This is our mission and right.

Through years of rigorous efforts, marked progress has been made in the technological development of China, which has attracted the attention of the international community. These technological achievements are neither stolen nor obtained via forced technology transfer. Instead, the achievement is the result of self-reliance and hard work of thousands of technologists as well as the international technological cooperation based on mutual benefits.

China’s vibrant technological innovation and world-renowned achievements show the use of despicable means to suppress the so-called ‘competitors’ does not guarantee its technological leadership in the globe.

5. Will the maximum pressure imposed on China take effect?

Using maximum pressure to achieve its own goals is a trick frequently used by some in the US for international negotiations, calling it “the art of trading.” Its main feature is using the means of multi-faceted attack and unlimited requirements while at the same time gaming against its opponent in multiple issues that cross different fields, and then resorting to selected compromising moves, thus to achieve the goals of core interests, to maintain hegemony through power, and to defeat the opponent through bullying and deception. Some people in the US think that maximum pressure is extremely powerful, and decidedly useful when dealing with China.

Is the maximum pressure measure really effective? In dealing with some small and weak countries, the US government has arbitrarily waved the big stick of sanctions and relied on its powerfulness and means of maximum pressure to impose its own interests above other countries. Some countries, shadowed by the powerful economic and political pressures from the US, either because of weaker overall strength or because of long-term dependence on the US, have been forced by the US to make compromises in accordance with the requirements of the US in negotiations, and they have to quiet down and let the US get what it wants. This is a situation that happens often and inevitably leads some people in the US to form the opinion that all countries, including China, will be afraid of the maximum pressure strategy and will certainly yield and surrender under their powerful pressure.

However, some people in the US have misjudged the situation, found the wrong target, and miscalculated. Cooperation must be based on principles. Consultation must be based on equality, mutual benefit, and sincerity. China will never compromise with regard to major principles. China is growing into a big and powerful country and is not a ‘lamb’ to be slaughtered. Some in the US are trying to suppress China to surrender, with the bullying means of extreme pressure, and their deeds are doomed to be in vain. Their attempts to isolate China will in turn isolate themselves, and such maximum pressure aiming at China will inevitably cause great resentment and strong opposition from the Chinese people. In the history of the US, there has been several times when it regretted and reflected who should be responsible for “losing China.” I want to ask these people in the US today, can you shoulder such responsibilities?

Mutual respect, equality and mutual benefit are the basic norms of modern international relations. However, the maximum pressure strategy adopted by some in the US has severely violated such basic norms, causing great damage to the world trade rules and international order. Historical experience has shown that it will only undermine the relations of mutual trust and cooperation, and cost the historical opportunity of cooperation, if the way to reach an agreement is through means of extreme pressure. Some people in the US have adopted the means of imposing extreme pressure on China, which is not only unhelpful to solve the problem, but will also further damage the interests of all parties.

Maximum pressure looks to be aggressive, but in fact it is ferocious in appearance but feeble in essence. The unilateralism, protectionism and trade hegemonism pursued by the US have been causing greater and greater damage to itself internationally and domestically, and have gradually become an important dynamic differentiating American political forces. The maximum pressure will only make the world more aware of the nature of US hegemonism, and make the US more isolated in the international community. (To be continued)

 

 

 

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