China Center for International Economic Exchanges

Chen Wenling: To be the Ballast Stone and Booster for World Peace and Stability
Date:Aug 23,2018    Source:CCIEE

The future development of the US-China relationship will affect not only the development of China and the United States but also the peace, stability and development of the world as a whole.

The handling of the US-China relations, especially the economic and trade frictions will affect the economic development of the two countries and even the world economy. If the US government continues its wrong practices and strategies, the short-term economic recovery and prosperity it might achieve will eventually become a flash in the pan because the US will lose its credibility and international influence. According to the principles proposed by the General Secretary Xi Jinping, we should adhere to mutual respect, treat each other equally, and achieve mutual benefit and win-win results so as to establish a new type of major-power relationship. China and the US should become the ballast stone and booster for world peace and stability.

The slogan of “America First” and protectionism advocated by the US will inevitably isolate itself from the world economy.

The “End of History” of the American political philosopher Francis Fukuyama, represents the historical view of free-market liberal democracy. He believes that the end of the Cold War means the end of the ideological battle, liberalism would become the world’s final form of human government and no other ideology can compete with it. In 2016, however, the rise of the anti-constructivism trend has posed a serious challenge to liberalism. In particular, Trump’s victory in the US presidential election has had a great impact on this linear historical view.

There are 101 countries in the world trading with the United States and China is the second largest trading partner of the United States. Among the 34 countries that have a trade surplus with the United States, China accounts for more than 40% of the total surplus. The essence of international trade is matching market demand and supply by exchanging goods between different countries and so, we must have rules, order and institutions in place for international trade. The trade problems between China and the United States, between the United States and other countries is an inevitable result of the long-term cross-border marketization, rather than the so-called loss of the United States. However, the current US government has amplified this issue and triggered a global trade war.

The current US government has changed Obamas’ rule-based “fair trade” to an interest-based one. The laws used by the United States to develop foreign trade policies are primarily domestic legislation, including the Section 201 (Prevention of Trade Damage), Section 232 (National Security), Section 301, and Super 301 (Unfair Trade and Authorized Presidential Retaliation Measures), Section 337 (Intellectual Property protection) and so on. The 301 Investigation Report used by the United States to impose tariffs on China’s goods is based on Section 301 of the US Trade Act 1974. According to this clause, the United States can investigate trade practices of other countries that it considers “unfair” and the president will decide whether to take retaliatory measures such as raising tariffs, restricting imports, and suspending relevant agreements. In 1988, the US Congress amended Section 301by adding the “Super 301 Clause” and “Special 301 Clause.” The “Super 301 Clause” is primarily for countries that restrict US products and services from entering their markets. The “Special 301 Clause” is for countries that do not provide adequate protection for intellectual property, which means that the United States has imposed sanctions on China not just because of the trade deficit, but to contain China’s development of high-tech industries.

China has used its wisdom and maintained strategic patience, endurance and strength to guide a healthy development of the US-China relations and resolve the economic and trade frictions through negotiations. The United States, nonetheless, has ignored the principles of the World Trade Organization (WTO) and disregarded China’s good faith. It used domestic laws and regulations as a weapon to fight against China and other countries. It has broken its promise again and again. The bullying practices of the United States has led to opposition from China and other countries. Apart from that, the United States has also triggered new social contradictions domestically. For example, 107 US industry organizations have opposed the unilateral sanctions and trade wars; 1,100 economists expressed their opposition in a joint letter to Trump, and the Congress passed a resolution restricting the president’s authority on trade sanctions. On July 2, Fukuyama wrote on Japan’s newspaper “Yomiuri Shimbun”, saying that the trade war of the US has greatly reduced its possibility of cooperation with China. The relationship deterioration between the US and its allies has seriously undermined the leadership of the US in the liberal and democratic international order, and made the world politics extremely unstable. The “American first” politics will only isolate the US from the rest of the world.

The unreasonable trade protection, strikes, and blackmail adopted by the US have escalated trade frictions and brought enormous risks and uncertainties to the world.

The current US government has adopted very tough approaches, such as the traditional mercantilism and strong trade protectionism. Moreover, it promotes extreme national self-interest. Trump believes that the US has done everything to help other countries get rich, but the infrastructure in the US is creaking, the wealth, strength and confidence of the US have faded away, factories have been shut down and relocated, millions of American workers are left behind, the wealth of the middle class has been distributed to the rest of the world. Therefore, the US has to get everything back by following two simple principles: buying American goods and hiring Americans only!

Comparing with the previous governments, the current US government has taken more irrational, unconventional and unusual trade sanctions. After levying 25% high tariff on $25 billion Chinese goods, it then increased the tariff from 10 % to 25% on another $200 billion Chinese goods, plus $300 billion is pending. The United States imposes trade sanctions on countries such as Iran and prohibits all countries from trading with them. It has withdrawn from the Trans-Pacific Partnership Agreement (TPP), the UNESCO, the UN Human Rights Organization, the Paris Agreement, the Iranian nuclear agreement, and even claims to withdraw from the World Trade Organization. Furthermore, it has restarted the North American Free Trade Agreement negotiations and the US-South Korea FTA negotiations. All these withdrawals did not follow necessary procedures and the purpose is to discharge its responsibility, lift restrictions, and use these withdrawals as a bargaining chip in exchange for maximum benefit. Nowadays, many countries, including America’s allies started to realize the true intention of the US and oppose the United States’ violation of historical laws, basic economic laws and the laws governing the development of human society.

The acts of the United States are very different from the traditional trade protectionism, and it might lead to a fight in the world market, which happened in the 18 and 19 century. The high level of institutionalized democracy achieved by the US through more than 200 years of hard work has been compromised by today’s US government as it tends to disregard the entire system and rely on its own small ruling team to make decisions, which is quite dangerous and harmful.

The extreme trade protectionism and blackmail of the US hurt not only the order of international trade, but also the interests of American consumers, sales industry, and producers. It has affected the employment directly or indirectly. The irrational behavior of the government has triggered strong opposition within the American society. On August 20th, the first day of the 6-day public hearings on the proposed 25% tariff on $200 billion of Chinese goods, organized by the Office of the United States Trade Representative (USTR), only 3 of the 61 speakers agreed, and the rest were against it.

The various excuses used by the United States to launch trade wars are being debunked and cast aside. The US will no longer be able to take advantage of the rest of the world. In recent years, the United States has abandoned economic globalization, trade facilitation and liberalization, refused to fulfill its obligation to provide public goods to the rest of the world, and did not comply with international agreements and rules.

For example, more countries have realized that the trade deficit magnified by the United States in the past is a false proposition. The international monetary system adopted the Bretton Woods system after the Second World War and as a result, the US dollar could be treated like gold in exchange for goods from all over the world. In a sense, the US dollar is the debt of the US central bank, which means the exchanged goods are the goods “borrowed” by the United States, and the net goods exchanged in US dollar are the deficit. After the collapse of the Bretton Woods system in the early 1970s, the Jamaican system became an international monetary system: the exchange rates of various countries did not peg to each other, and gold could no longer be used as a base currency. However, the United States can still print dollar and use it to trade for goods with various countries to enjoy high welfare at low prices because the US dollar was seen as a quasi-international currency. Under normal circumstance, the United Kingdom, France, Germany and other countries have a real-time settlement when they do business with the United States, but this is not the case for China and some other countries. Under the Bretton Woods system, printing dollar is like printing gold. If the dollar is to be converted into British pound, it needs to deal with both pounds and gold. Under the Jamaican system, however, the dollar does not need to connect itself with British pound and gold. In other words, the United States can directly print the currencies of other countries and hijack their right to print money. When the US dollar is used as a settlement currency and has a monopolistic position, the trade deficit is actually the net income of the United States and thus, imposing a high taxation on the so-called trade deficit is a way of obtaining more ill-gotten wealth by trade fraud.

The three major international institutions and international order were established by the United States after the Second World War and they have been recognized worldwide. Currently, the United States is trying to break the international order and rules. As the article “How America Lost Its Mind” published in the Atlantic says, “from the start, our ultra-individualism was attached to epic dreams, sometimes epic fantasies—every American one of God’s chosen people building a custom-made utopia, all of us free to reinvent ourselves by imagination and will. In America nowadays, those more exciting parts of the Enlightenment idea have swamped the sober, rational, empirical parts.”

China and the US should cherish the progress made in the US-China relations over the past 40 years since the establishment of their diplomatic relations; cherish the friendship built by the Chinese and American people through years of efforts; and cherish the cooperation and integration of the Chinese and American economy, culture and other aspects.

The relations between China and the US have made tremendous progress since they established diplomatic relations almost 40 years ago. Chinese and American people should work hard to maintain the healthy development of US-China relations. The economies of the two countries have been highly integrated and the cultures have influenced each other. In the course of China’s 40 years of reform and opening up, many practices are based on the study of the experience of developed markets such as the United States, combined with China actual conditions. The United States has also gained significant benefits from China’s development. For example, China has become the fastest growing market for US exports. If everything goes well, China will become the largest trading partner, the largest manufacturing partner, and the largest energy partner and the largest market of the US. Short-sighted and irrational behaviors destroy not only the current trade order, but also affect the entire world. We should protect the hard-won US-China relations like protecting our eyes and life, and cherish the earned mutual understanding and trust.

As a country with a history of 5,000 years of civilization, China has not only provided 1.39 billion people with food, clothing, and housing, but will also lead the people to socialist modernization and build a socialist modernization power. Stepping into the 21st century, the great rejuvenation of the Chinese nation is unstoppable. The United States will maintain its position as the world’s number one for a long period of time. In history, the West has learned from China’s imperial examination system and other ideas. Today, China’s reform also drew experience from the Western market economy. Human exploration of social systems is endless.

Whether the US can maintain its international status depends on the United States itself. Whether China can achieve its own strategic goals also depends on itself. There is still a big gap between China and some developed countries such as the United States in many aspects, but China will never succumb to unjustified sanctions and blackmail from any country or anyone. In order to create a better future, China and the US have to properly handle the US-China relations, solve economic and trade frictions, avoid other conflicts, and following the principles of non-conflict, non-confrontation, mutual respect, and win-win cooperation. The United States needs China’s support and cooperation to maintain its current international status. The US government must respect and obey international rules. If the US continues its trade protection and arrogance, it will make things worse.

The strategic competition between China and the United States is a long-term, systematic competition. In the long run, the frequent cultural exchanges between the Chinese and American people will bring the two countries closer in all aspects, and help the two nations to maintain a healthy development of the US-China relations. The foundation of the US-China relations ultimately lies in the people of both countries. Therefore, China and the US should adhere to the principles of mutual benefit, win-win and cooperation so as to progress together. The two countries are changing each other while changing themselves. The common goal of China and the US is to create a new international relationship which consists of mutual consultation, contribution and shared benefits.

 

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