On June 2, the State Council Information Office issued a white paper on “China’s Position on China-US Economic and Trade Consultations” to introduce the basic situation of the China-US economic and trade consultations and clarified China’s position. The program of “China Interview” once again invited Chen Wenling, chief economist of China Center for International Economic Exchanges to talk about her views.
China.org.cn: Ms. Chen, thank you very much for doing this interview with us. Why did the State Council Information Office choose to issue the white paper on 2 June?
Chen Wenling: the white paper was issued at this point has a special meaning. First of all, the 11th round (China-US economic and trade) negotiation suffered a setback and we need to let the world know the reason for the setback, and who should be made responsible. Secondly, the G20 summit will be held soon. Before the commencement of the G20, it is necessary to show the US government and President Trump China’s bottom of line and the position of the Chinese government. China wants to tell the US government what our most important principles are in the China-US trade consultations.
Third, despite the opposition from the international community, the producers and consumers in the US, the US government continues to frantically impose extreme pressure on China and increase tariff. For example, a high tariff of 25% is imposed on $200 billion of China’s goods. On June 17, the US will launch an investigation into the $325 billion of Chinese exports. If the US ends the investigation by adding tariffs, that means the US would have imposed high tariffs on all goods exported by China to the US.
On 1 June, China proposed counter-measures by imposing the tariff on $60 billion of US goods. The tariff rate of some products have been increased to 25%, some are kept at 5%, while some other products have reached 15%-20%. As can be seen, trade friction is escalating because China is forced to fight back.
China wants to solve the problem through negotiations. However, the US has repeatedly gone back on its word during past negotiations. Now, the US is trying to contain China by exerting extreme pressure on China. Under such circumstances, the Chinese government has issued a white paper to warn the US: there is no way out if you choose to continue the wrong path. You will not be able to achieve your goal, and the US will not be great again.
China.org.cn: According to the White Paper, the US has broken its promises three times in the China-US economic and trade consultations and should be held accountable for the setbacks of the negotiations. How do you view the performance of the US in the China-US economic and trade consultations?
Chen Wenling: the US went back on its word three times, this is not only my opinion, but also the opinion of the world’s major countries, companies, economists, and politicians. At a Forum held in South Korea on 31st May, I participated in the sub-forum discussing the China-US issues. Throughout the discussion, everyone believes that the trade war initiated by the US is untenable, unreasonable, and the responsibility lies with the US.
The white paper explains in great details how exactly did the US break its promises. In the entire trade negotiation, especially in the trade negotiations with China, the US has lost its credibility.
The US launched trade sanctions against China in early February (2018). In the following March, we started trade negotiations but the agreement reached was quickly overthrown by the US. On 19th May, the two sides reached a consensus that they would not impose high tariffs on each other. On 29th May, unfortunately, the US once again did not keep its promise and continued to impose high tariffs on $50 billion of Chinese goods. On 30th May, China fought back by adding tariff on a list of US goods.
Between the 10th and 11th round of negotiations, the US and China were just about to finalize the agreement of the negotiations, the US went back on its word for the third time. The Chinese government has shown great sincerity and made compromise on many issues. China is willing to make a concession if the requests of the US are in line with the direction of China’s reform and opening-up, and the need for the structural reform. China has also launched several major initiatives to deepen reform and opening-up. In fact, many things are not in the negotiations but China still did it because it is part of China’s blueprint for future development. If China wants to become a socialist modernization power, we must follow this path.
Therefore, the two countries can reach an agreement if they can find similarity in their appeals. Some of the appeals can be agreed after negotiations but the bottom of line can never be crossed. I feel that the US is very impatient and too eager to reach an unequal agreement based on its own interests. The US has broken its promises three times and is liable for the setbacks of the trade consultations.
China’s sincerity is regarded by the US as being weak. The concessions and compromises made by China made the US think that it can get more from China. China’s generosity is considered by the US to be China’s fear. This kind of judgment is completely wrong. The US has made a strategic shift in its China strategies and has begun to block it comprehensively in terms of trade, manufacturing, high-tech, finance, education, and even exchanges among think tank personnel.
At the Jeju Forum in Korea, a senior researcher at the Peterson Institute said that the wrong actions of the US are based on its erroneous worldview. I feel that it is not only based on its wrong worldview, but also its misjudgments of the entire international situation, China’s development, China’s counter-capacity, the will of the Chinese people, China’s future development and its ability to compete with the US.
The US believes that the rules of the world are the rules of the US and it imposes trade tariffs on anyone it wants. Trade tariff is used as an economic weapon by the US to compete with or block other countries, but this weapon is not very useful now. In the past traditional form of trade, the entire process of manufacturing is completed in one single country. Nowadays, however, the global industrial chain, supply chain, service chain, and value chain have been formed and the economic division of labor and transactions are getting increasingly interconnected. Under such circumstances, no one can isolate itself from the rest of the world. According to the latest research results of the IMF (International Monetary Fund), and many research institutes in the US, the high tariffs imposed by the US will eventually be borne by the US importers. As a result, the US importers will transfer the costs to manufacturers, markets, and consumers in the US.
The US wants to suppress China, impose high tariffs on Chinese goods and destroy Chinese companies. In the end, it shot itself in the foot, which is painful. If the US goes on like this, the situation may become worse and it may not be able to stand up.
The US economy has shown a downward trend since May, including economic growth, trade with related countries, and retail market sales. Furthermore, the recognition of the US dollar and debt around the world is also declining. Many institutions predict that the US will have a financial crisis between 2019 and 2020, and some even believe that an economic crisis will erupt.
Therefore, the US has only itself to blame. It replaces international rules with the laws and rules of its own; ignores the rules and basic principles of international trade; uses traditional method, theory and sanctions to solve modern trade problems. This is simply not going to work because this will only harm the world economy.