TheauthorisaprofessorattheSchoolofInternationalStudiesatPekingUniversityandanon-residentseniorfellowattheCenterforChinaandGlobalization,aprivatethinktankinBeijingWorkersassemblecarsatafactoryofSGMW,ajointventurebetweentwoChineseandoneU.Spany,inLiuzhou,GuangxiZhuangAutonomousRegionXINHUA
ImportedbeefproductsfromtheUnitedStatesforsaleinasupermarketinShanghaiXINHUA
TheDonaldTrumpadministrationisfightingatradewarwiththeworld,inparticularChina.ThepresidenthasslappedtariffsonChinesegoods,railingabouttheChina-U.S.tradedeficit.
Lastyear,Chinaexportedgoodsandservicesworthroughly$500billiontotheUnitedStates,whiletheUnitedStatessentbackexportsworth$130billion.Thepresidentcallsthat$370-billiondeficitthievery,butmosteconomistsdon’tseetheharmitdoestotheUnitedStates.
TheU.S.peopleneedtohearthetruthaboutU.S.-Chinatrade,insteadofTrump’schargesofbadfaith.Despitewhatthepresidentsays,tradebetweenthetwonationsisfreeandfair,andthe10followingpointsdemonstratewhy.
1.AlthoughChina,asadevelopingcountry,hashighertariffsinplaceonU.S.goodsthantheUnitedStatesdoesonthosefromChina,itstariffsarestilllowerthanmanyotherdevelopingcountries,includingIndia.SinceitsaccessiontotheWorldTradeOrganization(WTO)in2001,Chinahasconsistentlylowereditstradebarriers.IthasalsobeenthefastestgrowingmarketforU.S.exports,andU.S.exportersarenotstupid:Theyknowagooddealwhentheyseeone.Accordingtolastyear’sdatafromChina’sMinistryofCommerce,56percentofU.S.soybeans,26percentofBoeingairplanesand17percentofU.S.-madeautomobilesweresoldinChina.
2.AsforgoodscomingintotheUnitedStates,U.S.importersarenotstupideither.NooneisforcingthemtobuyChinesegoods.InexpensiveChineseimportshavehelpedtheU.S.middleclass,whichhasex-periencedslowincomegrowthforyears,tobuymorewiththesamewages.
3.Itisn’tChinesebarriersbutU.S.exportcontrolsthatlimiteconomicexchange.China’stradeadvantageliesinitscheaperlaborcosts,andtheU.S.advantageliesincapitalandland.ChinaexportslaborintensiveproductstotheUnitedStates,theUnitedStatesexportstechnologyandagriculturalproductstoChina.However,U.S.exportpolicyisstricterthanthoseofEurope,Germanyinparticular,andJapan,determiningwhatandhowmuchcanbeexported.Withoutexportrestrictionson20hi-techproductssuchasaircraftandaircraftengines,navigationsystems,lasersandfiberoptics,theU.S.-Chinatradedeficitwoulddecrease.
4.Thenumbersbehindtradedeficitscanbedeceiving.TakeApple’siPhoneforexample.WheniPhonesarriveintheUnitedStatesfromChinawheretheyareassembled,theirhighcostaddssignificantlytothetradeimbalanceinChina’sfavor.ButChineseworkersandfactoriesonlyreceive5percentofthevalueofaniPhone(mainlylaborcosts),whileApple’sdesign,brandandmarketingaccountfornearly60percentofitsvalue.Chinadoesn’tevenprovidepartsfortheiPhone,whichcomefromtheglobalsupplychainandthebenefitsofwhichgotothesuppliers,nottoChina.Byonecalculation,aniPhone’sestimatedfactorycost—$240—exaggeratesthevalueofChina’sexportstotheUnitedStatesbecauseChinakeepslessthan$9perphone.
5.WhenU.S.protectioniststalkaboutthetradedeficitwithChina,theydeliberatelyignoretheU.S.tradesurplusinservicesviasectorssuchastravel,education,banking,insuranceandroyaltypayments.AccordingtoChina’sstatistics,in2017,thatimbalancewasashighas$54.1billion,andithasrisensteeplyforadecade.
6.AnotherthingprotectionistsdeliberatelyignoreisthatthesalesofU.SpaniesinChinahavesurpassed$500billion.Thesefirmsaremakinghugeprofitsfromthefast-growingChinesemarket,andtheirsuccessaddstotheexportsofU.Sponentsandintellectualproperty(IP)rightstoChina.
7.AsforIP,TrumpconstantlyaccusesChinaofstealingU.S.technologyandcopyingitsgoods.AlthoughChinaestablishedIPprotectioncomparativelylate—inthe1990s—theselawsareworking.In2017,China’sexternalpaymentofIPfeesreached$28.6billion,15timesmorethanwhenitjoinedtheWTOin2001,withU.S.IPownersthebiggestbeneficiaries.
8.AccusingChinesefirmsofforcedtechnologytransfersisanotheroutdatedcharge.Nolawsorregulationscompelsuchtransfers;jointventuresarebasedondeal-by-dealnegotiationsandsomeU.SpaniesarewillingtotransfertechnologyforChinesemarketaccess.ThejointventuresofGeneralMotorsandFord,forexample,havemadethemtwoofthelargestautomobilemanufacturersinChina.
9.TrumpwantstocontainMadeinChina2025,astrategyaimedatmodernizingChineseindustriesandchargesChinawith“statecapitalism.”However,ChinesesubsidiesareinlinewithWTOregulationsandtheyareavailabletoforeign-fundedenterprisestoo.Moreover,theUnitedStatesengagesinsimilarprotectionismitself:SubsidiesanddefensespendinghavenurturedtheInternet,semiconductors,nuclearpowerplantsandmilitary-civilianspacetechnology.
10.China’stradepracticesarebroadlyincompliancewithWTOrulesand,liketheUnitedStates,ChinaissubjecttoabiennialWTOreview.Since2001,Chinahasbeenaccused40timesandtheUnitedStates80inWTOdisputes.WhenjudgmentsgoagainstChina,itcorrectsitscourse.TheUnitedStateshasobeyedtheWTOmuchlessoften.
Chinadoesn’twanttofightintheescalatingtradewarwagedbytheTrumpadministration,butitwilldefenditself.Atthesametime,itisreachingouttootherforeigninvestorstocounterbalanceU.S.actions,andtheUnitedStatesmayloseinvestmentopportunitiesiftheTrumpadministrationpersists.Thepresident’sactionsareevocativeofthe1930s,whenCongresspassedtheprotectionistSmoot-HawleyTariffAct.Theresultwasaworldwidetradeconflict,acurrencywarandfinallyWorldWarII.PeopleintheUnitedStatesshouldremembertheirhistoryandopposeTrump’stradewaragainstChina.
CopyeditedbyLaurenceCoultonCommentsto