“Pursuing protection is just like locking oneself in a dark room. While wind and rain may be kept outside, so are light and air.”
— Xi Jinping, Chinese president
During his campaign, President Donald Trump raised the specter of a trade war with China.
China is indeed a powerhouse, becoming the world’s largest producer and consumer of most global commodities, as well as the No. 1 exporter of goods in general.
This past week, at the World Economic Forum in Davos, Switzerland, Chinese President Xi Jinping tried to reduce tensions. Xi sounded like a champion of globalization, warning that, “No one will emerge as a winner in a trade war.”
Trump said repeatedly on the campaign trail that he might impose punitive tariffs on Chinese imports of 35 to 45 percent and label China a currency manipulator. Billionaire investor Wilbur Ross, Trump’s choice for commerce secretary, echoed Trump’s harsh rhetoric, calling China “the most protectionist major economy in the world” and vowing to level the playing field with China on trade, especially reducing its overcapacity in its steel industry.
On Dec. 8, the World Trade Organization cast Beijing as an abuser of open global markets. Specifically, it alleged that China provides subsidies to many of its state enterprises, allowing them to dump goods globally below their costs. According to the WTO, since China joined the organization in 2001, its exports in value terms have increased three-fold while the U.S.’ had declined by 30 percent.
China’s share of global goods exports is about 13 percent and the U.S.’ is approximately 9 percent.
Through November 2016, the U.S. had a trade deficit of $319 billion with China, according to a U.S. Census report. The U.S. imported $423 billion from China and America exported $104 billion to China. During this same period, the U.S.’ total trade deficit, which includes both goods and services, reached $408 billion.
Stated differently, on a stand-alone basis, our trade deficit in 2015 was $763 billion.
To allay tensions, a Chinese Commerce Ministry spokesman, Sun Jiwen, said his government was willing to work with the Trump administration to promote the healthy development of commercial ties, according to a Jan. 19 Reuters report. A Chinese Foreign Ministry spokeswoman, Hua Chunying, said any disputes should be resolved via constructive talks, to avoid any miscalculations.
But China was not content to just make soothing statements.
Lester Ross, head of the American Chamber of Commerce in China, said, “To our knowledge, China is already preparing measures in the event of actions by the Trump administration should they impose restrictions on trade and investment.” From 2000 to the present, Chinese investment in the U.S. has totaled approximately $109 billion, creating more than 100,000 jobs for Americans, providing plenty of potential leverage.
On a positive note, China has taken steps to improve its observance of intellectual property rights, long a subject of complaints. In November 2014, the Chinese government announced plans to open a series of intellectual property courts. In July 2016, Intellectual Asset Management reported a finding by the Santa Clara University of Law that foreign plaintiffs won 10 percent of the patent litigation cases and China won 70 percent of them.
On Nov. 10, Trump threatened to blow up the entire U.S.-China relationship by making continued American support for the “One China Policy” conditional on progress toward improving Chinese trade and currency practices. Chinese leaders can show flexibility on trade but they will fight before they lose their claim to Taiwan.
Trump needs to distance himself from anti-China hawks on his team, such as the new White House National Trade Council head Peter Navarro. In Navarro’s book, “The Coming China Wars,” he advocated trade sanctions against China for both economic and military reasons.
I embrace President Xi’s advocacy of “light and air” to moderate tensions between the world’s two largest economic superpowers. Furthermore, I believe that President Nixon’s reaching out to China in 1972 led to America’s greatest diplomatic victory since World War II.
Since then, while China has not become an ally, it no is longer an enemy. In this time of global tension, we need to forge a workable relationship with this super power.
The downside of a dispute between the world’s two largest economies has both trade and military implications that cannot be solved with 140-character Tweets.
Originally published in the Sarasota Herald-Tribune
