Since March, Sino-US trade conflicts have been intense, which has shrouded relations and the world economy with uncertain risks. In reality, both China and the United States will lose out in five key aspects. Shifting But if they the thinking methods, the joint efforts of both sides may also be able to create a "miracle" in the history of world trade.
I.By launching a trade war, the US will lose five major potential benefits.
First, China and the US will lose a broad space for future cooperation. According to a quantitative study conducted by the Peterson Institute in 2013, which is objective and feasible, if China and the US cooperate to promote BIT (FTA), up to $50 billion trade volume of imports and exports and 4.8 million jobs it will be created. If the two countries continue to struggle with the deficit in traditional trade and refuse to look further, the closer cooperation and integration between China and the US might be illusive.
Second, China and the US will lose the huge benefits brought about by the labor division of the global industrial chain. Restraining China by the US 301 investigation, the credit chain connecting the global industry will be cut off, and the industrial chain, supply chain and value chain will be broken subsequently.
As a result, the global division of labor, cooperation and trade, which were originally products of market selection, and the gains from market behaviors of countries under these mechanisms, will be lost. This will not only affect China and the US, but also affect the labor division of other countries in the chain.
Third, it will make the world lose a historical opportunity for economic recovery and warming-up, whose recovery has started. This year, 75 percent of the world's economies are on the rise, indicating that the world has entered a track of transition from normal to rapid economic development. The uncertainty of Sino-US trade issue will inevitably challenge the world economy recovery.
In accordance with the research by relevant institutions, if the Sino-US trade conflict cannot be solved, its impact will spread to the whole world, causing great decrease in world trade. This is not an alarmist, because the trade volume of the two countries accounts for nearly 25 percent of the world's total. Once Sino-US trade problems become acuter, it will be a disaster for the global economy.
Fourth, the international order and rules formed over the years will be deprived of authority, leading to chaos internationally. It can be said that the harmony and disputes of the Sino-US relations have a direct impact on the international community. At present, the WTO is in the most difficult moment in history. Some countries are changing multilateralism for unilateralism and replacing international rules with domestic rules, which worries many ambassadors to the WTO.
The replacement of multilateralism and WTO rules with unilateralism by the US may pose great challenges to the two countries and even to the world order. Since 1974, 125 trade sanctions against 35 countries were provoked by the US by using 301 clause. After the establishment of the WTO in 1995, the organization objected to the US practice and believed that this had violated WTO rules. Therefore, the US has stopped using Section 301 since 1995.
This time, by reusing the 301 clause on China, the US extended sanctions to industries such as manufacturing, high-tech industries and the civil-military integration development. This action of using unilateralism to replace multilateralism and WTO rules will give great challenges to the world economy, order and rules.
Fifth, most importantly, the US will lose China’s huge market dividend. China's market is developing rapidly. In 2017, the size of China's market has been equal to that of the US market. With current development speed, the Chinese market will increase at a rate of 13 percent per year, and soon become the world's largest market. At the same time, China’s imports will increase by $10 trillion in the next five years. The Sino-US trade war will make the US to lose China’s huge market dividend.
II. China and the US can create new miracle from four aspects.
Trade conflicts are harmful in all ways. Therefore, if the two countries can cooperate in trade, investment and other aspects more closely, the US will share China’s market dividend and also got more investment opportunity. In order to resolve the Sino-US trade conflict, both sides must adjust their thinking methods. Currently, the attitude change of the US is essential in term of resolving the Sino-US trade conflict. There are four aspects in which China and the US can create new miracle.
First, loosen US exports of high-tech products. With this measure, China can increase imports by $100 billion. In 2017, China's chip imports were $260 billion, of which $87.5 billion are from the US. However, at present, the US is imposing strict control over the export of high-tech products to China. If related products are not restrained any more, it will not be difficult for China to import $100 billion more.
Second, jointly promote the digital economy. The two countries can make joint efforts on promoting the digital economy including international e-commerce trade and open data circulation. In 2017, the total of the cross-border e-commerce in the US was 11.6 trillion yuan ($1.7 trillion), and that of China was 4.6 trillion yuan. If related cooperation can be boosted, China can increase imports by at least $100 billion.
Third, strengthen cooperation related to the Belt and Road Initiative. Cooperation between the two countries in infrastructure investment under the Belt and Road framework and joint developing of third-party markets should be fastened. In particular, intellectual and high-tech service companies in the US can play the role of risk assessment on major projects in the Belt and Road Initiative so that they can not only develop the markets alongside the “Belt and Road”, but also obtain huge interests.
Fourth, promote the China-US FTA. The Sino-US FTA has not yet entered the agenda. If the China-US FTA is launched, according to the research of the Peterson Institute, the two sides can increase trade volume by $500 billion.
In summary, if the US can change its mentality, the deficit problem will be be easily reduced, and bilateral trade will have greater development.
Chen Wenling is chief economist of the China Center for International Economic Exchanges.The author contributed this article to China Watch exclusively. The views expressed do not necessarily reflect those of China Watch.
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Since March, Sino-US trade conflicts have been intense, which has shrouded relations and the world economy with uncertain risks. In reality, both China and the United States will lose out in five key aspects. Shifting But if they the thinking methods, the joint efforts of both sides may also be able to create a "miracle" in the history of world trade.
I.By launching a trade war, the US will lose five major potential benefits.
First, China and the US will lose a broad space for future cooperation. According to a quantitative study conducted by the Peterson Institute in 2013, which is objective and feasible, if China and the US cooperate to promote BIT (FTA), up to $50 billion trade volume of imports and exports and 4.8 million jobs it will be created. If the two countries continue to struggle with the deficit in traditional trade and refuse to look further, the closer cooperation and integration between China and the US might be illusive.
Second, China and the US will lose the huge benefits brought about by the labor division of the global industrial chain. Restraining China by the US 301 investigation, the credit chain connecting the global industry will be cut off, and the industrial chain, supply chain and value chain will be broken subsequently.
As a result, the global division of labor, cooperation and trade, which were originally products of market selection, and the gains from market behaviors of countries under these mechanisms, will be lost. This will not only affect China and the US, but also affect the labor division of other countries in the chain.
Third, it will make the world lose a historical opportunity for economic recovery and warming-up, whose recovery has started. This year, 75 percent of the world's economies are on the rise, indicating that the world has entered a track of transition from normal to rapid economic development. The uncertainty of Sino-US trade issue will inevitably challenge the world economy recovery.
In accordance with the research by relevant institutions, if the Sino-US trade conflict cannot be solved, its impact will spread to the whole world, causing great decrease in world trade. This is not an alarmist, because the trade volume of the two countries accounts for nearly 25 percent of the world's total. Once Sino-US trade problems become acuter, it will be a disaster for the global economy.
Fourth, the international order and rules formed over the years will be deprived of authority, leading to chaos internationally. It can be said that the harmony and disputes of the Sino-US relations have a direct impact on the international community. At present, the WTO is in the most difficult moment in history. Some countries are changing multilateralism for unilateralism and replacing international rules with domestic rules, which worries many ambassadors to the WTO.
The replacement of multilateralism and WTO rules with unilateralism by the US may pose great challenges to the two countries and even to the world order. Since 1974, 125 trade sanctions against 35 countries were provoked by the US by using 301 clause. After the establishment of the WTO in 1995, the organization objected to the US practice and believed that this had violated WTO rules. Therefore, the US has stopped using Section 301 since 1995.
