China-US trade war: Zero-sum game, a loss-loss confrontation

Special Correspondent
The United States of America’s administration wielded tariffs as a “big stick” and coerced other countries into accepting its demands in the name of “America First”.

The US has launched investigations under the long-unused Sections 201 and 232 against its main trading partners, causing disruption to the global economy against the trend of multilateralism.

Since August, 2017, it has launched a unilateral investigation under Section 301, accusing China of not being able to properly protect intellectual property and forcing foreign enterprises to transfer their technologies, which is totally unfounded. Though China is willing to resolve trade disputes with the US through dialogue and consultation, which is conducive to the interests and expectations from both sides, the US administration, however, has once and again breached the consensus reached in previous consultations, and imposed additional tariffs on Chinese goods exported to the US, upgrading the trade friction to a degree in no one’s favour.

Neither side shall be the winner in the prolonged trade friction. International landscape today is no longer governed by zero-sum game. On the contrary, in a world where all countries’ interests are more intertwined than ever before, any party’s loss will impact the global economy as a whole. Given the large volume of intermediary goods and components from other countries in Chinese end-products exported to the US, US tariff hikes will hurt all the multinationals that work with Chinese companies, US companies included.

Tariffs hike is not a solution but a weapon, a weapon not to enemies, but to partners. Researchers found that, to avoid loss of customers, some enterprises have to afford part of the tariffs themselves, some others will do their best to reduce tariffs by way of entrepôt and processing trade or readjust their global supply chains at the expense of optimal resource allocation. Ultimately, customers and enterprises in both countries will suffer, slowing down bilateral trade and investment as a result since profits are shrinking.

According to the research by the US National Retail Federation, the 25 percent additional tariffs the US imposed on furniture alone will cost the US consumer an additional US$4,6 billion per year.

According to a joint report by the US Chamber of Commerce and the Rhodium Group in March 2019, due to the impact of China-US trade friction, US GDP in 2019 and the following four years could decrease by US$64-91 billion per year, about 0,3-0,5 percent of its total GDP. The International Monetary Fund also lowered its projection of 2019 world economic growth down to 3,3 percent from the 2018 estimate of 3,6 percent in its World Economic Outlook report published in April 2019, suggesting an even sagging world economy caused by the trade fiction.

So why is the US administration determined to launch the trade war at the cost of a possible recession of its own economy and pose threat to a looming world economy? Is it true that an emerging China will endanger US economic interests or world trade order? Economy and trade between China and US is not the main cause for China’s growth, nor is it the cause weakening US’s national power, but a driver for a balanced world economy instead.

Eric Fishwick, CLSA’s head of economic research, said that the China-US tariff battle isn’t just about Americans buying too many Chinese goods. This is really because China is the next geo-economic and geopolitical rival to the US, and the US is uncomfortable with that. China US trade war is not simply a war in trade or economical volume, but a war in political strength and influence.

Looking back at US geopolitical strategic foreign policy, containmentism and cold war mentality remains as the features till today. The US policy-makers hold the view that only by keeping finding a rival and defeating it, could the US stay in absolute advantage and security till it reaches hegemony, its final goal.

The rival might not only mean a “hard power” giant in either military or economy, but also indicates a “soft power” threat who doesn’t buy in US value. Being a superpower for decades in post-Cold War era, US holds that its national interests is at risk if they fail to curb a potential hegemony, namely China, before it becomes too strong.

The pursuit of the ultimate power is uncompromising, thus a zero-sum game is inevitable. In its new National Security Strategy issued in December 2017, it addresses key challenges and trends that affect US world status, including revisionist powers, such as China, that use technology, propaganda, and coercion to shape a world antithetical to US interests and values, and to succeed in geopolitical competition, the US will protect its national security innovation base from intellectual property plagiarism and unfair innovation exploiting, to ensure its leading role in those fields. Uncertainty and insecurity by seeing a growing China touched the nerves of US, and they decided to resort to a trade war as the first step ahead.

With such a mindset, the US neglects the close partnership and complementarity in two-way trade and investment, while regards all China’s development as dangerous, arbitrarily interfering in normal economic activities. The current US administration is owing its domestic issues to the unbalanced trade with other countries, internationalising and politicising economic problems.

China became the primary target as the biggest source of US trade deficit. Trying to solve domestic problems and bring the manufacturing sector back home, the US adopted technological and industrial development policies whereas making unwarranted accusations against other countries’ industrial policies, attacking China’s “Made in China 2025” plan, accusing China of “stealing” IPR and violating world trade order, curbing China’s high-tech development by imposing sanctions on Chinese private owned technology companies, and using protectionist measures to unilaterally claim normal contractual technological cooperation as forced technology transfer.

To guard its own interests, the US adopted unilateralism in the name of America First. By using proactive expansive measures the US assorted to “long-arm jurisdiction” based on its domestic law, asserting influence on transnational corporations or even containing other countries’ economic development by impeding the free flow of goods, services and capital.

The US, as the biggest economy in the world, however, refused to shoulder its due responsibility in international community. It denies the trend of globalisation and defies multilateral mechanisms by withdrawing from JCPOA, the Paris Agreement on climate change, UNESCO and UNHRC. It is because the US deems that a fair and cooperative multilateralised world will constrain it from realising its selfish and aggressive aim, which is to keep its position as the one and only global leader.

History has witnessed the vicissitudes of the changing world. China is not the only target the US attempted to contain. In the 1980s, the US administration launched 24 investigations under the auspices of Section 301 towards Japan, holding Japan responsible for the unbalanced bilateral trade, coercing the Japanese government to accept almost all demands and forcing Japan into signing the Plazza Accord, which led to the Japanese asset price bubble of the late 1980s.

Today’s China is not Japan in the 1980s, but a dynamic economy second biggest in the world with a large market, a low degree of dependence on export, and a strong momentum of technological innovation. China does not want a trade war, but it is not afraid of one and it will fight one if necessary.

Actually speaking, the trade war ignited by the US also brought with it opportunities to China, in that China saw clearly of its own shortages in innovation and high-tech development, and realised the importance of a development path of self-independence.

The trade war comes when the world is at a crossroad, with one direction leading to the pursuit of hegemony, the other leading to cooperation for common development. No matter how far China develops, it will never seek hegemony.

China will never pursue development at the expense of others’ interests and China’s development does not pose a threat to any other country. China is a firm believer of multilateralism and a strong promoter and defender of globalisation. As the biggest developing country, China is devoted to its own development and is selflessly sharing its experience with other developing countries.

The Belt and Road Initiative initiated by China will continuously serve as an open platform to enhance connectivity between countries for a more prosperous world, and China’s gate for international cooperation will only open even wider, never shall it be deterred by any forms of deterrence.

A Chinese proverb goes that “a just cause enjoys abundant support, while an unjust cause finds little”. Dialogue and consultation is the only correct choice for China and the US, and win-win cooperation is the only path to a better future. When the US and China work together, they can be the anchor of world stability and the propeller of world peace.

China doesn’t believe in the Thucydides Trap, nor did China be a self-fulfilling prophecy through a peaceful development path. China and the US should have confidence in each other and stick to cooperation on mutual interests.

It is hoped that the US, in the spirit of no conflict or confrontation, mutual respect, and win-win cooperation, pull in the same direction with China to strengthen trade and economic cooperation, work together on a new way of harmonious coexistence, healthy competition and cooperative win-win results, without being disturbed by disputes or differences, jointly advancing the sound development of China-US relations. — Chinese Embassy in Zimbabwe.

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