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More China-US trade cooperation is the right way forward

By CHEN WEIHUA | China Daily USA | Updated: 2018-01-13 02:02

There have been plenty of talks lately that the China-US trade and investment relationship will deteriorate in 2018 as US President Donald Trump, surrounded by some trade hawks, plans to impose more punitive and restrictive measures on China.

Based on the talks, a trade war between the world's two largest economies seems again simmering. But if such a trade war or a major tit-for-tat retaliation truly happened, it will surely hurt both countries and make both countries less great. There won't be any winner in such a mutually assured destructive game.

People tend to forget how interdependent China and the US have become. The tumbling of the US bond market on Wednesday after the false news report that China, the largest foreign holder of US Treasury bonds, may reduce or halt its purchase of the bonds is just one reminder. The Chinese decision a few months ago to ban imports of foreign waste has resulted in the piling of recyclable waste in many US cities.

For the same reason, AT&T's dropping its deal this week to sell Huawei's smartphones under pressure from US government and lawmakers on national security ground has a chilling effect on Chinese investors looking to come to the US.

It's not the first such case that a Chinese company has been rejected on increasingly broad and vague national security ground. That's why some Chinese start to say that their government should impose restrictions on Apple and other companies which have access to data of Chinese citizens.

The decisions to be made later this month by the US government regarding imports of Chinese solar panels, washing machines, steel and aluminum will trigger strong response from China if those measures inflict huge costs on Chinese companies.

The US has been excessively abusing its protectionist trade remedy regime not only against China, but many other countries. That is why Canada announced this week that it has filed an expansive complaint with the World Trade Organization, charging the US of violating international trade rules, in particular how the US investigates products for subsidies and below-cost sales.

Many complaints expressed by the Trump administration don't make sense to economists. For example, the bilateral trade deficit with China has more to do with US fiscal policy, rather than a trade policy with China. If the US cuts its imports from China, it has to pay more to buy elsewhere.

Thinking that Americans will instead make those products at home is simply ignoring Econ 101. Michael Froman, the former US Trade Representative, recently dismissed the possibility that iPhones will be made in the US because they will cost $3,000 each.

Picking Chinese steel as a target is largely political. China exports very little, about 1 million tons, of steel to the US, and it does not make into the Top 10 sources for US steel imports while US was ranked only 25th Chinese steel export market in 2016. Canada, South Korea, Japan and Germany export far more steel to the US but they are exempted simply because they are US military allies.

There is no doubt that China and the US are experiencing increasing trade and investment frictions amid their expanding relationship. But resorting to unilateral punitive measures and sanctions is not the right way forward. It will squander many opportunities for win-win cooperation that could and should be expanded between the two countries.

Indeed, when Trump goes to Davos later this month for the World Economic Forum, he will have a hard time explaining his America First trade policy to the world he is at odds with.

The author is deputy editor of China Daily USA. chenweihua@chinadailyusa.com

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