By Niu Xinchun
The China-US trade imbalance spiced up with US Congressmen
threatening punitive measures against Chinese goods and the US
administration taking piracy complaints to the WTO may give heat,
if not light, to the second session of the Sino-American Strategic
Economic Dialogue opening today in Washington.
The Chinese delegation, led by Vice-Premier Wu Yi, and the US
delegation, led by Treasury Secretary Henry Paulson, are expected
to discuss a range of major issues affecting China-US economic
relations.
Top Chinese and US leaders attach great importance to this
regular dialogue. It involves the highest ranking economic
officials and covers the widest range of issues, though both sides
remain cautious in expressing expectations.
US President George W. Bush telephoned Chinese President Hu
Jintao on May 9 to discuss issues relating to the upcoming
meeting.
Vice-Premier Wu Yi made clear China's viewpoints on the dialogue
in an article in the May 17 issue of the Wall Street Journal. Wu
defines the Sino-American Strategic Economic Dialogue as an
important channel through which economic issues of strategic
importance are discussed and pressing economic questions
resolved.
The Sino-American Strategic Economic Dialogue ought to settle
three major questions or at least reach some consensus. When the
two sides share more common ground on the issues, disputes will be
more easily settled. If disagreements on these major issues grow,
resolution will be more difficult.
The first issue involves the two countries' reaching a basic
common understanding on the overall evaluation of the Sino-American
economic relationship.
A wide gap exists between the two sides' assessment of their
current economic ties.
China emphasizes that the bilateral economic relations are on the
whole healthy and positive.
The United States, though stressing that the bilateral economic
ties facilitate the development of both economies, sees more
negative factors than positive ones. In the eyes of some US
leaders, the bilateral economic ties are on the whole unhealthy and
fraught with risks.
In the assessment of bilateral trade, China emphasizes the
encouraging growth in trade volume. Chinese statistics show that
volume increased 106 fold between 1979, when bilateral diplomatic
ties were normalized, and 2006, an average 18.9 percent annual
increase.
The statistics also indicate that China has become the United
States' fourth largest export market since China officially became
a member of the World Trade Organization in late 2001. The United
States' China trade has been increasing 3.7 times faster than its
overall average worldwide.
However, what the US side emphasizes is the growing trade
imbalance. Although US exports to China in the decade between 1997
and 2006 rose from US$12.5 billion to US$51.6 billion, US figures
show that imports from China in that period outstripped exports
roughly 5:1.
As a result, US deficits sustained from its trade with China
shot up from around US$50 billion to US$235.4 billion. Last year,
the general trade deficit of the US stood at US$765.3 billion, of
which one-third stemmed from its China trade. This year's US trade
imbalance with China is expected to exceed last year's.
The Chinese side emphasizes that China's trade with the US helps
create many more new US jobs and lower prices for US consumers. In
the past decade, commodities exported from China have saved an
estimated US$600 billion for US consumers.
Statistics show that the jobs of 4 million to 8 million
Americans are closely connected to Chinese-US trade. This includes
many jobs created by retailers selling Chinese goods.
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A report by the Economic Policy Institute, a US government think
tank, however, maintains that US imports from China in 1997, for
example, led to the disappearance of 736,000 US jobs while US
exports to China created merely 138,000 jobs for Americans that
year.
Second, the Chinese and US sides have different conceptions of
the root causes of the economic disputes.
The Chinese side holds that the US' trade deficits with China
should be attributed to global influences and the United States'
own China-trade policy.
In her article in the Wall Street Journal, Wu Yi states that the
trade deficits are caused by a host of factors connected to
economic globalization. They include differences in labor force and
investment distribution.
At the same time, the US is restricted by its own trade policy
towards China. The US, as the global leader in science and
technology, should relax its control of high-tech exports to China.
Reversing the United States' dwindling share in China's high-tech
market would constitute an effective way to reduce US trade
deficits with China.
A Chinese official said on the eve of the strategic economic
dialogue that the Chinese side will continue to appeal to
Washington to remove restrictions on the export of some US
high-tech products to China and that the US acknowledge China's
market-economy status.
The US side attributes the trade imbalance to China's
artificially keeping down the value of the renminbi and subsidizing
exports.
Third, China and the US have different conceptions of the
so-called politicization of economic issues.
Leaders of both countries acknowledge that politicizing the
economic disputes is extremely dangerous. However they define the
issue differently.
President Bush has time and again warned that the colossal trade
deficits have become a political issue in the United States and
some US lawmakers are pushing for punitive measures against China.
The request from the US Congress that China be punished is
stonewalled by the White House, although the administration is
under increasing pressure from Capitol Hill.
Vice-Premier Wu Yi points out that some Americans are trying to
magnify the Sino-American trade imbalances, even trumpeting
protectionism. In her view, there should be no place for attempts
at politicizing trade issues.
The US interprets "politics" as using political power to resolve
economic problems, in this case the US Congress wields its
legislative power. The Chinese interpretation of the word is that
some elements in the United States are making use of economic
problems for political gains.
Problems must first be analyzed before they can be resolved. The
right prescription can be found only after the root causes of the
problems are clearly defined. The three primary issues actually
reflect qualitative analysis of the Sino-American economic
relationship.
Only after consensus is reached on these issues can a formula be
found acceptable to both sides. With so much at stake, the
Sino-American Strategic Economic Dialogue is obligated to promote
mutual understanding and bring about consensus on these basic
issues.
The author is a researcher with the Institute of
International Contemporary Relations.
(China Daily May 22, 2007)
