Pro­tec­tion­ism will only hurt Sino-US ties

China Daily (USA) - - VIEWS -

At the eighth China-US Strate­gic and Eco­nomic Di­a­logue in Beijing in June, a dis­pute over steel trade be­came a very thorny issue. China is now the big­gest steel pro­ducer and ex­porter in the world, with its crude steel pro­duc­tion ca­pac­ity be­ing 1.13 bil­lion tons, which ac­counts for nearly half of the world’s to­tal. US Un­der Sec­re­tary of Trea­sury Nathan Sheets al­leged China’s ex­cess steel ca­pac­ity was hav­ing a huge im­pact on the United States, Europe and other mar­kets. And US Sec­re­tary of Com­merce Penny Pritzker has levied an as­ton­ish­ingly high tar­iff of 522.2 per­cent on Chi­nese steel.

The US ac­cu­sa­tion is un­fair, be­cause China’s 4 tril­lion yuan ($601 bil­lion at cur­rent rates) after the global fi­nan­cial cri­sis boosted the growth of in­dus­tries such as steel, ce­ment and elec­trolytic alu­minum, and helped it con­trib­ute up to 50 per­cent to global eco­nomic growth from 2009 to 2011.

Slug­gish global de­mand has ag­gra­vated the ex­cess steel ca­pac­ity prob­lem de­spite China mak­ing tremen­dous ef­forts to re­duce its steel pro­duc­tion— for ex­am­ple, its steel out­put fell by 90 mil­lion tons last year. And since more than half of China’s steel pro­duc­ers are pri­vate com­pa­nies, it can­not just tell them to cut their out­puts. To re­duce steel pro­duc­tion, it has to im­ple­ment stricter eco-norms and for­mu­late sup­port­ive fis­cal poli­cies to deal with the mass lay­offs of work­ers.

The dis­pute over steel trade ac­tu­ally re­flects the grow­ing trade pro­tec­tion­ist ten­dency of the US. An Amer­i­can In­sti­tute for Eco­nomic Re­search re­port sug­gests that im­ports from China took away 2 mil­lion to 2.4 mil­lion job op­por­tu­ni­ties in the US from 1999 to 2011, ac­count­ing for about 40 per­cent of the 5.6 mil­lion job losses in man­u­fac­tur­ing.

Be­sides, Repub­li­can pres­i­den­tial can­di­date Don­ald Trump says that, if elected, he would levy a tar­iff of 45 per­cent on Chi­nese prod­ucts. Demo­cratic pres­i­den­tial nom­i­neeHil­lary Clin­ton too has crit­i­cized China for its “un­fair” trade prac­tices.

The fact is, “made in China” prod­ucts have hugely ben­e­fited Amer­i­cans over the past decade and more. A re­search by the Fed­eral Re­serve Bank of San Francisco shows about 55 cents of ev­ery dol­lar spent by Amer­i­cans on Chi­nese prod­ucts go to Amer­i­cans in­volved in ship­ping and sales of the prod­ucts. Many “made in China” prod­ucts are ac­tu­ally as­sem­bled from parts im­ported from the US. As such, puni­tive tar­iffs im­posed by the US on Chi­nese steel prod­ucts may please Amer­i­can steel­mak­ers, but they will also in­crease the costs of US com­pa­nies that use Chi­nese steel. When Chi­nese com­pa­nies cut their steel out­puts, they will re­duce im­ports from the US of high-priced coal, cru­cial for steel­mak­ing, which will have a huge im­pact on Amer­i­can coal com­pa­nies.

More­over, US pro­tec­tion­ist mea­sures have al­most al­ways failed to bear the ex­pected re­sults. Data from theMin­istry of Com­merce show that in 2015, Sino-US trade was worth$560 bil­lion, mean­ing trade is the back­bone of China-US eco­nomic re­la­tions.

The two sides there­fore need to adopt a smarter ap­proach to ad­dress their trade fric­tions. In par­tic­u­lar, the US needs to ease its ex­port con­trols over China and al­low it to buy more of its high­tech prod­ucts. The US also needs to fa­cil­i­tate di­rect in­vest­ment by Chi­nese com­pa­nies in the US, be­cause it will help cre­ate more jobs for Amer­i­cans.

And given the enor­mous re­spon­si­bil­ity of China and the US in pro­mot­ing the global econ­omy, they need to show greater po­lit­i­cal re­solve to shun trade pro­tec­tion­ism, and work to­gether to up­hold an open and in­clu­sive in­ter­na­tional trade regime to boost global eco­nomic growth and main­tain last­ing peace among coun­tries.

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