Sino-US trade based on complementarity

The US Trade Representative’s office released its annual trade barriers report on Friday, listing trade irritants in 63 countries and regions. In the China section, it accused China of pursuing a wide range of industrial policies and providing financial support to industries such as steel and aluminum, which have led to excess capacity in China and large volume of exports that have distorted global markets. The report also criticized China for imposing cybersecurity restrictions with a long-term goal of replacing foreign information and communications technology products and services with locally produced ones.

The US runs bigger trade deficit with China than with other countries, a situation which is not caused by China’s trade policies. The huge trade volume between China and the US reflects their mutual need and the complementarity. The huge flow of trade is mostly generated through voluntary market activities rather than by the efforts of the two governments. China has never set trade barriers to US products in violation of the WTO rules nor has it deliberately guided trade surplus with the US. China’s Internet management involves some necessary political principles, but these principles treat Chinese and foreign Internet companies equally. As long as US Internet companies observe Chinese laws, they could do business and develop in China.

The reality is that the US is already a hightech nation and its competitiveness lies in its high-tech products. But the US is reluctant to export its cutting-edge technologies to China, which has considerably undermined its advantages in trade. Sino-US trade engagements are a natural process which benefit both.

Hundreds of thousands of young Chinese students go to the US every year to pursue their studies. The quality of education in the US has irresistible attraction to many Chinese middle-class families. Although it has drawn much criticism in China, the trend continues, with more Chinese students going to the US for study, creating a huge education deficit with the US. Can China and the US work together on the government level to solve this problem?

If the US wants to greatly narrow the trade deficit with its trade partners by imposing political pressure, this is not a wise tactic. The current condition of international trade is shaped by various market factors independent of government involvement and the role of politics in it is limited. If the US hopes to increase exports, it should cater to the need of external markets, launch structural reform on the supply side and produce more products favored by consumers of other countries. The Chinese economy is highly market-oriented. If the US wants the Chinese market to contribute to the US economic prosperity, it can only do so through market means.