Washington using trade war to thwart China’s rapid development
US President Donald Trump escalated the trade war with China on July 6, forcing Beijing to adopt retaliatory measures and triggering a trade confrontation between the two biggest economies in the world. Earlier, Canada hit back at US protectionism with the strongest measures. Canadian Prime Minister Justin Trudeau said he had “no choice” but to announce countermeasures against the US tariffs. If a trade war between Europe and the US is eventually unavoidable, almost every country needs to come up with countermeasures against Trump’s administration.
According to the White House, as guarantor of the global trade system, the US has been offering big trading opportunities, market and benefits to other countries since WWII, especially since the 21st century. However, it has been unfairly taken advantage of by its trading partners, and hence had to launch the Section 301 investigation to punish those who didn’t abide by the trade rules. The logic does not hold water.
As is known to all, the US is the main beneficiary of free trade and also the main architect and protector of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO). Economist David Ricardo and John Myanard Keynes, both of whom were strong advocates of free trade, have profound influence on the US.
The Bretton Woods system, established in 1944 and led by the US, drafted major rules and routines of global economy, finance and trade. Although the system itself collapsed, the ideal remains. Its major feature includes expanding the production and trade of goods and service based on generally recognized principles, forming an integrated multilateral trading system, and gradually eliminating tariff and non-tariff trade barriers. Its purpose is to dispel trade discrimination, meet the needs of countries and promote global economic growth by reducing trading partners’ transaction cost based on bilateral or multilateral free trade zones.
The US has been playing the role of an organizer and one which propels reforms, winning tangible and intangible benefits.
Those familiar with economic history would know that Western capitalist countries have been grabbing countless wealth under the system of free trade since the Industrial Revolution. The Trump administration still believes that the global trading system should benefit the US most, otherwise it would be unfair.
However, Washington’s wish couldn’t totally influence the global trading system in the real world. China was on the fringes of the global value chain before 2001 and yet it joined the WTO and gradually adapted to global trade rules. By improving its technology and service, China has boosted export competitiveness and quickly became an important participant in the value chain.
China’s achievements have obviously made the US restless.
During my discussions with US businessmen and politicians, it comes out that although they were not sure about the result of the China-US trade dispute, most of them believe that China’s development has outrun the US’ expectations and that both the global wealth’s distribution and asset pricing center are likely to transfer from the US to China. Besides, China is promoting the redrafting of regional and global trade rules, which is hard for Washington to accept. The US will have to take unconventional measures to hinder China’s export competitiveness and cut down its major value chain, winning back its dominance in the new round of global wealth allocation by the policy of containment. It seems that the purpose of the US wantonly trampling on global trade rules through unconventional measures such as trade war is to achieve its phased national goal. However, deep down, its strategic purpose is to make sure that it has an upper hand over its major rival by enhancing its competitiveness in high-end industries, business rules and institutionalized hegemony.