[CGTN] Think tank: Trade data doesn’t justify Trump’s accusation
2018年7月26日
Wang Huiyao, president of the Center of China and Globalization(CCG) think tank /CCG Photo
US President Donald Trump cites his nation’s gaping trade deficit with China as one reason to raise tariffs on Chinese goods. He insists a trade war would reduce that deficit.
Well… The deficit is true. According to data from the US Commerce Department, the US-China trade deficit peaked at 375.2 billion US dollars in 2017.
However, it certainly doesn’t justify Trump’s trade war and his accusation of China hurting the US economy. The whole world is so interlinked and intertwined by the global value chain today, even goods manufactured in China are assembled with parts from all over the world. If you look at the value added trade data, which is the trade value stripped off of value of foreign made components, the deficit was 200 billion US dollars in 2014, compared to the official number of 315 billion US dollars that year.
And among that data, there is also the value of goods made by American companies, selling to the Americans.
"Americans are only calculating the goods movement, but now we have to realize that 40-50 percent of those goods come from multinationals, particularly US companies,” said Wang Huiyao, president of Chinese think tank Center for China and Globalization (CCG). “For example, US companies make 200 to 300 billion dollars a year in China."
Well, if you feel the deficit is still too big, the US is benefiting from other forms of interaction with China. For example, the US has a 53 billion US dollars surplus with China in term of the services trade in 2017, which President Trump chose to ignore. And there are also transactions that are harder to quantify. About three million Chinese tourists visit the US each year, generating three billion US dollars worth of revenue.
"We have half a million Chinese students studying in the US. The associated costs are about 40 billion dollars there," said Wang.
“It is quite unfortunate that President Trump is looking at the trade data in a traditional way,” said Wang.
CCG also points out some of the reasons for the US-China trade deficit.
First of all, the US dollar is the dominant currency in world trade. This enables the US to print money to purchase more imported goods it needs. This also benefits the American people, as it supplies them with affordable and quality consumer goods from developing countries.
“It also helps keep inflation in the US low,” said Wang.
Also, the US is somehow destined to have a trade deficit with China because of the international division of labor and global value chain. As a developed country and one of the centers of global economy, the US depends on consumer goods supplied from developing countries like China, as the focus of US economy shifting to service from industry.
Distribution of GDP across U.S. economic sectors from 2000 to 2015 /Statista Photo
To solve the current conundrum, CCG points out that there is work to be done by both sides. Both sides should continue trade talks and safeguard the multilateral world trade system.
Both sides also need to deepen structural reform. In the case of the US, American companies still have the potential to export more goods to China if the US relaxes its limits on exports to China, especially hi-tech products. China, on the other hand, can open up its domestic market more, as there are still limits in some sectors on foreign investment.
However, China is actively addressing this issue by lowering tariffs (China just recently lowered tariffs on automobiles by up to 10 percent) and slimming down the negative list on market access for foreign investors.
Collaboration between countries is more than just trade these days, and the international value chain is more complicated than ever. A long term trade war will result in a lose-lose situation for the world.
From CGTN， 2018-7-25
