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Obama's call for growth driven by exports is music to China's ears
By John gong |
December 17, 2009, Thursday
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Print Edition
Print Edition
THE current Sino-US economic relationship may be best described as that between bitter in-laws - they have to live with each other for the sake of their children, but simply can't get along without quarrels.
Not a week passes lately without hearing some antidumping, countervailing or special safeguard cases brought up by the trade authorities in the US.
In September, Chinese low-end tire exporters were hit with prohibitively expensive tariffs. The US has since targeted Chinese steel pipes with tariffs, and is moving ahead with investigations into the alleged dumping of coated paper and of certain phosphate salts from China.
During times of economic hardship, it is not surprising to see the surge of protectionist waves in the interests of domestic constituents. It is happening everywhere around the world. WTO general secretary Pascal Lamy forecasts a whopping nine percent drop in global trade volume for 2009. WTO's Doha round of negotiations has come to a grinding halt.
Codependence
But what is unique about the Sino-US trade relations is that, as eloquently put by Keith Richburg in a Washington Post editorial, "the two economies have become inextricably intertwined, locked in a codependence situation that neither side thinks is particularly healthy."
The trade deficit on the US side was a mere US$20 billion in 2000, but now has bloomed to over US$200 billion. The overwhelming imbalance of flow of goods and services across the Pacific has come to exert profound impact on unemployment, financial markets, the status of the dollar, and the overall economic structure in the US.
Trade with China has turned into a domestic political issue in American politics, especially at a time when unemployment rate has reached an unprecedented level of 10 percent.
From China's perspective, the trade imbalance firstly needs to be interpreted within the context that China has been open to American investment for many years, such that the bulk of the exports to the US are actually by foreign multinationals (MNCs), certainly including many American MNCs.
Second, China is doing its part in terms of adopting an industrial upgrade policy in some of its coastal regions that are traditionally export powerhouses.
A significant portion of China's exports to the US are low-tech and labor-intensive products such as textiles and toys dominated by small private enterprises. China is in the process of reducing the percentage of this sector in total exports, and move onto high-tech products that generate more economic values.
Export control
More importantly, it has long been China's position that the fundamental approach to addressing trade imbalance is to increase American imports to China, instead of rolling back Chinese exports to the US. In fact, China has a huge appetite for American high-tech products that are currently constrained by the US export control regime.
With the United States running record budget deficits as it spends furiously to try to stimulate the economy, US President Barack Obama said it is going to be vital to find innovative new ways to finance growth, and the new recipe is what he describes as the export-driven growth.
This sounds music to the ears in Beijing, provided that the American export control regime undergoes reform to reflect the current status of Sino-US relationship.
For too long, it has remained as a legacy of the cold war. As Sino-US foreign relations improve greatly over the years, relaxation of these rigid policies, particularly in accordance with President Obama's export-driven growth strategy, is very much in the interests of both countries.
(The author is associate professor of economics at the University of International Business and Economics. The views are his own. His email: johngong@gmail.com).
Not a week passes lately without hearing some antidumping, countervailing or special safeguard cases brought up by the trade authorities in the US.
In September, Chinese low-end tire exporters were hit with prohibitively expensive tariffs. The US has since targeted Chinese steel pipes with tariffs, and is moving ahead with investigations into the alleged dumping of coated paper and of certain phosphate salts from China.
During times of economic hardship, it is not surprising to see the surge of protectionist waves in the interests of domestic constituents. It is happening everywhere around the world. WTO general secretary Pascal Lamy forecasts a whopping nine percent drop in global trade volume for 2009. WTO's Doha round of negotiations has come to a grinding halt.
Codependence
But what is unique about the Sino-US trade relations is that, as eloquently put by Keith Richburg in a Washington Post editorial, "the two economies have become inextricably intertwined, locked in a codependence situation that neither side thinks is particularly healthy."
The trade deficit on the US side was a mere US$20 billion in 2000, but now has bloomed to over US$200 billion. The overwhelming imbalance of flow of goods and services across the Pacific has come to exert profound impact on unemployment, financial markets, the status of the dollar, and the overall economic structure in the US.
Trade with China has turned into a domestic political issue in American politics, especially at a time when unemployment rate has reached an unprecedented level of 10 percent.
From China's perspective, the trade imbalance firstly needs to be interpreted within the context that China has been open to American investment for many years, such that the bulk of the exports to the US are actually by foreign multinationals (MNCs), certainly including many American MNCs.
Second, China is doing its part in terms of adopting an industrial upgrade policy in some of its coastal regions that are traditionally export powerhouses.
A significant portion of China's exports to the US are low-tech and labor-intensive products such as textiles and toys dominated by small private enterprises. China is in the process of reducing the percentage of this sector in total exports, and move onto high-tech products that generate more economic values.
Export control
More importantly, it has long been China's position that the fundamental approach to addressing trade imbalance is to increase American imports to China, instead of rolling back Chinese exports to the US. In fact, China has a huge appetite for American high-tech products that are currently constrained by the US export control regime.
With the United States running record budget deficits as it spends furiously to try to stimulate the economy, US President Barack Obama said it is going to be vital to find innovative new ways to finance growth, and the new recipe is what he describes as the export-driven growth.
This sounds music to the ears in Beijing, provided that the American export control regime undergoes reform to reflect the current status of Sino-US relationship.
For too long, it has remained as a legacy of the cold war. As Sino-US foreign relations improve greatly over the years, relaxation of these rigid policies, particularly in accordance with President Obama's export-driven growth strategy, is very much in the interests of both countries.
(The author is associate professor of economics at the University of International Business and Economics. The views are his own. His email: johngong@gmail.com).
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