HEADLINE Using tariffs to deal with trade deficit is like climbing tree to catch fish

HEADLINE

Using tariffs to deal with trade deficit is like climbing tree to catch fish

By Wu Qiuyu | People's Daily app

00:23, April 06, 2018

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Within a day, the world’s top two economies have successively unveiled their proposed tariffs on imported products worth $50 billion. The US action is indeed trade protectionism in the name of reducing trade deficits, and China has no choice but to take countermeasures. The trade dispute provoked by the US has aroused great concerns from the international community.

The move is like climbing a tree in order to catch a fish. All the world’s major organizations and financial media agree that this tactic will be ineffective. History and reality have repeatedly proved that economic globalization has provided a powerful impetus for international economic and trade development, promoted commodity and capital flows, the advancement of science and technology, and exchanges among people of all countries. The US itself is also one of the biggest beneficiaries of economic globalization. Wielding trade protectionism in a wayward manner is a violation of the basic laws of the market economy and will be doomed to fail. An attempt to reduce a trade deficit through a trade war is even more wrong.

A research report released by the European Central Bank last year pointed out that trade protectionism will not reduce a country’s trade deficit, but will increase it. For a long time, China has attached great importance to Sino-US economic and trade relations and hopes to resolve disputes and differences through dialogue and consultation so as to benefit the two peoples. Regrettably, the US government has ignored the long-term interests of mutual economic and trade cooperation, but focused on the short-term trade deficit. The US’s erratic actions have resulted in an obstruction of a comprehensive economic dialogue between the two countries and aggravated trade imbalances.

By inciting a trade war, the US is mistaking cause and effect. The most effective way of averting the trade imbalance between the US and China is not to limit Chinese exports but to expand US exports. Trading is the result of enterprises and consumers of the two countries making deals on their own accord. Relaxing the limitations and facilitating convenience is the key to increasing exports and cutting the deficit. One major reason that has lead to the trade deficit with the US is that the US government limits its exports to China, especially its high-tech products, which are competitive. The market is distorted when one does not sell the products people want to buy but forces trade on products people do not want to buy. A US research agency report said if the US relaxes its restrictions on exports, the trade deficit to China could decrease by about 35 percent. But if the US goes in the opposite direction, it will only make the deficit worse, which will further harm the cooperation between the two countries and jeopardize the interests of both countries in the long run.

By inciting a trade war, the United States is ignoring the facts. In recent years, China has further promoted supply-side structural reforms and has achieved remarkable economic structural adjustments. It has accelerated its pace of opening up to the world, and has witnessed the fruits of opening up in finance among other fields. Since joining the WTO, China has earnestly fulfilled its commitments, strictly abided by the rules, and taken effective measures to promote balanced international trade. The percentage of the current trade surplus in terms of GDP has fallen to about 1.7 percent last year, while number for the United States dropped to 2.3 percent in the same period. Facing China’s sincerity and efforts in expanding the openness of its economy, and the continued improvement in trade structure between China and the United States, Washington has opted for blindness and amnesia to simply blame China for the imbalances in international trade. Wielding trade protection and rudely demanding that China reduce its trade surplus by $100 billion is totally ignoring the facts and wishful thinking, which has been jointly criticized by interested parties including US companies.

By inciting a trade war, the United States is wrong in its failure to discern right from wrong. As the biggest developed country in the world, the US has a relatively low savings rate and a rather high consumption level, which leads to an inevitable trade deficit in its global trade, not only with China but also many other countries. Meanwhile, the US has to keep a big trade deficit to maintain US dollar's dominance as a global payment currency. On the one hand, the country is enjoying all kinds of cheap consumer goods with high quality from other countries. On the other, it is rebuking others for gaining extra advantages by unfair means. Economies around the world have rejected this kind of irrational mentality. This trade war launched by the US is doomed to complete failure, because the US did not examine the reasons for the trade imbalance and merely blames it on China.

The scale of global economy is as vast as the oceans. This is a fact that no one can avoid. Neither trying to cut off the international flow of capital, technology, merchandise, business and personnel nor rolling the global economy back to isolated small ponds or streams is possible. Furthermore, this does not accord to the current trends. This US-initiated trade war was started without a just cause. It lacks morality and justice, making it deplored around the world. It not only contributes nothing to solving Sino-US trade issues, it is also pushes global trade and economic globalization off a cliff. The US is making an inglorious mistake that will be engraved in history.

We will fight if you ask for it! Take a look into history. Instead of sticking to short-term gains, winners always have long-term visions and count total gains and losses. The US should not underestimate China’s determination and capability of protecting its legitimate interests. The enormous economy China has, the great potential China owns and the innate tenacity China possesses means China is able to withstand any trade wars at any scale, in any form or at any intensity. We do advise the US to have a precise grasp of the situation, stop hurting both others and itself, and refrain from isolating itself. In the roaring torrent of economic globalization, there is no room for arbitrary actions, and just causes will eventually prevail.

(The story is a second-page comment published on April 6 in the People's Daily newspaper. Compiled by Du Mingming, Lu Wen’ao, Qu Qiuyan and Qiao Wai)

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