OPINIONS 'Anti-contract trap' will hurt global economic and trade environment

OPINIONS

'Anti-contract trap' will hurt global economic and trade environment

People's Daily app

17:11, July 14, 2018

As the largest economy in the world, the US is also the “unruly” nation among all World Trade Organization (WTO) members with two-thirds of the global trade body’s rules violated by the country, according to WTO’s report on trade dispute ruling. 

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Although the US is at fault of wearing a special hat and undermining international rules, the world finds it shocking that the Trump administration parades “America First” while abandoning fundamental long-term contractual values and unscrupulously sliding into the "anti-contract trap".

It’s common sense that the voluntary signing of the contract and the conviction of promise are the important foundations of modern market economy. Countries promote the free flow of factors of production which are complementary and help develop the global economy based on spirit of contract. 

Over the years, both developed and developing countries have forged a cycle of advanced technologies, low-cost labor, natural resources and other economic factors in accordance with economic laws and voluntary commercial principles to drive global economic growth. 

However, the White House has decided to ignore basic historical facts and frequently accuses current international rules of being “unfair” to America. The US government has forgotten that the Sino-US economic and trade exchange is based entirely on market principles. The technical exchange and cooperation between Chinese and American companies is based completely on commercial contracts.

Trump’s government has unilaterally launched the Section 301 investigation against China despite opposition from Beijing and the international community. Such a move is neither in keeping with its role as a WTO member nor respectful of the contractual obligations generated by the enterprises that constitute economic and trade cooperation. The US has disrupted the global value chain and upset cooperation by undermining the foundations of market economy.

Fair competition is a cornerstone of market economy and an important prerequisite for the market to play its role effectively. Administrative intervention in the legitimate and independent management rights of enterprises will only disrupt market order and distort resource allocation.

In the past year, the US government has rejected multiple foreign M&A attempts and even began to directly interfere in some specific investment activities of American and foreign companies, infringing on their rights to choose an independent course. 

For example, in the choice of production bases, the White House forced US Ford Motor Company to change its global layout strategy and publicly threatened Harley's overseas plants. This is totally against the long-standing principle of fair competition in a market economy and interferes with market operations and lowers companies’ profit expectations. The flow of cross-border capital, which used to be orderly, is now compromised. 

Being free, equal and open has been the crux of modern global market economy. The Trump administration has been undermining core global trade values while promoting unilateralism, protectionism, and isolationism. 

Facing economic and trade challenges, the US government failed to analyze the issue domestically and tried to pass the buck to others. Being the country that breaks rules repeatedly, the US bypasses international organizations but condemns other countries when they break rules. This amounts to shunning responsibility as the sole superpower. Washington also lets its domestic laws undermine international rules to distract attention from policy failures inside the country. As a result, the global trading system and economy is thrown into chaos. 

On one hand, the US government decides to ignore the huge profits US companies have made in China. On the other, it is concerned that their investment in China requires “mandatory technology transfer”, which might affect their technological leadership. The US is satisfied with job opportunities created by Chinese companies investing in US, but still worries about “losing advanced technology and intellectual property rights under government intervention". No wonder the White House has created obstacles in the way of technical cooperation between Chinese and American companies. 

The US government’s narrow mindset makes it want to gain benefits without obligations, seriously affecting normal trade and investment activities of enterprises, increasing business uncertainty, and affecting US investment climate. Such a mindset is also not good for the health of American companies that want to compete in global markets. 

Order builds up foundation for positive results. One of the important reasons why the global economy could benefit people in all countries is the setting up of institutional frameworks including international economic and trade rules after long-term continuous efforts. For the world economy as huge as it is, order is as indispensable as sunshine and oxygen is to all life. It is the shared responsibility and obligation of all countries to abide by international rules in a spirit of contract.

Being the largest economy, the US has turned out to be the remarkable “unruly” member, with pernicious practices and a myopic mindset.

(Compiled by Dong Feng)

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