China and the United States issued a joint statement on Saturday, vowing to take effective measures to substantially reduce the trade deficit between the two nations. According to the statement, China agreed to greatly increase its purchase of US goods and services to meet the growing demands of Chinese consumers and promote high-quality economic development. This will also create benefits for the US' economy and job market.
The two nations agreed to increase the export of US agriculture and energy products. They also reached a consensus to create favorable conditions for expanding trade on manufactured goods and services. The statement said that both sides placed high value on intellectual property protection and agreed to promote cooperation in this regard.
Trade between the two countries has continued to grow since China launched its reform and opening-up policy, allowing it to become the largest bilateral trader of goods in the world. In recent years, both nation's service trade markets have shown substantial growth. However, China's surplus of trade goods with the US has gradually expanded due to several factors, making it the world's largest trade surplus.
According to China's statistics, China's merchandise trade surplus with the US reached $275.8 billion in 2017 while US statistics showed that the US trade deficit with China was as high as $375.2 billion in 2017 - which makes up about half of the US global trade deficit. It is difficult to maintain such an unbalanced bilateral trade system. The US-China trade deficit has continued to expand, despite China working to reduce this number for many years. The deficit increased by more than $20 billion from 2016 to 2017.
The US is currently experiencing strained relations with its trade partners around the world, especially with China. Early this year, the US unilaterally imposed import tariffs on steel and aluminum products. China took counter measures in response to such US polices. The battle has severely impacted the overall bilateral relationship between the two nations and sent shockwaves throughout the global market.
China and the US have gone through three rounds of consultations so far, starting with Chinese Vice Premier Liu He's trip to the US in February, the US delegation team's visit to China in early May, and the vice premier's most recent US visit last week. These consultations allowed the world's two largest economies to consult with each other to analyze, define, and resolve the issues of their current trade mechanisms to provide long-term operation.
Economic and trade cooperation has always played the role of ballast and propeller in China-US relations. However, the recent economic and trade issues have continued to be one of the major challenges for maintaining a good and comprehensive relationship between the two countries. It is imperative to resolve these issues. If the two countries work together to keep trade relations stable, then the China-US bilateral relationship will be much stronger, and both sides can benefit from this win-win cooperation system.
However, this appears to be a historic period of difficult adjustment, since both nations fought fiercely for their own country's interests. In the past two and a half months, the situation was close to reaching disastrous conditions. Even until the very last moment before the final agreement was made, both countries did not give up, kept their determination, and stood firm in their resolve.
Many may have noticed the words "to substantially decrease the US trade deficit in goods with China" in the joint statement. This might lead some to think that the US has won the trade talks.
However, the focus of the China-US economic and trade consultations was meant to discuss how China will expand its imports from the US because the large deficit reflects the imbalance between the two nation's trade systems. The main direction of the consultation is to promote and balance China-US trade.
Now, both nations need to figure out how to achieve this balance. Washington hopes to maximize the interests of the US in this process, while China insists that the expansion of US imports must meet the urgent needs of its country's economic and social development. The US wants China to help reduce its trade deficit in a planned economic way. China persists that the goal must be achieved through marketization to create a trade balance. China believes that in order to reduce the US trade deficit, the US should further open its domestic market to Chinese buyers. US products must meet the expectations of the Chinese market to stimulate China's purchasing activities. This is the key point behind the trade dispute between China and the US.
From this perspective, the agreement signed by China and the US today has followed the win-win principle. The US will have the opportunity to reduce its trade deficit with China, while China will achieve the consistent purchase of US goods to benefit the development of the country and its people's life. The US has promised to break its control of energy exports to China, which will diversify China's energy import channels. The US will sell more agricultural products to China, which is the equivalent to "exporting" agricultural nature and technologies to China.
From a macro perspective, trade balance is one of the key factors for continuous development of globalization. Each negotiation held by the two countries will push the situation to a better position. The promotion of fair trade principles is an irresistible trend. No positive outcome can be achieved without fairness.
For example, if China agreed to help the US reduce its trade deficit, but the US could not provide products to meet the needs of China's markets and consumers, the agreement signed by both countries would be worthless. All trade agreements have to be executable and feasible, rather than irrational. This has been a fundamental rule before the two nations started their negotiations, and it will remain the same in the future.
As one of the largest trade surplus countries in the world, China has learned from this dispute with the US, and will improve its understanding of international trade. It is also a good opportunity for all Chinese citizens to review their country's power from a new perspective.
China must continue to expand its market capacity and enhance the country's irreplaceability in global production and supply chains. It is time for Chinese citizens to see that if China wants to become a modern power in the world, there is a lot of work to do.