Thursday, March 22, 2018

China Has Various Options for Hitting Back at US on Trade
By Wang Weiwei
Global Times
Published: 2018/3/22 21:53:40

US President Donald Trump has threatened to impose tariffs on imports from various countries, but has granted Canada, Mexico and Australia immunity. The tariff order also allows any country with a security relationship with the US to hold discussions, with the possibility of further exemptions. But Trump has been more and more aggressive in his trade measures toward China.

Earlier this month, the Trump administration asked China to cut its trade surplus by $100 billion. Several days later, Trump talked of a $60 billion annual tariff plan for Chinese products. The US leader's tendency to tie economic interests and security together to exert pressure on China is becoming clearer. But China can deal with the US measures and the threat of a trade war in various ways.

The first would be to increase imports and exports between the two countries in order to use cooperation to resolve the various issues. Exports were one of the main drivers of China's economic recovery in 2017 and an important source of employment. China's exports will be affected in the short term by the escalation of US trade sanctions, which will impact the Chinese economy. China could use cooperation to defuse the conflict by increasing trade between the two countries, for instance by expanding its opening-up in services, manufacturing and commodities. And the US could relax its controls on exports of high-tech, high-value-added products to China.

Second, multilateral organisations and a dispute settlement mechanism could be used to put pressure on the US. China can improve regional economic cooperation via the Free Trade Area of the Asia-Pacific (FTAAP) and the Regional Comprehensive Economic Partnership (RCEP), while countering the US within the framework of the WTO.

China could also set up an international dispute settlement mechanism to resolve trade rows. With the expansion of China's trade and investment, the country's economic development has become more integrated with the world economy, and a dispute settlement mechanism could help in solving any problems.

Third, there is the issue of security. The US uses its national security as a pretext for keeping other countries in check, and takes advantage of hot issues such as North Korea's nuclear program to gain political support and obtain economic benefits. As a growing power, China is also a key player in major regional issues. Therefore, China could also use security issues as a bargaining chip to check the US measures.

In response to the US' leveraging of the alliance system, China should recognize that the main intention of the US in the short term may be to transfer attention away from domestic problems and earn some political capital for Trump. In this regard, China can wait and assess the impact of the situation, and can take the quiet approach.

The fourth option is to respond directly to the protectionist policies of the US. China has made it clear that it does not want a trade war, but it will respond in a legitimate and necessary way if a trade war is triggered. The US has taken the lead on trade penalties and expanding the scope of sanctions, but China has ways to counter the US protectionist policy.

There is a significant trade surplus for China in the fields of electronics and electrical equipment, but there is also a significant deficit in trade of agricultural products, transport equipment and services. China's imports of agricultural products, leather and aircraft account for a significant portion of US exports. Therefore, these sectors could be targeted if China wanted to impose its own trade sanctions on the US.

The author is a postdoctoral researcher with the School of International Studies at Peking University.

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