Sat, Jun 08, 2019 - Page 8 News List

China must deal with trade spat carefully

By Li Chi-keung 李志強

After releasing a white paper titled “The Facts and China’s Position on China-US Trade Friction” on Sept. 24 last year, the Chinese State Council on Sunday released another one titled “China’s Position on the China-US Economic and Trade Consultations” to once again express Beijing’s stance in the trade dispute between the two nations.

The white paper, which was released in eight languages, includes three key points.

First, it accuses Washington of initiating the trade dispute, which hurts the interests of both nations and the whole world.

Second, it says the reason that no agreement has been reached after several rounds of negotiations over the past year is that Washington repeatedly backtracks on its commitments at the last minute, and it is this lack of good faith, as Beijing calls it, that has caused the talks to fail.

Third, Beijing remains willing to cooperate to resolve economic and trade disputes, and push for “a mutually beneficial and win-win agreement.”

“China does not want a trade war, but it is not afraid of one and it will fight one if necessary. China’s position on this has never changed,” it says.

The white paper mainly reiterates China’s old stance, showing that Beijing does not have too many tools to retaliate, or that retaliating could harm it more than the US, because economic and trade activities between the two have always been asymmetric.

US customs’ statistics show that US exports to China last year were US$120.34 billion, while Chinese exports to the US were US$539.5 billion, so US taxes imposed on Chinese goods are much greater than Chinese taxes on US goods.

After the US on June 15 last year announced that it was increasing tariffs by 25 percent on US$50 billion of Chinese imports, China responded by raising tariffs by 25 percent on US$50 billion of US imports.

On May 10m US President Donald Trump’s administration increased tariffs on another US$200 billion of Chinese imports from 10 to 25 percent, while Beijing merely raised tariffs on another US$60 billion of US imports by 5 to 25 percent in retaliation, so there is still room for China to raise tariffs on another US$10 billion of US goods.

On May 13 the Office of the US Trade Representative threatened to raise tariffs by 25 percent on a list of Chinese goods worth US$325 billion.

China has also started to adopt non-trade countermeasures against the US.

For example, it launched an investigation after two packages shipped from Japan to Huawei Technologies Co in China were diverted to the US by FedEx without prior authorization.

Huawei said that the two packages only contained regular documents, not technical products, and there was no leak of confidential information.

The Chinese Ministry of Commerce on May 31 said it is drafting an “unreliable entities list,” which would apply to foreign businesses, organizations and individuals that block supplies to Chinese businesses and harm their interests for non-commercial reasons.

More concrete measures and penalties have yet to be released.

However, as the trade dispute snowballs into a long-term confrontation, quite a few foreign manufacturers are thinking about relocating from China to other regions.

If Beijing’s retaliatory measures against US companies operating in China are too harsh, it could accelerate foreign companies’ withdrawal from China.

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