The Center for China and Globalization (CCG), a leading global think tank in China of international repute, released a Report (Issue 7 of Volume 25) dated September 2018 titled China-US Trade Relation and Challenges: Past, Present, Future and Policy Options.
A CCG delegation traveled to Washington for a five-day visit to conduct over 20 activities in September as part of Track II diplomacy efforts to promote bilateral trust and understanding.
On September 26, with the Hudson Institute, a leading conservative think-tank, CCG co-hosted a symposium titled “40 Years of Sino-US relations: Past, Present, Future and Policy Recommendations.” Hudson Institute President and CEO Kenneth R. Weinstein gave opening remarks. Michael Pillsbury, Hudson Institute senior fellow and Director for China Strategy chaired the event. His 2015 book "The Hundred Year Marathon: China's Secret Strategy to Replace America as the Global Superpower" is widely held to have inspired Vice President's fiery anti-China speech at the Hudson Institute on 4 October, declaring nothing less than a full-blown new Cold War against China. Click here
The following extracts usefully highlight the potential damage that a protracted trade war may have on the American and global economy -
"The National Association of Chemical Distributors released a study this month that predicted nearly 28,000 chemical distributor and supplier jobs would be eliminated because of higher prices due to the USD 200 billion round of tariffs. The US Chamber of Commerce estimated that as many as 2.6 million jobs could be threatened by the Trump administration’s trade policies. An Axios analysis claims that the retaliatory Chinese tariffs would affect 11 million American workers concentrated in rural, deeply red, already-struggling parts of the US. Forecasting sectoral employment impacts under a full trade war scenario, the Peterson Institute for International Economics (PIIE) expects large employment decline to occur. Even short-term aborted trade war could lead to private sector employment falls of 1.3 million. The chief economist of Moody predicts 150,000 fewer jobs in the US if current and proposed tariffs are continued. More than 60 US industry groups launched a coalition called Americans for Free Trade, comprising thousands of companies, farmers and manufacturers, arguing that the trade war will kill US jobs and raise prices for US households."
"Goods originating in China will also become more expensive, pushing up costs for both businesses and consumers. Apple sent a letter to the USTR highlighting how the upcoming tariffs on USD 200 billion Chinese goods would “increase the cost of our US operations, divert our resources, and disadvantage Apple compared to foreign competitors.” Intel pointed out that many products in the list have final assembly or testing done in China, but chips will be subject to tariffs on the full value. Intel estimates it would cost USD 650-875 million to relocate a chip factors away from China. Tech companies Dell, Hewlett-Packard and Juniper Networks have raised similar concerns about harm to US companies, workers and consumers from applying tariffs to networking products and accessories."
"In September, IMF Managing Director Christine Lagarde warned that as well as triggering vulnerabilities in China’s Asian neighbors, a US-China trade war could also deliver a shock to already struggling emerging markets such as Turkey, Argentina, and Russia via a domino effect on global value chains and the impact on risk appetite around the world."
"Work by the IMF predicts that if threatened trade barriers are implemented, each country could see the cost of imports rise by 10%, leading to a 15% contraction in global trade over five years and 0.5% fall in global output compared to the projected level by 2020. The European Central Bank and Bank of Korea have already revised down their growth forecasts for the Euro area and Korea respectively due to the introduction of tariff measures."
"A report by the Brookings Institution forecasts that a relatively minor global trade war where tariffs rise 10% would reduce GDP of most countries between 1 and 4.5%. The authors of the report warn that a 40% hike in tariffs could cause a deep global recession akin to the Smoot-Hawley tariff of 1930.61 Meanwhile, Roberto Azevêdo, director general of the World Trade Organization, emphasizes that a trade war would hurt people all over the world, citing research that found that the poorest consumers could lose up to 63% of their spending power."
CCG puts forward the following recommendations for both China and US policymakers:
- Build on the agreements already reached through bilateral negotiations and work to increase Sino-US bilateral trade and opportunities in services trade.
- Forge a new bilateral agreement on intellectual property rights (IPR).
- Increase opportunities for US companies in China Manufacturing 2025.
- 4. Seek further tariff reduction through bilateral negotiations and re-engage in BIT talks.
- Build on the foundation of domestic reforms to rebalance the Chinese and US economies as ways to achieve trade balance.
- Update the way that Sino-US trade is measured to more accurately reflect the value derived by each side.
- Expand cooperation in infrastructure and explore creating a Sino-US infrastructure investment fund.
- China and the US can work together to reform the WTO.
- Strengthen Sino-US cooperation between provinces and states. 1Develop the role of Track II diplomacy and promote bilateral dialogue.
While the above recommendations are all practical and realistic, they do not address the hidden unease about a rising powerful challenger of worrying governing model and ideology to the world order underpinned by American supremacy. Indeed, this is the crux of Michael Pillsbury's seminal book. However polite and balanced he might have chaired the symposium, one wonders how much the American powers that be agreed that the CCG recipe is sufficient to stop the brewing Cold War in its tracks, even if it may ultimately fail to contain China.