It’s time to bring common sense to the China-US trade dynamic

While moderating a debate last Thursday, Wall Street Journal Editorial Board member Mary Kissel asked former Mexican president Vicente Fox a hypothetical question of how he would deal with China being a rule-breaker at the World Trade Organization.

Journalists should not induce their interviewees with such a question, but that is a topic for another time.

Fox, who served as Mexican president from 2000 to 2006, did not take the bait. Instead, he delivered a scathing critique of US President Donald Trump by saying a nation develops its economy by trading, but Trump does not think like this and believes China and everybody else are winning and the US is losing.

He recalled how Mexico opened its economy and how US companies conquered the Mexican market, saying Mexicans have to drink Coca-Cola instead of their own nectar drinks; hamburgers and hot dogs instead of tacos and tortas.

But when Mexico became more competitive, Trump blamed the loss of US jobs on Mexico and insisted on unreasonable concessions in the ongoing renegotiation of the North American Free Trade Agreement (NAFTA).

Fox noted that NAFTA has delivered great benefits to the US, making US corporations more competitive. He also defended China later by saying that the Chinese are less ideological and “don’t fight like dogs and cats like Republicans and Democrats do every day”.

“They are a pragmatic government. They work on technology, exports, trading,” Fox said, to Kissel’s surprise.

A similar episode took place on Sunday when Fareed Zakaria, host of CNN’s GPS, asked former US Treasury secretary Larry Summers almost the identical question that Kissel posed. Summers did not fall for it either.

Summers said that the US has benefited enormously since China’s entry into the WTO, and that the trading relationship has had a positive effect on the bilateral diplomatic relationship.

He said that China had a global trade surplus of nearly 10 percent of its GDP five years ago (it was actually 10 years ago), and everybody said it was a problem.

But that surplus fell to 1.8 percent (in 2016). Everybody said China had the wrong currency, and China spent $1 trillion propping up its currency.

Summers noted that there still are problems to be addressed, but they must go through multilateral systems rather than unilateral tariffs, which are shooting the US in the foot by imposing costs on American consumers and producers.

Summers was the one who said years ago that he could picture a 21st century in which the US and China prosper, and he could picture a 21st century in which the US and China do not prosper, but he could not picture a 21st century in which one of them prospers and the other does not.

In his article “How to Win a Trade War With China”, published on the Politico website on Saturday, Zachary Karabell, an economist and head of global strategies at financial services firm Envestnet, noted that China is the fastest-growing export market for US goods and perhaps the largest potential market for US services.

“These services include Chinese tourism to the United States and Chinese students studying here, whose economic ripple effects are surely underreported (a Chinese student paying rent shows up in no trade number, for instance). And those numbers don’t include China investing tens of billions in the US to buy companies with its surplus dollars, nor its trillion-dollar investment in US bonds,” he wrote.

He warned that if the two countries do plunge into a trade war, the US is unlikely to emerge stronger, and China is unlikely to weaken. “The only way for Trump to win his trade war is if it is never fought,” he wrote.

The comments by Fox, Summers and Karabell are just common sense, but common sense is a high bar these days for US politicians, who often fill the airwaves and cyberspace with misinformation.

Consider Trump’s tweet on Saturday: “The United States hasn’t had a trade surplus with China in 40 years. … The US is losing $500 billion a year.”

Time and again, Trump misleads the American people. The US has had a trade deficit since 1976 with many countries, long before China’s economic rise.

Trump can’t even get the number right; the bilateral trade deficit was $375 billion, according to US Commerce Department data, not to mention that the trade deficit does not mean a loss for the US, and it is not caused by China.

Misinformation aside, Trump’s message often could be confusing and contradictory, like the one he tweeted Sunday morning: “President Xi and I will always be friends, no matter what happens with our dispute on trade.

China will take down its trade barriers because it is the right thing to do. Taxes will be reciprocal and a deal will be made on intellectual property. Great future for both countries!”

Does that mean he now prefers talks to tariff threats? And will the US take down its barriers on restricting Chinese investment in the high-tech sector and on the sale of high-tech products to China?

Contact the writer at chenweihua@chinadailyusa.com