REUTERS – The fact that United States President Donald Trump points to America’s trade deficit with China as one reason to tax Chinese goods cannot justify a trade war with data calculated in outdated methods, said Wang Huiyao, president of the Center for China and Globalization (CCG).
According to data from the U.S. Commerce Department, the U.S.-China trade deficit peaked at 375.2 billion U.S. dollars in 2017. Chinese experts agree with the number, but don’t agree with the notion that China is hurting America’s economy based on import-export data.
One reason, the Beijing-based CCG points out, is that the number doesn’t reflect revenues made by American companies in China.
“Americans are only calculating the goods movement, the goods crossing borders, but we have to realize now 40 to 50 percent of those goods passing borders now are composed of a contribution by all multinationals, particularly the U.S. companies. For example, U.S. companies make 200 to 300 billion dollars in China a year,” Wang explained.
The U.S.-China trade deficit might be inevitable because of the global value chain of today. However, the U.S. is benefiting from other forms of interaction with China, for example, a surplus with China in term of the services trade.
“We have three million tourists from China to the United States, which generates 33 billion dollars revenue as well, is not calculated. Students, we have half a million students from China studying in the United States and that associated cost all together is about 40 billion [dollars] there,” said Wang.
President Trump’s top economic adviser Larry Kudlow blames China for blocking deals made between the two countries. However, China has continued in its efforts to open up its market to the world, cutting tariffs and narrowing the negative list on market access for foreign investors. Wang points out that both sides should keep working together toward a deal.
“Both countries have the responsibility and the duty to actively solve this disputed issue, the friction issue, because it does no good to both countries, and also no good to the mankind, to the world,” he said.
Collaboration between countries is more than just trade these days, and the international value chain is more complicated than ever. Experts agree that a long-term trade war will result in a lose-lose situation for the world.