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U.S. will not find cure through absurd remedies

Alwihda Info | Par peoplesdaily - 17 Juillet 2018

The U.S. initiating the trade war is groundless both in its reasons and actions. The country is often viewed as a “wild card” on the international arena. It is just because rational major countries would never make such absurd excuses and practices.

By Jia Jinjing

U.S. will not find cure through absurd remedies
In the latest escalation of its trade offensive against China, the U.S. said on July 10 that it would impose 10 percent tariffs on an additional $200 billion worth of Chinese imports.

It is apparently a provocative act that will both harm Sino-US trade and world economy. We cannot help but to ask where the reason lies in such an arbitrary move of the U.S.

Some U.S. officials recently reiterated that the U.S. has “been treated unfairly” in its trade with China, saying that the latter had “stolen” its technologies and thus gained “unfair advantages” through “forced technology transfer.”

What the U.S. officials said is based on a so-called Section 301 investigation report released by the U.S. early this year against China.

The report has been an excuse for the U.S. to slap tariffs on Chinese aerospace, information technology, robot and mechanical engineering products, and China’s counter strikes were said to be the reason for releasing the latest tariff list that involves $200 billion worth of Chinese products.

However, will such reason and actions of the U.S. really hold water? The fact is that the report has even been refuted by the Peterson Institute for International Economics, the think tank of the U.S. government.

The institute pointed out in its report that the U.S. indeed benefited substantially from China in intellectual property.

It said that the technical license fee paid by China to foreign enterprises increased fourfold over the past decade, reaching about $30 billion yuan in 2017. The U.S. happened to be the biggest beneficiary that enjoyed the fastest growth of economic returning in this field, seeing a 14 percent rise in its gaining.

Statistics released by China also showed that China spent $28.6 billion yuan on foreign intellectual property last year, 15 times more than that in 2001 when the country joined the World Trade Organization (WTO).

As a matter of fact, the U.S. Section 301 investigation report confused the micro-level technology transfer with macro-level technology diffusion.

At micro-level, Chinese enterprises are mostly using foreign technologies through “paid licenses”, which means the foreign enterprises will not have their technologies “stolen”, but in turn make profits from such licenses.

It is a mutually beneficial cooperation based on business negotiation, and a typical market conduct without governmental intervention.
The technical cooperation and other economic and trade cooperation between Chinese and foreign companies are completely contractual behaviors based on the principle of free will. Over the years, enterprises from both countries have enjoyed benefits from such cooperation, which has been a major source of income for the U.S. in the intellectual property business with China.

At macro-level, technology diffusion is a general law, which is similar to the worldwide spread of the Arabic numerals and electricity technology.

The German Karl Friedrich Benz developed the world’s first automobile, and seven years later, the first motor vehicle of America was manufactured by the American Charles Edgar Duryea. Wouldn’t that be a plagiary of technology if the Section 301 logic is applied here?

Absurd logic leads to no reasonable action, and will a trade war with China bring economic benefits to the U.S.?

The modern world is interwoven by a global value chain that links most of the products of every country. If the chain was a grid, and consumption and production were respectively a light bulb and switch connected to it, the number of light bulbs and switches possessed by each country would vary.

The U.S. has the most lights bulbs, but less switches, meaning it consumes more but produces less. The U.S. is turning off the switches of other countries through the trade war, but what it doesn’t realize is that its own switches will also get turned off by other countries. With not enough switches, the U.S. is doomed to lose the trade war once the battle becomes protracted.

The U.S. initiating the trade war is groundless both in its reasons and actions. The country is often viewed as a “wild card” on the international arena. It is just because rational major countries would never make such absurd excuses and practices.

It was even said by some U.S. high officials that the U.S. is facing the trade war with its best economic performance: the buoyant stock market and extremely low unemployment rate. But, is that true?

The following is the facts. The S&P 500 Index is twice higher than that before the 2008 financial crisis; the U.S. sales only grew by less than 50 percent; the cyclically adjusted price-to-earnings ratio (CAPE) stands at 32.33, 26.2 points higher than that at the outbreak of the financial crisis, indicating huge bubble in the country’s stock market.

In addition, the labor force participation rate has hit a new low despite the low unemployment rate, which indicates that a large number of people in the country have already quit their job-hunting.

The U.S. looks just like a “paper tiger” by initiating the trade war, seemingly threatening but is indeed ineffectual and unable to withstand challenges. The U.S. will never find a cure if it keeps its domestic structural issues unattended.

(The author is the chief researcher at Chongyang Institute for Financial Studies of Renmin University of China)

Source: People’s Daily Overseas Edition

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