Has the United States really been ripped off by China?

Note: The following article is taken from the Chinese-language "Commentaries on International Affairs".

Chinese-made hats are displayed for sale at a Manhattan department store in New York City, May 07, 2019. [Photo: Spencer Platt/Getty Images via VCG]

China's Ministry of Commerce released a report on Thursday that lays out the benefits the United States has obtained from its trade with China. The report reveals the nature and causes of the China-U.S. trade deficit using detailed data, rigorous calculations, and careful analysis. It also elaborates on the benefits the United States has gained from the two-way economic and trade cooperation, and concludes that it has been mutually beneficial in spite of China running trade surpluses. In short, it finds the claim that the United States has been “ripped off by China” totally unsupportable.

The main excuse Washington has used to impose tariffs is that the United States runs a deficit of more than 500 billion U.S. dollars in its trade with China. In Washington's view, this trade deficit is a sign that China has been taking advantage of the United States and therefore justifies raising tariffs on Chinese imports in order to narrow the deficit. But the Commerce Ministry report points to flaws in how the United States assesses its imports: it counts goods made in China but imported from a third country in the same category as imports directly from China. The U.S. also enjoys a services trade surplus with China. Taking all these into account, according to figures from China, America's overall trade deficit with China stood at around 153 billion U.S. dollars last year – only 37 percent of the figure announced by Washington.

The report also takes an in-depth look at the causes of the deficit, which is impacted by factors such as industrial competitiveness, the international division of labor, trade policy, and the status of the dollar. This conclusion is consistent with the work of many other domestic and foreign experts. For example, Steven Roach, a senior research fellow at Yale University, has pointed out that the United States must import capital from the world's major savers, including China, in order to invest and grow, as its own economy lacks savings. This comes at a price, that is, a long-term current account deficit and a trade deficit. It's why, Roach points out, the United States runs trade deficits with over one hundred countries. "The blame game", he said, is only "identifying others as the culprit rather than admitting responsibility for deep-rooted problems."

The report also cites data from a variety of sources to show that trade with China benefited the United States. American exports to China supported more than 1.1 million jobs in the United States from 2009 to 2018. Low-priced goods imported from China in 2015 helped to reduce consumer prices by up to 5 percent. In 2017, the export of goods and services by the United States to China totaled 241 billion U.S. dollars and the sales revenue of U.S. companies in China was about 700 billion U.S. dollars. By the end of 2017 the total amount of capital that flowed into the United States from China including China’s U.S. treasury holdings reached 1.37 trillion U.S. dollars. Taken together, it's clear that the United States has not been ripped off by China. Quite the opposite: Bilateral trade and economic cooperation has greatly benefited both sides. It also shows that China's market is critically important to the American economy.

Two-way trade between China and the United States is the result of market demand created by enterprises and individual consumers in both countries. By laying the blame for its trade deficit on China, the United States is ignoring the rules of international economics and trade, and it is violating the code of conduct for economic cooperation by acting as a bully in order to force seemingly endless concessions from China. And China is not the only country on the receiving end of American bullying. Washington recently launched attacks on Mexico and India, while increasing pressure on the European Union and Japan. And it has lost a number of lawsuits within the WTO after it was sued by trading partners including the European Union, Japan, Canada, South Korea, Switzerland, Norway, New Zealand, and Brazil. But the United States has repeatedly refused to settle the judgments. This blatant contempt for the rules of the multilateral trading system has made it clear for the international community to see that the United States poses the biggest challenge to global growth.

The research report by the Commerce Ministry on China-U.S. trade helps the international community to better understand how Washington is pursuing its policy of playing the economic bully in order to advance its own interests. Despite this behavior, China continues to regard dialogue and consultation as the best way to resolve economic and trade frictions, but only when it is done on the basis of mutual respect and equality. Using tools like tariffs to bully China won't work, and the sooner the United States realizes that, the better off it will be.