Review | Trump should seek cooperation, not conflict with China on trade



By APD writer Lu Jiafei

Washington, Nov. 14 (APD) -- For a U.S. president preoccupied with the idea to “Make America Great Again” in trade, collaboration with China is more of a necessity than a choice. Donald Trump should keep that in mind.

Weeks before Trump’s five- country Asia tour, U.S. top military officer Joseph Dunford named China as likely the “greatest threat” of any foe to the United States by about 2025 in his congressional hearing. While the era of military competition in the Pacific between China and the United States has long predated Trump’s presidency, Washington’s anxiety of a rising China being a threat economically has newly prevailed with the new president touting “America First” as the major and overriding theme of his administration.

Recently, I talked to Harvard professor Joseph Nye, the scholar known for coining of the term “soft power”. While Nye stressed that there is no existential conflict between the two countries, he cautioned that the Trump’s presidency, which takes a much narrower view on trade benefits, would usher in an era of more competition in trade between the two countries.

“The problem with the Trump administration is that they think that a bilateral trade deficit or surplus is a measure of the virtue of a country and most economists will tell you no,” Nye told me, before mentioning that China did need to address the issue of not allowing full reciprocity in trade.

“I think that there is the danger that the Trump administration has a misunderstanding of the benefits of trade and so we may see worse trade relations than we expect,” Nye added.

U.S. President Donald Trump, left, and Chinese President Xi Jinping, right

Nye is not alone when it comes to criticize the new administration’s fixation on wiping out trade deficits. Mireya Solís, co-director of Center for East Asia Policy Studies Senior Fellow at Brookings Institution recently wrote that Trump risks setting up trade deal renegotiations to fail by doubling down on eliminating bilateral trade deficits as the central objective of the talks despite the fact that the trade balances reflect larger macroeconomic forces and are not an indicator of U.S. economic health.

Trade balances matter overwhelmingly to Trump, and his relentless pledge to cut trade deficits so far has put his administration’s unilateralism in full display.

During his speech to business leaders at the Asia-Pacific Economic Cooperation forum in Danang, Vietnam last week, Trump proclaimed again that he was “not going to let the United States be taken advantage of anymore” before targeting China for “the enormous trade deficits they have produced with the United States.”

The things Trump failed to point out are the enormous economic benefits trade with China has created for the United States. China bought 165 billion U.S. dollars in goods and services from America in 2015, and the figure is expected to further grow, according to a recent report by Oxford Economics.

Job creation is another Trump’s favorite topic. Then, he should be aware that Chinese companies directly employ over 140,000 Americans, often in areas that were left behind by globalization, or in other words where his supporters live, according to a report by the National Committee on US-China Relations and the Rhodium Group.

Overall, the Oxford Economics report found out that about 2.6 million U.S. jobs are supported by the U.S.-China bilateral trade.

Although some US manufacturing jobs have been lost because of the trade deficit with China, Oxford Economics pointed out that U.S. firms sell high-value products to China, including cars and trucks, construction equipment, and semiconductors, which in turn support job creation back in America.

According to figures provided by Oxford Economic, U.S. firms also export business and financial services, totaling 6.7 billion U.S. dollars in 2014 and 7.1 billion U.S. dollars in 2015. By 2030, it is expected that U.S. exports to China would rise to more than 520 billion U.S. dollars.

If the figures mentioned above cannot convince Trump of the importance of cooperation with China on trade, he should heed the conclusion by the Oxford Economics report which noted that “economic data show that nations trading closely with China outperform nations with less integrated trade ties, and we expect this trend to continue.”

Lu Jiafei, researcher of APD Institute. After spending one year in Palestine covering the Israeli-Palestinian conflict between 2013 and 2014, Lu moved to Washignton, D.C. and covered the 2016 U.S. presidential election till the very end of Donald Trump’s upset victory. He is a political contributor to APD.