Xinhua News Agency, Beijing, June 2-the State Council Press Office published a white paper on China’s position on Sino-US economic and trade consultations on June 2. The full text is as follows:
China’s position on Sino-US economic and trade consultations
(June 2019)
People’s Republic of China (PRC)
the State Council Information Office
catalogue
foreword
First, the United States provokes economic and trade frictions with China and harms the interests of the two countries and the world.
Second, the United States reneged on its word and did not stress honesty in Sino-US economic and trade consultations.
3. China has always adhered to the consultation position of equality, mutual benefit and integrity.
Concluding remarks
foreword
Sino-US economic and trade relations are the "ballast stone" and "propeller" of bilateral relations, which are related to the fundamental interests of the two peoples and the prosperity and stability of the world. Since the establishment of diplomatic relations between the two countries, bilateral economic and trade relations have continued to develop, the areas of cooperation have been continuously expanded, and the level of cooperation has been continuously improved, forming a mutually beneficial and win-win relationship with high complementarity and interests, which not only benefits the two countries, but also benefits the world.
Due to different stages of development and economic systems, differences and frictions are inevitable in economic and trade cooperation between the two countries. In the course of the development of Sino-US economic and trade relations, there have been many twists and turns and difficulties. In a rational and cooperative attitude, the two countries solved problems through dialogue and consultation, resolved contradictions and narrowed differences, and bilateral economic and trade relations became more mature.
Since the new US administration took office in 2017, it has threatened to impose tariffs and other means, frequently provoking economic and trade frictions with major trading partners. Since March 2018, in response to the Sino-US economic and trade frictions unilaterally initiated by the US government, China has to take effective measures to resolutely defend the interests of the country and the people. At the same time, China has always adhered to the basic position of resolving disputes through dialogue and consultation, and conducted several rounds of economic and trade consultations with the United States in an effort to stabilize bilateral economic and trade relations. China’s attitude is consistent and clear. China and the United States are beneficial to each other, but fighting hurts each other. Cooperation is the only correct choice for both sides. China is willing to solve the economic and trade differences and frictions between the two countries in a cooperative way, so as to reach a mutually beneficial and win-win agreement. However, cooperation is principled, consultation has a bottom line, and China will never give in on major issues of principle. Regarding the trade war, China is unwilling to fight, not afraid to fight, and has to fight if necessary. This attitude has never changed.
In order to comprehensively introduce the basic situation of Sino-US economic and trade consultations and clarify China’s policy stance on Sino-US economic and trade consultations, the China Municipal Government has issued this white paper.
First, the United States provokes economic and trade frictions with China and harms the interests of the two countries and the world.
The current U.S. government pursues the policy of "giving priority to the United States", adopts a series of unilateralist and protectionist measures abroad, uses the "big stick" of tariffs at every turn, and imposes its own interests on other countries. The United States launched the "201 investigation" and "232 investigation" that have been dusty for many years, and frequently attacked major trading partners, disrupting the global economic and trade pattern. The United States also pointed its finger at China, and launched a unilateral "301 investigation" in August 2017, ignoring China’s unremitting efforts and great achievements in strengthening intellectual property protection and improving the business environment for foreign investors over the years, making many negative and objective comments on China, and adopting economic and trade restrictions such as increasing tariffs and restricting investment to provoke Sino-US economic and trade frictions.
Ignoring the economic structure of China and the United States, the characteristics of development stages and the reality of international industrial division of labor, the United States insists that China has adopted unfair and unequal trade policies, which has led to a trade deficit with China, suffered losses in bilateral economic and trade exchanges, and unilaterally imposed tariffs on China. In fact, in the era of economic globalization, the economies of China and the United States are highly integrated and form a complete industrial chain. The economies of the two countries are linked by bones and tendons, which are mutually beneficial and win-win. It is a miscalculation to regard the trade deficit as a "loss". The trade restrictions adopted by the United States against China are not conducive to China, the United States and the world.
(A) the United States tariff measures harm others and do not benefit themselves
The US government imposes tariffs on China’s goods exported to the United States, which hinders bilateral trade and investment cooperation and affects the confidence of the two countries and even the global market and the smooth operation of the economy. U.S. tariff measures led to a decline in China’s exports to the United States, which fell by 9.7% year-on-year from January to April 2019 (Note 4), falling for five consecutive months. At the same time, American exports to China declined for eight consecutive months because China had to increase tariffs in response to the US tax increase (Note 5). The uncertainty caused by Sino-US economic and trade friction makes enterprises of the two countries take a wait-and-see attitude towards investment cooperation. China’s investment in the United States continues to decline, and the growth rate of American investment in China has also obviously slowed down. According to statistics from China, in 2018, China enterprises directly invested 5.79 billion US dollars in the United States, down 10% year-on-year (Note 6). In 2018, the actual US investment in China was US$ 2.69 billion (Note 7), and the growth rate dropped sharply from 11% in 2017 to 1.5%. Due to the uncertain prospect of Sino-US economic and trade friction, the World Trade Organization lowered the growth rate of global trade from 3.7% to 2.6% in 2019 (Note 8).
(B) The trade war did not bring the so-called "greatness again" to the United States.
The tariff increase measures not only failed to promote the economic growth of the United States, but also brought serious harm.
The first is to increase the production costs of American enterprises. The manufacturing industries between China and the United States are highly interdependent. Many American manufacturers rely on China’s raw materials and intermediate products, and it is difficult to find suitable alternative suppliers in the short term, so they can only bear the cost of increasing tariffs.
The second is to raise domestic prices in the United States. Importing good quality and low price consumer goods from China is one of the important factors that keep the inflation rate in the United States low for a long time. After the imposition of tariffs, the final selling price of China products has increased, and in fact, American consumers have also borne the tariff cost. A study by the National Retail Federation of the United States shows that the imposition of a 25% tariff on China furniture alone will cost American consumers an extra $4.6 billion a year (Note 9).
The third is to affect the economic growth and people’s livelihood in the United States. According to the report jointly released by the American Chamber of Commerce and Rongding Group in March 2019, due to the economic and trade friction between China and the United States, the US GDP will probably decrease by 64 billion to 91 billion US dollars every year in 2019 and the next four years, accounting for 0.3%-0.5% of the total US GDP. If the United States imposes a 25% tariff on all goods exported from China to the United States, the gross domestic product of the United States will be reduced by US$ 1 trillion in the next 10 years (Note 10). According to the research report released by the American think tank Trade Partnership in February 2019, if the United States imposes a 25% tariff on all goods exported from China to the United States, the gross domestic product of the United States will decrease by 1.01%, the number of jobs will decrease by 2.16 million, and the annual expenditure of a family of four will increase by $2,294 (Note 11).
The fourth is to hinder US exports to China. On May 1, 2019, u.s.-china business council released the "Report on the Export of States to China — — 2019 pointed out that during the decade from 2009 to 2018, US exports to China supported more than 1.1 million American jobs, and the China market was vital to the US economy. In this decade, 48 States in the United States have achieved cumulative growth in goods exports to China, of which 44 States have achieved double-digit growth. However, in 2018, when Sino-US economic and trade frictions intensified, only 16 States in the United States achieved growth in goods exports to China, while 34 States saw a decline in exports to China, of which 24 States experienced double-digit decline, and agricultural states in the central and western regions suffered the most. Affected by tariff measures, the export of American agricultural products to China decreased by 33.1% year-on-year, of which soybeans decreased by nearly 50%, and the American industry was worried about losing the China market that had been cultivated for nearly 40 years.
(C) US trade bullying has affected the whole world.
Economic globalization is an irresistible trend of the times, and beggar-thy-neighbor unilateralism and protectionism are unpopular. A series of trade protection measures adopted by the United States violate the rules of the World Trade Organization, damage the multilateral trading system, seriously interfere with the global industrial chain and supply chain, damage market confidence, bring severe challenges to the global economic recovery and pose a major threat to the trend of economic globalization.
First, it undermines the authority of the multilateral trading system. The United States launched a series of unilateral investigations such as "201", "232" and "301" according to domestic laws, and adopted measures to increase tariffs, which seriously violated the most basic and core rules of the World Trade Organization, such as most-favored-nation treatment and tariff restraint. This kind of unilateralism and protectionism not only harms the interests of China and other members, but also damages the authority of the World Trade Organization and its dispute settlement mechanism, putting the multilateral trading system and international trade order at risk.
The second is to threaten global economic growth. The global economy has not completely emerged from the shadow of the international financial crisis. The US government has escalated economic and trade frictions and raised the tariff level, and relevant countries have to take corresponding measures, which has led to the disorder of global economic and trade order, hindered the global economic recovery, harmed the development of enterprises and people’s well-being in various countries, and made the global economy fall into the "recession trap". In January 2019, the World Bank released the Global Economic Outlook report, which further reduced the global economic growth forecast to 2.9% in 2019. Continued tension in trade relations is one of the main downside risks (Note 12). The World Economic Outlook report released by the International Monetary Fund in April 2019 lowered the forecast of global economic growth in 2019 from 3.6% in 2018 to 3.3%, and said that economic and trade frictions may further inhibit global economic growth and continue to weaken the already weak investment (Note 13).
The third is to disrupt the global industrial chain and supply chain. Both China and the United States are important links in the global industrial chain and supply chain. The final products exported by China to the United States include a large number of intermediate products and parts imported from other countries. If the United States imposes tariffs on imported products from China, the victims will be many multinational companies, including American enterprises, which cooperate with China enterprises. Adding tariff measures leads to an artificial increase in supply chain costs, which affects the stability and security of the supply chain. Some enterprises are forced to adjust the global layout of supply chain, and global resources cannot be optimally allocated.
It can be predicted that the latest tariff escalation measures taken by the United States against China will not only fail to solve the problem, but will further harm the interests of all parties, which China resolutely opposes. Recently, the US government has imposed "long-arm jurisdiction" sanctions on many China enterprises such as Huawei in the name of so-called "unwarranted" national security, and China is also firmly opposed.
Second, the United States reneged on its word and did not stress honesty in Sino-US economic and trade consultations.
After the United States provoked economic and trade frictions, China had to take countermeasures, and the trade and investment relations between the two countries were affected. Both sides believe that it is necessary to sit down and negotiate to solve the problem through consultation, based on the needs of the well-being of the two peoples and the needs of their respective economic development. Since the launch of the economic and trade consultation in February 2018, great progress has been made, and the two countries have reached a consensus on most of the contents. However, the consultation has also experienced several twists and turns, each of which stems from the United States’ violation of consensus, reneging on its words and not stressing honesty.
(A) renege for the first time
From the very beginning, China advocated that Sino-US economic and trade frictions should be resolved through negotiation and consultation. In early February 2018, the US government proposed that China send a high-level delegation to the United States for economic and trade consultations. China has shown great sincerity and made active efforts. It has held several rounds of high-level economic and trade consultations with the United States, focusing on in-depth exchange of views on trade imbalances and other issues, and reached a preliminary consensus on expanding imports of agricultural products and energy products from the United States, making important progress. However, on March 22, 2018, the US government threw out the so-called "301 investigation" report on China, and made false accusations against China, such as "stealing intellectual property rights" and "compulsory technology transfer". Based on this, it announced that it would impose a 25% tariff on goods worth $50 billion imported from China.
(B) the second renege
The China administration, focusing on the overall situation of bilateral relations, once again sent a working team to hold serious consultations with the United States. On May 19, 2018, China and the United States issued a joint statement, reaching a consensus that "the two sides will not fight trade" and agreed to continue to maintain high-level communication and actively seek solutions to economic and trade issues of their respective concern. The United States publicly stated that it would suspend its plan to impose tariffs on China. On May 29, 2018, despite the opposition of the domestic industrial and commercial circles and the general public, the US government overthrew the consultation consensus only 10 days after the two sides issued a joint statement, making wanton accusations against China’s economic system and trade policy, and announced that it would continue to push forward the tariff increase plan. Since the beginning of July 2018, the United States has imposed a 25% tariff on $50 billion of goods exported from China and a 10% tariff on $200 billion of goods exported from China for three times, and said that the tax rate will be raised to 25% from January 1, 2019. The United States also threatened to impose tariffs on all the remaining goods exported from China to the United States, which led to a rapid escalation of economic and trade friction between the two countries. In order to defend national dignity and people’s interests, China has to make necessary response and impose tariffs on US$ 110 billion worth of goods exported to China.
(3) reneging on one’s word for the third time
On November 1, 2018, US President Trump telephoned the Chairman of the Supreme Leader and proposed to hold a meeting between the two heads of state. On December 1, the heads of state of China and the United States met during the G-20 summit in Argentina, and reached an important consensus on bilateral economic and trade issues. They agreed to stop imposing new tariffs on each other, step up consultations within 90 days, and work towards the abolition of all tariff increases. In the following 90 days, the Chinese and American working teams held three rounds of high-level consultations in Beijing and Washington, and reached many preliminary consensus on the principles and contents of the Sino-US economic and trade agreement. On February 25, 2019, the United States announced that it would postpone the original deadline for raising tariffs on US$ 200 billion worth of goods exported from China to the United States from March 1. From the end of March to the end of April, the working teams of the two countries held three rounds of high-level consultations and made substantial progress. After several rounds of consultations, the two countries have reached an agreement on most issues. In view of the remaining problems, the China government proposed that both sides should make mutual understanding and accommodation, and jointly seek solutions to their differences.
However, the U.S. government pushed its luck, adopted a hegemonic attitude and extreme pressure, insisted on unreasonable high asking price, insisted on not canceling all tariffs imposed since the economic and trade friction, and insisted on writing mandatory requirements concerning China’s sovereignty affairs in the agreement, which led to the delay in bridging the remaining differences between the two sides. On May 6, 2019, the United States irresponsibly accused China of "retrogression" and tried to blame China for the unfinished negotiations. Despite China’s resolute opposition, the tariff rate on 200 billion US dollars of China’s goods exported to the United States was raised from 10% to 25% on May 10, which led to a serious setback in Sino-US economic and trade negotiations. On May 13th, the United States announced the initiation of the procedure of imposing tariffs on the remaining about $300 billion of goods exported from China to the United States. The above-mentioned actions run counter to the consensus of the first US dollar to resolve frictions through consultations, and run counter to the expectations of the two countries and people all over the world, casting a shadow over bilateral economic and trade consultations and the prospects of world economic growth. In order to defend its own interests, China has to take measures to increase tariffs.
(D) Sino-US economic and trade consultations have been seriously frustrated, and the responsibility lies entirely with the US government.
It is totally nonsense for the US government to accuse China of "driving backwards" in the negotiations. In the process of negotiation between the two sides, it is a common practice in trade negotiations to propose amendments and adjustments to the text content and related expressions. In the past ten rounds of negotiations, the US government has constantly adjusted relevant demands and accused China of "retrogression" at will. Historical experience has proved that trying to reach an agreement by throwing dirty water, dismantling Taiwan and exerting extreme pressure will only undermine the cooperative relationship between the two sides and miss historical opportunities.
In a country of gentlemen, courtesy comes first, then soldiers. After the United States raised the new tariff threat, the international community was generally worried that China might cancel the consultation plan to the United States and pay attention to the future of Sino-US economic and trade consultations. Proceeding from the overall situation of maintaining Sino-US economic and trade relations, China maintained a rational and restrained attitude. According to the previous agreement between the two sides, he sent a high-level delegation to the United States for the eleventh round of economic and trade consultations from May 9 to 10, 2019, demonstrating his utmost sincerity and responsible attitude in resolving economic and trade differences with the United States through dialogue. China and the United States had frank and constructive exchanges, and agreed to work hard to control differences and continue to promote consultations. China expressed strong opposition to the unilateral imposition of tariffs by the United States, clarified its solemn position and said that it would have to take necessary measures to fight back. China once again stressed that economic and trade agreements must be equal and mutually beneficial, and will never give in on major issues of principle involving China’s core interests. The premise for the two sides to reach an agreement is that the United States will cancel all tariff increases, and the procurement should be in line with reality, while ensuring that the text of the agreement is balanced and in line with the common interests of both sides.
3. China has always adhered to the consultation position of equality, mutual benefit and integrity.
The China government has always believed that the threat of trade war and the constant imposition of tariffs are not conducive to solving economic and trade problems. China and the United States should uphold the spirit of mutual respect, equality and mutual benefit, resolve problems through consultation in good faith, narrow differences, expand common interests, and jointly safeguard global economic stability and development.
(1) Consultation should be based on mutual respect, equality and mutual benefit.
As the world’s two largest economies and trading powers, it is normal for China and the United States to have some differences in economic and trade cooperation. The key is how to enhance mutual trust, promote cooperation and control differences. Proceeding from the overall situation of safeguarding the common interests of the two countries and the world trade order, China insists on solving problems through dialogue and consultation, responds to the concerns raised by the United States with utmost patience and sincerity, properly handles differences by seeking common ground while reserving differences, overcomes various difficulties, puts forward pragmatic solutions, and makes arduous efforts to promote bilateral economic and trade consultations. During the consultation, China has always adhered to the principles of mutual respect, equality and mutual benefit, and worked hard to reach an agreement acceptable to both sides.
Mutual respect means respecting each other’s social system, economic system, development path and rights, respecting each other’s core interests and major concerns, not challenging the "bottom line" or crossing the "red line", not at the expense of one party’s right to development, and not damaging a country’s sovereignty. Equality and mutual benefit means that the status of consultation between the two sides is equal, the results of consultation are mutually beneficial, and the final agreement is win-win. If one side forces the other side to negotiate, or if the negotiation results only benefit one side, such negotiations will not succeed.
(two) the consultation should move in the opposite direction and be based on honesty.
Consultation requires mutual understanding and joint efforts. Consultation is a process in which the parties concerned seek consensus or compromise on the problems they face through discussion. There are many variables during the consultation. It is normal for all parties to react differently to various changes at different stages from their own interests. China government believes that economic and trade consultation is an effective way to solve the problem. Only when all parties hold a goodwill attitude and fully understand each other’s position during the consultation process can we create favorable conditions for the success of the consultation. Otherwise, it will be impossible to form a basis for reaching a long-term effective agreement and it will be difficult to reach a sustainable and executable agreement.
Honesty is the basis of negotiation. The China administration has always been based on honesty, and has held consultations with the US government with great sincerity. China attaches great importance to the concerns of the United States and strives to find effective ways and means to resolve the differences between the two sides. Significant progress has been made in the 11 rounds of high-level economic and trade consultations held by the two sides. The results of these consultations are in the interests of both China and the United States, and they are the result of joint efforts and direction. During the consultation, China stressed that credit is important and commitment is important, and repeatedly stressed that if the two sides reach an agreement, China will earnestly and earnestly fulfill its commitments.
(3) China will never give in on the issue of principle.
Every country has its own principles. During the consultation, the sovereignty and dignity of a country must be respected, and the agreement reached by both sides should be equal and mutually beneficial. China will never back down on major issues of principle. Both China and the United States should see and recognize the differences and stages of national development and respect each other’s development path and basic system. We can’t expect to solve all the problems through one agreement, but also need to ensure that the agreement meets the needs of both parties at the same time and realizes the balance of the agreement.
The recent announcement by the United States to increase tariffs on China is not conducive to solving bilateral economic and trade problems. China strongly opposes this and has to respond to it to safeguard its legitimate rights and interests. China’s position and attitude are consistent and clear, and China hopes to solve the problem through dialogue rather than tariff measures. For the benefit of China people, American people and people all over the world, China will treat it rationally, but China will not be afraid of any pressure and is ready to meet any challenge. Talk, the door is open; Fight, fight to the end.
(D) No challenge can stop China’s progress.
The development of China will not be smooth sailing, and there will inevitably be difficulties, obstacles and even stormy waves. Facing all kinds of risks and challenges, China is confident to face up to difficulties, turn crises into opportunities and open up a new world.
No matter how the situation develops and changes, China insists on doing his own thing. Developing and strengthening yourself through reform and opening up is the fundamental way to deal with economic and trade frictions. There is a huge demand in China’s domestic market. The promotion of supply-side structural reform will bring about an overall improvement in the competitiveness of products and enterprises, and there is ample room for fiscal and monetary policies. China can maintain a good momentum of sustained and healthy economic development, and its economic prospects are very optimistic.
China will continue to deepen its reform and opening up, and the door of China will not be closed, but will only grow wider. In the keynote speech at the opening ceremony of the second Belt and Road International Cooperation Summit Forum, the Chairman of the Supreme Leader announced that China will adopt a series of major reform and opening-up measures, strengthen institutional and structural arrangements, and promote a higher level of opening up, including expanding foreign market access in a wider range, strengthening international cooperation in intellectual property protection, increasing imports of goods and services on a larger scale, more effectively implementing coordination of international macroeconomic policies, and paying more attention to the implementation of opening-up policies. A more open China will form a more benign interaction with the world and bring more progress and prosperity to China and the world.
Concluding remarks
Cooperation is the only correct choice for China and the United States, and a win-win situation can lead to a better future. In the general direction of Sino-US economic and trade consultation, China is not looking backward, but looking forward. The differences and frictions between the two sides in the economic and trade field will eventually need to be resolved through dialogue and consultation. It is in the interests of China and the United States to reach a mutually beneficial and win-win agreement, which conforms to the expectations of all countries in the world. It is hoped that the United States and China will go hand in hand, manage economic and trade differences and strengthen economic and trade cooperation in the spirit of mutual respect, equality and mutual benefit, jointly promote Sino-US relations based on coordination, cooperation and stability, and enhance the well-being of the two countries and the people of the world.
(Note 1) In February, 2018, the Center for Global Innovation Policy of the American Chamber of Commerce released the 2018 International Intellectual Property Index Report, which stated that in 2018, China ranked 25th among 50 economies with a score of 19.08, up two places from 2017, http://www. theglobalipcenter.com/wp-content/uploads/2007.
(Note 2) On January 18, 2018, China National Intellectual Property Administration, China held a press conference on the main work statistics and related information in 2017, http://www.sipo.gov.cn/twzb/gjzscqj 2017 nzygztjsjjgqkxwfbk/.
(Note 3) u.s.-china business council website: 2019 State Export Report, https://www.uschina.org/reports/2019-state-export-report, May 1, 2019.
(Note 4) Website of China General Administration of Customs: http://www.customs.gov.cn/customs/302249/302274/302275/2418393/index.html, May 8, 2019.
(Note 5) Website of China General Administration of Customs: http://www.customs.gov.cn/customs/302249/302274/302275/2418393/index.html, May 8, 2019.
(Note 6) Data of China Ministry of Commerce.
(Note 7) Website of the Ministry of Commerce of China: China’s FDI absorption news from January to December 2018, http://www.mofcom.gov.cn/article/tongjiziliao/v/201901/2019010283209.shtml, January 15, 2019.
(Note 8) World Trade Organization (WTO) website: WTO Trade Forecasts: Press Conference, https://www.wto.org/English/news _ e/spra _ e/spra255 _ e.htm, April 2, 2019.
(Note 9) The website of the National Retail Federation of America: NRF Warns USTR Tariffs Would Cost Americas Billions, Releases New Study on Consumer Impact, Https://nrf.com/media-center/press-releases/nrf-warnings-USTR-towers-would-cost-Americans-bills-releases-new-study, August 22, 2018.
(Note 10) Rongding Group website: Asserting the Costs of Targets on the US ICT Industry: Modeling US China Targets, https://rhg.com/research/Asserting-the-Costs-of-Targets-on-the-US-ICT-Industry, March 15, 2019.
(Note 11) Trading partner websites: estimated impacts on the U.S. economy and workers (2019), https://tradepartnership.com/reports/estimated-impacts-of-targets-on-the-u-s-economy-and-workers.
(Note 12) World Bank website: Global Economic Prospects, https://www.worldbank.org/en/publication/global-economic-prospects, January 8, 2019.
(Note 13) International Monetary Fund website: World Economic Outlook, https://www.imf.org/en/publications/WEO/issues/2019/03/28/world-economic-outlook-April-2019, April 2, 2019.
