Is China-US JCCT able to 'put out fire'?

15:30, December 16, 2010      

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The meeting of the 21st China-US Joint Commission on Commerce and Trade, or JCCT, was held in Washington on Tuesday and Wednesday. Since its inception in 1983, the JCCT has been considered a platform of vital importance to address the Sino-US bilateral trade friction issue and promote bilateral exchanges in commerce, and so it has earned the name of an "extinguisher".

The U.S.'s trade deficit has long been the crux of Sino-US trade relations. The U.S.-China Economic and Security Review Commission maintains that both countries should take half of the responsibility for global economic imbalance in its recent report submitted to U.S. Congress. China should increase imports from the U.S., while reforming the exchange rate system of its Chinese yuan or RMB to limit the competitiveness of its exports products and to cut its trade surplus.

Meanwhile, the United States set forth the goal of doubling its exports by 2015 in a hope to expand exports, promote employment and reduce the effect of its trade deficit. However, recent developments in world situation do not fully comply with this subjective desire. The U.S. deficit in goods rose 20.6 percent in the first eight months this year over the same period in 2009, according to U.S. statistics.

Owing to a high employment rate in the U.S., volatile circumstances in the political situation, and the growing intense desire of the US government to promote exports, the trade deficit with China has once again become a very sensitive issue in the Sino-US economic and trade relations.

Difference between China and the U.S. in elements of the comparative advantage and their complementary industrial structure poses a driving force to generate the deficit. Moreover, the US dollar's reserve currency status is an important factor which enables the U.S. to retain the size and growth of its long-term deficit. At the same time, some institutional arrangements of either nation may affect bilateral trade patterns. But some major monetary system adjustments and their impact have gone far beyond the trading sphere.

Currently, the United States very much wants China to increase its imports from it, so as to help terminate its trade deficit. The US export to China has the main comparative advantage in the area of farm produce and high-tech goods. The U.S. is ready to export more agricultural products, but the bulk importation of US farm produce has the risk of harming the interest of Chinese farmers and jeopardizing China's national economic security, and so they have to be kept within a proper scope. As for high-tech products, China is willing to import, but the United States has all along been restrictive with its export to China in this regard. A full week ago, on December 9th, the United States government announced its decision to ease its control on the sale of high-tech products to 37 of its allies, and China is not included nevertheless. Meanwhile, the US-China JCCT has admitted that China's export to the U.S. has brought tangible benefits to American consumers as a whole, though it may be detrimental to domestic producers in the U.S.

What merits particular attention is that the U.S. has kept asking China to re-evaluate Chinese yuan, expanding imports from it, beefing up the intellectual property rights (IPR) protection, opening up the government procurement market, while continuing to implement its intensive trade protection measures against China's export products, ignoring the appeal of the Chinese side not to have a firm grip over the high-tech products export to China and not to take a negative attitude on recognition of China's market economic status. By giving heeds to the U.S. interests at the expense of interests of the Chinese side, it cannot be counted for as the "win-win" situation. In so doing, the U.S.-China JCCT is definitely not able to "put out fire".

All in all, the U.S. trade deficit with China has had complex causes for its shaping, and it will last a fairly long time. As a matter of fact, it is impossible to have a fast settlement through imposition of the political pressure or trade barriers. Hence, both sides should get to understand the interest appeal and varied demands of the other side, take actions to enhance engagement and consultations, so as to spur the U.S.-China trade balance with mutual benefit and a "win-win" outcome.

Visiting Chinese Vice Premier Wang Qishan has co-chaired the two-day JCCT meeting with U.S. Commerce Secretary Gary Faye Locke and Trade Representative Ron Kirk. The two sides had an extensive, wide-ranging exchange of views on trade, investment, agricultural products, technologies and standards of inspection and quarantine, IPR, bilateral exchanges and cooperation.

By People's Daily Online and its author is Yang Changyong, a Ph.D. research associate with the Foreign Economic Research Institute of China's National Development and Reform Commission
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