About a year ago, on December 21, 2020, I wrote an article titled “It’s Time to Turn the Page”, in anticipation of improving China-U.S. Trade relations following Joe’s election. Biden as President of the United States. Sadly, even nearly a year after Biden’s presidency began, this has not happened.

Joe Biden and President Xi Jinping held a virtual summit on November 16 and established a framework and guideline for bilateral relations. An intensive dialogue at ministerial level also took place in 2021, all constructive. But there has been little change in US actions, and therefore little easing of tensions.

Biden continues his containment policy

The Biden administration has kept tariffs high on $ 370 billion in Chinese goods, ignoring Chinese and American citizens’ demands for their removal.

In fact, US Treasury Secretary Janet Yellen has pointed out that tariffs are not the right solution and only hurt the US economy. In addition, the American business community’s call for tariff elimination has intensified.

But the US trade representative did not revoke them, only accelerated the process of tariff exclusion.

Unilateral sanctions and restrictions on high-tech trade intensified in the second half of 2021. US lawmakers passed the Telecommunications Equipment Security Law on October 29 to tighten restrictions on Chinese high-tech giants Huawei and ZTE. And the Federal Communications Commission released a list of equipment and services it believes pose a threat to national security and terminated China Telecom America’s license to provide services in the United States.

On November 24, the US Department of Commerce announced sanctions against 12 Chinese high-tech companies in the fields of artificial intelligence, big data, semiconductor chips and quantum computing, followed by another round. sanctions on December 16 against 34 companies.

In addition, Biden skillfully aligned American allies to contain China. And his administration hosted the QUAD Summit and formed AUKUS (a security alliance between Australia, UK and US) to propel its Indo-Pacific strategy.

At the G7 summit in Cornwall, Britain at the end of June 2021, Biden announced the ‘Better World Initiative’ to counter China’s proposed ‘Belt and Road’ initiative, with the EU summit -United States which followed the creation of the Trade and Technology Council. control China’s business and technological development by aligning the two economies’ supply chains of semiconductor chips and other advanced technologies with “like-minded” countries.

And recently, US Secretary of Commerce Gina Raimondo toured Southeast Asia to strengthen the Indo-Pacific economic framework, in order to contain China.

Global trade is increasingly hijacked by the political and ideological motives of Western powers. The US Senate passed a law banning imports from China’s Xinjiang Uighur Autonomous Region under the pretext of fabricated rumors that China uses “forced labor” in the region to produce goods.

US stocks have made relations worse

These developments that have worsened Sino-US relations reveal two distinctive features of the Biden administration’s Chinese trade policy. US trade policy is guided by its stated core values ​​of “democracy” and “human rights.” The United States assumes that China, since it is ruled by the Chinese Communist Party, has completely different core values. In short, the United States sees China as a threat to its national security that must be countered.

The second characteristic is the orientation of the United States towards hegemony. He can’t digest the fact that China’s economy is getting closer to that of the United States (China’s GDP in 2021 will be about 75% of that of the United States) and China’s high-tech growth questions American domination. Worse, anti-Chinese positions have become politically correct in the domestic political ecology of the United States.

Anti-China policies, however, have failed to control bilateral trade, which, ironically, is booming. According to Chinese customs data, bilateral trade volume in the first 11 months of 2021 increased by 30.2% compared to the same period a year ago, and by 7.7% for the whole of 2018 , the previous record, before the launch of former US President Donald Trump. the trade war.

The volume of bilateral trade for the whole of 2021 could reach 750 billion dollars against 633.5 billion dollars in 2018, the previous record. For the record, Chinese exports to the United States are probably up over $ 90 billion and imports by $ 25 billion. And the first 11 months saw an increase in foreign direct investment in China, up 21.4% year-on-year to $ 157.2 billion.

Restrictions on high-tech trade (semiconductor chips, in particular) also didn’t make a difference. In the first 10 months of 2021, China’s domestic chip production grew 22.2 percent year-on-year. And the first 11 months of 2021 saw chip exports increase 34%, with imports rising 23.4%. In addition, China’s global chip share continues to increase rapidly.

A recent study by the Belfer Center at the Kennedy School of Harvard University found that China has overtaken the United States in artificial intelligence, 5G and quantum computing. China has six times as many articles on AI as the United States. It also owns 87% of the world’s 5G stations and two of the world’s top five 5G technology providers. The United States has zero.

And the Semiconductor Industry Association (US) estimates that China will become the world’s largest chip supplier, accounting for 40% of the global market by 2030.

The United States’ attempt to rally its allies to contain China has yielded poor results, as in the first three quarters of 2021, the volume of China-ASEAN trade reached $ 630.54 billion, while the volume US-ASEAN trade was only $ 278.81 billion. In the past three years, China-ASEAN trade grew 45.3%, while US-ASEAN trade grew 34.1%.

China-ASEAN trade was 2.26 times higher than US-ASEAN trade in the first three quarters of 2021, compared to 2.15 times three years ago. And while China-EU trade grew by 33.8% during this period, US-EU trade grew by a meager 8.2%.

In addition, the regional comprehensive economic partnership agreement, which entered into force on January 1, represents 30% of world trade and includes China, the 10 members of the Association of Southeast Asian Nations, Japan , the Republic of Korea, Australia and New Zealand, but not the USA. RCEP is the largest free trade agreement in the world.

Washington should change its bad policy

Which means Washington’s containment policy is not working. Why?

The first mistake of the United States is to have set the wrong strategic objective. He sees China as a threat to its geopolitical, economic and military domination. In reality, China is not a threat. The real problem is American hegemony. The world order is based on multilateralism with the United Nations and the United Nations Charter at the heart, not on the domination of a single country.

China pursues economic growth to improve the livelihoods of its 1.4 billion people, not to displace the United States in the world market. Even if China’s GDP per capita reaches $ 20,000 and therefore its total GDP reaches $ 28 trillion, which is 33% more than the current GDP of the United States, its GDP per capita will still be below the threshold of member economies. of the OECD and only 30% of the United States. So where is the threat?

The second mistake of the United States is its total neglect of world economic laws. The Chinese and American economies operate on the basis of global supply chains, which depend on an efficient allocation of global resources, capital, technology, market and talent. Global supply chains only follow economic laws, not the will of a government.

China and the United States both need perspective to draw key lessons before considering realistic and achievable ways to manage differences and promote cooperation.

The two governments must set concrete guidelines for peaceful coexistence, as agreed by Xi and Biden at their virtual summit. For this, the two parties must respect five principles: mutual respect for sovereignty and territorial integrity, non-aggression, non-interference in internal affairs, equality and mutual benefit.

So, the United States should not try to control China and instead work with it for the benefit of both sides and the rest of the world. He should not challenge China on the Taiwan issue either, as the island is an integral part of China. Nor should he challenge China over Xinjiang, which is China’s domestic affair. Based on equality and mutual benefit, trade issues should be separated from politics.

In addition, the trade teams of the two governments should enter into serious and substantial consultations to identify strategic and practical issues. The two sides should form various study groups that can conduct a thorough study of the main issues and concerns and find common ground for cooperation and collaboration, and come up with workable proposals on which they can act. And the United States must lift punitive tariffs on Chinese products.

In addition, industry associations and chambers of commerce of the two countries should create joint working groups covering AI, 5G, semiconductors, quantum computing and cybersecurity to develop workable proposals to resolve cooperation and security issues. The aim of these efforts should be to build open, equal and mutually beneficial China-US supply chains.

And subnational cooperation, especially between US states and Chinese provinces, should be encouraged, and it should include climate change, alternative energy, AI, cross-border e-commerce, 5G, agriculture, biotechnology. and capital markets.

Hopefully governments and the business community will make constructive efforts in 2022 to seek new ways to ease tensions and stabilize relations between the world’s two largest economies in the years to come.

The author is a senior researcher at the Chongyang Institute for Financial Studies. Source: chinausfocus.com

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