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Wang Yi Talks About China-United States (US) Trade Friction: Unilateralism and Economic Hegemony Are Unacceptable, and Threatening and Putting Pressure Will Only Be Counterproductive
2018-07-30

On July 30, 2018, State Councilor and Foreign Minister Wang Yi and Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt of the United Kingdom (UK) met with the press together after co-chairing the 9th China-UK Strategic Dialogue in Beijing. Wang Yi expounded stance on China-US trade friction at inquiry.

Wang Yi expressed that trade liberalization is a universal consensus of the international community and an irresistible historical trend. China has always been on the side of safeguarding the free trade system and stood on the right side of history. One who carries out unilateralism is the one who will be isolated. The past, present and future international practice will continue to prove this point. In the talks just now, I have reached with Secretary of State for Foreign and Commonwealth Affairs Jeremy Hunt a consensus that the Chinese side will work together with the UK side as well as the international community to continue to safeguard the multilateralism process, the global free trade system and the rules of the World Trade Organization (WTO).

What I want to emphasize is that exchanges between countries are the same as those between people. They must be based on credit, grounded on facts, and accorded with rules. I would like to introduce some basic facts to you, on which I believe that everyone will make objective and rational judgments.

First, the main responsibility for the trade imbalance between China and the United States (US) is not in the Chinese side. First and foremost, trade is a spontaneous behavior of the market, and China has never imposed business deals on others. The trade structure is naturally resulted from international division of labor. Most of China's exports are final assembly, and a large number of intermediate products are not produced in China. In addition, the trade imbalance between China and the US also stems from the international currency status of the US dollar, the low domestic savings rate, the mass consumption within the US, and the export restrictions of the US side on high-tech products. Therefore, the root of the US trade deficit problem is in the US itself.

Second, the surplus and deficit are not the criteria of right or wrong. A surplus does not mean taking an advantage, and a deficit is not necessarily a loss. In fact, the US has been benefitting from the trade with China, such as obtaining a large amount of cheap resources and commodities, increasing the welfare of the consumer welfare and supporting the strong position of the dollar. The so-called "loss theory" of the US side is puzzling. It's like someone who goes to the supermarket and buys 100 US dollars of commodities, and then the person complains about losing 100 US dollars while holding the goods in hands. Is that logical?

Wang Yi pointed out that in the field of China-US service trade, China has an annual deficit of up to 50 billion US dollars with the US, and the annual production and sales of US-funded enterprises in China reach more than 600 billion US dollars, and the US side has actually gained huge benefits in China. In addition, about 60 percent of China's trade surplus with the US is created by foreign-invested enterprises in China. In the product value chain, the multinationals of the US and other developed countries have obtained major profits, leaving Chinese companies minor ones, which are mainly some processing fees.

Third, the trade friction between China and the US was first provoked by the US side. Despite the opposition of the Chinese side, the US launched a 301 investigation against China in March, firing the first shot targeting China, and then continued to take various escalating actions. The Chinese side does not want to fight a trade war, but in the face of the aggressive attitude and tort of the US, we have to take necessary counter-measures, which is purely legitimate and reasonable justifiable defense.

Fourth, the trade friction provoked by the US lacks legitimacy and justification. Both China and the US are the WTO members and should resolve trade friction within the framework of the WTO. However, the US side has thrown away the WTO dispute settlement mechanism and handled foreign trade friction according to its own domestic law. It completely deviated from the basic principles of the WTO and violated the tariff concessions and the most favored nation obligations of the US. And this is a typical approach of unilateralism and economic hegemonism, and no independent sovereign country can accept it.

Wang Yi said that since the beginning of this year, China and the US have held several consultations on trade issues and reached very important consensuses. Unfortunately, the US side has neither fulfilled its obligations, nor gone along with us. Reform and opening up is China's established national policy. Dealing with trade friction through dialogue rather than confrontation is China's consistent position and also the correct way to solve the problems. The door of the Chinese side to dialogue and negotiation has always been open. However, dialogue must be based on mutual equality and respect and based on the rules. Unilaterally posing threats and putting pressure will only be counterproductive.

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