Import expo to improve trade balance: Xi addresses opening ceremony of the CIIE; When realities hit the ‘Road’


The first ever China International Import Expo (CIIE) kicks off in Shanghai today. President Xi Jinping attends the opening ceremony and delivers a keynote speech at the ceremony.

The China International Import Expo (CIIE), the world’s first import-themed national expo, kicks off on Monday. More than 3,000 enterprises from some 130 countries and regions will exhibit their products, taking this as a premier opportunity to enter or expand their presence on the Chinese market.

But there are still fault-finding reports about the event. Some say sarcastically that no state leader or government head from the G7 will attend the expo. Some even link the CIIE with the China-US trade war in spite of the fact that China announced the CIIE in May 2017 at the Belt and Road Initiative on International Cooperation, before the trade war hadn’t started.

Why do these media always want to dig out some political ends from the CIIE, which is in any way a good thing for global trade as well as the exports of Western countries?

CIIE is being held to serve enterprises and exporters worldwide, not Western leaders. Japan ranks first in terms of the number of participating companies, followed by South Korea, the US, Australia, Germany and Italy. This fully demonstrates how much passion companies from developed countries hold toward the expo and heralds the expo’s success.

If more countries and regions with a trade surplus can host import expos, that will promote global trade balance. Those with a trade deficit should not blame others, but encourage their enterprises to grasp every opportunity to promote their products. Sometimes the problem lies in information asymmetry and an import expo can provide a platform for suppliers and buyers to communicate at a low cost.

China has long had a trade surplus and too much of it is not helpful for the country. More imports of high-quality products can help Chinese to upgrade their consumption and advance the production. The inherent drive for hosting CIIE is to translate part of China’s foreign exchange reserve into social progress.

China started very early by holding trade fairs in Guangzhou and later became a leading exporter in the world. Now we are holding the import expo in the hope of promoting our imports.

Tangled in a trade war with the US, China could have shut US companies out of the expo as a way of pressuring, but it has acted the other way around. By contrast, the US now thinks everything about the Chinese economy is wrong and whatever China does is a trick. The two countries differ in their visions.

We believe that the CIIE, if held regularly, will help China enhance the quality of its imports and balance its imports and exports. China doesn’t need to care what the outside world thinks of the expo, nor should it intentionally enhance the volume of transactions as a proof of kindness.

As long as the Chinese market grows larger, CIIE will attract more attention and will be remembered in world trade history as a positive event.

Countries, businesses look forward to CIIE

As the first China International Import Expo (CIIE) nears, officials and entrepreneurs around the world aim to seize the opportunity to explore the Chinese market, voicing greater confidence in China’s further opening up.

“We understand the CIIE as … showcasing China’s greater openness to importers. These are all moves in the right direction,” World Bank Group President Jim Yong Kim said. “We support what China is doing to expand imports and address global trade imbalances.”

Lithuanian President Dalia Grybauskaite told Xinhua that “the expo is a ‘win-win’ event for both, China and the world, as it provides new opportunities for cooperation, helps companies across the globe enter the Chinese market and paves the way for China to satisfy its growing demand for high-quality products.”

Pakistan is confronted with current account deficit and the CIIE “is a great opportunity for Pakistan to have a pavilion where we will be exhibiting our exports,” Pakistani Prime Minister Imran Khan said.

Khan hailed China’s reform and opening up policy which provides Chinese industries a better environment to compete in international trade. “China has set a good example,” he said.

Madagascar will showcase products such as vanilla, cocoa beans, coffee beans and minerals at the CIIE. China offers a great opportunity for everyone, and everyone must know how to seize this opportunity, Minister of Tourism Jean Brunelle Razafintsiandraofa told Xinhua.

“Australia thinks it (the CIIE) is a great celebration of … the economic contribution that China makes to the region and the world. That is why we’re delighted that some 180 Australian businesses and brands are participating,” said Australian Minister for Trade, Tourism and Investment Simon Birmingham.

“We are in global markets, we are all together and we want to cooperate,” Israeli Scientific Minister Ofir Akunis said, adding that it is a “very good idea” and the “right way” that China hosts the CIIE where people from all over the world will meet meet on cooperation in the future.

“I think (the CIIE) is a great opportunity to show the players in the global economic environment the opening of China to world trade, and it is also a contribution to the growth of the global market,” Marco Tronchetti Provera, CEO of Italian-Chinese tyre maker Pirelli, told Xinhua.

The CIIE, a significant move by the Chinese government to further open the Chinese market, has attracted about 2,800 exhibitors from over 130 countries and regions. Economic and trade exchanges are bringing more benefits to all sides.

“We are going to Shanghai to represent more than 89 of our members who are able to export a range of products (to China),” Sandile Ndlovu, Executive Director of the South African Aerospace, Maritime and Defence Export Council, said. “China could be one of our biggest customers as there is so much potential for trade with China.”

Marathon Ginseng, a U.S. Wisconsin-based ginseng grower, will have a stall at the CIIE. It registered for the expo the first time it heard of the fair.

“It is a big event in China,” Jiang Mingtao, founder of Marathon Ginseng, told Xinhua. “We hope to enhance the reputation of ginseng produced in the state of Wisconsin … and let more Chinese consumers know our products – Global Times

Highlights of Xi’s keynote speech at import expo – Chinadaily.com.cn

When realities hit the ‘Road’

 

JUST 11 weeks into his election victory, Pakistan’s new Prime Minister Imran Khan has already had to accomplish a task that seriously tests his diplomatic skills.

More than that, it is a task that would tax his diplomatic creativity. And that is in addition to the dire economic challenges he already faces at home.

Confronted with multiple needs and demands, it has taken some time for the new Government to form a Cabinet. Pakistan’s economy has taken some beating. Imran’s opposition party won the August election on a tide of change, against an incumbent party in government whose leaders had been charged with corruption.

Worse, the novice Prime Minister also has to contend with unfavourable terms that the previous government had agreed to with China in its Belt and Road Initiative (BRI) projects.

Imran is in Beijing this weekend to try to negotiate those terms.

He is a self-confessed fan of Malaysian Prime Minister Tun Dr Mahathir Mohamad. Even so, he could not possibly have planned to follow in Dr Mahathir’s footsteps so closely. Imran’s toughest task is to present his case in China so persuasively as to avoid a cynical sense of déjà vu among China’s leaders. But what can this new Prime Minister say that has not already been said by his much more experienced Malaysian counterpart, to any greater effect?

One theme Imran’s delegation may be pursuing is explaining to Beijing the plight currently facing Pakistan: in its dire economic straits, Islamabad has to choose between negotiating terms with the International Monetary Fund (IMF) or renegotiating terms with China.

Neither option is ideal by any means. Going with the IMF may even be a worse debt trap than China has ever been accused of fostering. The fact that Imran is in Beijing shows that the lesser evil may be to renegotiate the BRI terms, such as reducing the costs to Pakistan by a couple of billion US dollars.

If Pakistan opts to go with China, it would prove that any conceivable terms with the IMF would be more onerous and risky. Both the new Finance Ministry and Imran’s task force are leaning that way.

Alternatively the BRI projects could be deferred, but would China agree? Much of that remains to be seen, or heard, in the following days. For now, it is important to remember that such situations are prone to misinterpretation and misrepresentation – including of the deliberate kind.

Predictably, the largely Western international media have already portrayed Pakistan as “saying no” to the China-led BRI.

But why would Pakistan ever do that? The China-Pakistan Economic Corridor (CPEC) as a vital segment – indeed, the flagship – of the BRI is of far greater value and importance to Pakistan than to China.

Whatever strategic or symbolic significance the US$62 bil (RM258bil) CPEC may have or be said to have for China, it is dwarfed by the immediate and tangible benefits for Pakistan’s development.

It is situated fully and squarely in Pakistan, not China, covering much of Pakistani territory and set to boost such sectors as energy, telecommunications, tourism, trade and transportation. Pakistan’s Railways Ministry calls CPEC the “backbone” of the country.

Its strategic value to China is access to the Arabian Sea at the corridor’s south-western corner in the port of Gwadar. It is access that China does not need now, and may or may not need sometime in the future. China is comfortable investing heavily in Pakistan’s development because the two countries have a special relationship in South Asia. Western observers who still consider Pakistan a Western ally need to have their perspective of Asia updated. Casting Islamabad as a US ally is merely harking back to the 1950s era of the US-led South-East Asia Treaty Organisation (Seato) in the early phase of the Cold War.

Times have moved on, as have China and Pakistan. Their leaders have repeatedly declared their respective countries “all-weather friends” – perhaps even allies.

To India, China and Pakistan have no common border, their link being only Pakistan-occupied Kashmir (PoK). The territory is bitterly disputed with India following the 1963 China-Pakistan boundary agreement.

Controversy with India flared again two days ago when a bus service was launched linking Lahore with Kashghar in Xinjiang, with the route running through contested PoK.

The term “debt trap” in reference to allegedly risky China-led projects was not coined by China, Pakistan or even Sri Lanka. It was coined by an Indian economist.

If any doubt still lingers over the China-Pakistan relationship, BRI cooperation continues between them and may even expand. Both countries are now seeking to extend CPEC into Afghanistan.

On a stellar scale, China helped Pakistan launch two satellites this year. By 2020, Pakistan hopes to send its first astronaut into space under China’s space programme.

India’s problem with the BRI is essentially its passage through territory disputed with Pakistan. That has now been conflated with what is said to be “Pakistan’s problem” with the BRI.

Western pundits in particular tend to draw such hasty and hazy conclusions since they accord with preconceived US notions of a rising China threat. Such misperceptions are not only wrong but misleading.

Asian countries have a different perspective because a rising China as Asia’s main economy also means a rising Asia. It is the proverbial rising tide that lifts all boats in this region of the continent.

Even the classic anecdotal “debt trap,” Sri Lanka’s Hambantota Port, was never quite the disaster its detractors claimed it to be. That controversy was built up principally between Sri Lanka’s contending political parties and their different positions on China at the time.

Now that Mahinda Rajapaksa – prime mover of the Hambantota project and defeated in the 2015 presidential race – has returned as Prime Minister nine days ago, punditry should be buzzing.

The point, however, is to arrive at reasoned analysis away from wild speculation. China is a rational player whatever the objective may be, so that a rational approach can only help understanding.

For its part, China should also empathise with its BRI partners in the conditions they find themselves in. Financially strapped and economically challenged, nations that wish to work with the BRI are constrained by factors beyond their control.

First, these countries may have new governments that have inherited a broken economy from their predecessors. Much urgent repair work first needs to be done. Second, BRI projects are largely about massive infrastructure, usually the most expensive public projects to be undertaken by any government. Third, much of the BRI runs through developing countries and regions that may not have the largest financial resources even at the best of times.

How will Pakistan’s appeal to China for revised terms hold out? Prime Minister Imran Khan should be able to win some concessions.

After all, China has helped other Asian countries before in times of need, even at some expense to itself. When the 1997-98 Asian Financial Crisis struck, China postponed its scheduled currency revaluation to absorb some of the cost so that the afflicted countries do not go under from excessive loan repayments. Such a generous gesture from Beijing would not be out of character, whether the beneficiary is Pakistan or Malaysia.

After all, each boasts a special relationship with Beijing.

Bunn NagaraBy  bunn nagara

 

Martin Jacques – Big Picture: China’s Belt & Road Initiative will change the world as we know it

 


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Malaysia’s Budget 2019: Making the tiger roar again in 3 years?


The Pakatan Harapan government yesterday tabled its maiden budget that sought to restore Malaysia’s status as an “Asian Tiger” with a clean and transparent government that cares for the rakyat. (EPA/FANDY AZLAN)

KUALA LUMPUR: THE Pakatan Harapan government yesterday tabled its maiden budget that sought to restore Malaysia’s status as an “Asian Tiger” with a clean and transparent government that cares for the rakyat.

Finance Minister Lim Guan Eng, in tabling the 2019 Budget in Parliament, said: “As long as we are clean, people-centric and focused on carrying out institutional reforms, we can restore Malaysia back to fiscal health in three years.

“Let our love for our country unite us, our challenges make us stronger and our confidence awaken Malaysia as an Asian Tiger all over again.”

Themed “A Resurgent Malaysia, A Dynamic Economy, A Prosperous Society”, the RM314.5 billion budget for next year has three areas of focus with 12 key strategies.

One focus area — to ensure the socio-economic well-being of Malaysians — will be the key performance indicator of the government’s success.

“We will seek to meet this objective by ensuring welfare and quality of life, improving employment and employability, enhancing wealth and social welfare protection, raising real disposal income and education for a better future,” he said.

In a speech that lasted more than two hours, interrupted by intermittent heckling from opposition lawmakers, Lim announced a slew of measures to address the people’s key concerns, from cost of living to housing, healthcare, education and transport.

Cash grants for the low-income Bottom 40 (B40) group will continue, single vehicle/motorbike owners with engine capacity of 1500cc and below will get targeted fuel subsidy, and the minimum wage will be raised to RM1,100 from Jan 1.

A National Health Protection Fund, with free coverage on four critical illnesses of up to RM8,000 and a hospitalisation benefit of RM50 a day, was also introduced for the B40 group.

For the affordable home programmes, Lim announced an allocation of RM1.5 billion while Bank Negara Malaysia will set up a RM1 billion fund to help those earning below RM2,300 a month to own houses costing below RM150,000.

The government will also allow the private sector to engage in new crowdfunding schemes for first-time housebuyers.

The Education Ministry received the lion’s share of the budget, with an allocation of RM60.2 billion, including RM2.9 billion assistance for the poor and RM652 million to upgrade and repair schools.

An amount of RM3.8 billion has been set aside for government scholarships.

All intra-city toll rate hikes will be frozen next year, said Lim, and public transport users, meanwhile, can buy RM100 monthly passes for unlimited trips on RapidKL rail or bus services beginning January.

A RM50 monthly pass is also available for those who use RapidKL buses only.

Civil servants and pensioners were not left out — staff up to Grade 54 will receive a one-off special payment of RM500; while government pensioners will get RM250.

The budget deficit for this year is likely to be 3.7 per cent, while gross domestic product (GDP) growth is forecast at 4.8 per cent and 4.9 per cent next year.

To ensure strong and dynamic economic growth, another focus area is to promote an entrepreneurial state that leverages innovation and creativity, while embracing the new digital economy.

The government aims to provide at least 30Mbps broadband connectivity outside urban centres within five years, while funds have been allocated to encourage investments in green technology and transition into Industry 4.0.

Corporate tax rate will be reduced to 17 per cent from 18 per cent for SMEs with paid capital below RM2.5 million, and businesses with annual taxable income below RM500,000.

Meanwhile, after inheriting “a worrying state of financial affairs which was in dire straits” with debts amounting to RM1.065 trillion from the previous administration, the third area of focus is to implement institutional reforms that promote transparent fiscal discipline.

“We intend to table a new Government Procurement Act next year to govern procurement processes to ensure transparency and competition, while punishing abuse of power, negligence and corruption,” Lim said.

He said open tenders will not only achieve more value-for-money for taxpayers, it will also nurture an efficient and competitive private sector.

To ensure that Malaysia has a clean government, the budget also saw the Malaysian Anti-Corruption Commission receiving an increased allocation of RM286.8 million.

Lim said the allocation, which is an 18.5 per cent increase from this year’s, will see MACC employing up to 100 more staff next year as the government revs up its anti-graft campaign.

Putrajaya expects to collect a revenue of RM261.8 billion next year, including a RM30 billion dividend from Petronas.

To raise its revenue, the government will leverage its assets and review taxation policies.

This includes reducing its stake in non-strategic companies, expanding the Service Tax to cover online services, and raising licence fees and taxes in the gaming sector.- By Nst Team

The following are the highlights of the 2019 Budget, which was tabled by Finance Minister Lim Guan Eng in Parliament on Friday. (Bernama photo)

The budget carries the theme of “Credible Malaysia, Dynamic Economy, Prosperous Rakyat” and will focus on three main thrusts with 12 key strategies to recapture Malaysia’s ‘Economic Tiger’ status.

The three main thrusts are:

*Institutional reforms

*People’s wellbeing

*Promotion of entrepreneurial culture

.The 12 strategies are:

*Strengthening fiscal management

*Restructuring and rationalising government debt

*Increase government revenue

*Ensuring welfare and quality life

*Increasing job opportunities and marketability

*Improving quality of healthcare services and social welfare protection

*Increasing disposable income

*Education for a better future

*Initiating new economic power

*Grabbing opportunity to face global challenge

*Redefining government’s role in business

*Ensuring economic fairness and sustainable economic growth

Related:

Govt vows to restore our finances – Nation

 

image: https://www.thestar.com.my/~/media/online/2018/11/03/03/17/budget-spread.ashx?la=en

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Tariff war threatens world trading system


TODAY marks another milestone in the escalating global trade war that threatens to shake the foundations of the world trading system and cause economic uncertainty at a time of financial fragility. It’s an altogether bad development that adds more gloom to global economic prospects.

Last week, the United States announced it would slap an additional 10% tariff on US$200bil worth of imports from China. Hours later, China said it would put 5% to 10% extra tariffs on US$60bil of imports from the US.

Both sets of tariff increases come into effect today. But that’s not all.

The US also said it would raise the extra tariffs on the US$200bil of imports from 10% now to 25% at the end of the year. And if China retaliates (which it now has), the US might slap higher tariffs on yet another US$267bil of Chinese imports.

This comes on top of tariffs on an initial US$50bil worth of imports that the US had placed on Chinese imports a few months ago, and equivalent tariffs on US$50bil on US imports that China imposed as retaliation.

And even before that, the US had put extra tariffs on steel and aluminium imports from all countries, except a few that were exempted for the time being.

The US is also threatening to put tariffs on imported auto vehicles and parts, including those from Europe. That is on hold because of a bilateral deal reached, but could be re-ignited if President Donald Trump is not satisfied with Euro­pean behaviour.

The US itself is experiencing negative effects of this trade war. The prices of the initial US$50bil of imported Chinese products have started to go up in the US, raising costs for both consumers and producers.

The Chinese are similarly affected. Exports of both countries are also bound to decline, and this will eventually affect their overall economic growth.

There will be collateral effects on other countries. In Asia, those that are integrated in the global supply chain will find less demand for their exports of components to China. The effect on Malaysia is projected by analysts to be around 0.4 to 0.7 percentage point of GNP in 2019.

This could be offset by positive effects. Some companies producing in China are considering relocating to other countries, including Malaysia, to escape the US’ punitive tariffs. And some Malaysian products may become cheaper than Chinese products, which will now attract extra duties.

But it is likely that the bad effects will outweigh any such good effects, at least in the short run.

It is clear that the US is to blame for the trade war. Its unilateral actions are against the spirit and rules of the trading system, and have in fact undermined its legitimacy and viability.

The steel and aluminium tariffs were imposed under the US security clause of its domestic trade law, while the other tariff increases are under Section 301 of the trade law. The US actions are against various World Trade Organisation (WTO) rules.

Challenges to the US unilateral measures have been taken by China and other countries at the WTO. If the US is found in violation, which is quite likely, it has to stop its actions or face retaliation: the countries that win the cases heard by the WTO panels of experts are allowed to impose equivalent tariffs on US products.

However, the US has engineered a crisis in the WTO’s dispute settlement system so that soon the outcome of successful cases against it cannot be implemented.

This is because the US is now paralysing the WTO’s Appellate Body by refusing to allow new members of the body to be appointed to replace those retiring. Soon there will be only three members left, out of a full body of seven. Two more will be retiring in January 2019. A minimum of three members is needed to sit on a case.

Thus, if a lower-level panel rules against the US’ unilateral actions, and the US lodges an appeal that cannot be heard because there are not enough appellate body members, the panel decision cannot be enforced.

This would make the WTO quite a toothless organisation. There would be no legal remedy to enforce penalties for breaking the WTO laws. Countries that impose unilateral tariff increases can get away with it. In turn, other countries would also do the same.

The rules-based trade system is already starting to break down. We are now seeing blatant protectionism by the US and retaliation by affected countries. Within months, the trade war could spread, with the law of the jungle becoming more prominent.

Tears will not be shed in the developing countries if some rules cannot be upheld anymore, such as the WTO’s TRIPS agreement on intellectual property. The free trade economist Jagdish Bhagwati has said the TRIPS treaty does not belong in the WTO.

But what all members like about the WTO is its role in ensuring the predictability that their exports can sell in the markets of its members, with tariffs at rates agreed to at the WTO.

If that predictability is lost, then there can be a lot of uncertainty, as one country after another can unilaterally impose extra tariffs on other countries, which may then trigger retaliation.

This breakdown of the trading system may be the more serious effect of what started as a US-initiated trade war.

Trump may not care what happens to the system, as he has said many times that the WTO is a terrible organisation that the US should leave. And his recent actions, in fact, seem calculated to undermine, if not destroy it.

It is a new world we are looking at, in a scenario that would not have appeared possible a year or even months ago.

Policy makers, companies, analysts and the public should ponder about this, even as they follow the details of the tit-for-tat trade war that the US is waging against China and other countries.

Martin Khor is adviser of the Third World Network. The views expressed here are entirely his own.

Credit: Global Trend by Martin Khor

Related:

China won’t yield to US trade stick

We also hope that the Chinese public gets to know the causes and effects of the event and the steadiness of the Chinese government’s policies. No matter how long China-US trade conflicts last, China is doing what it should. China is honest and principled and a major trade power with intensive strengths. No one can take us down.

US hysterical in blocking sci-tech exchanges

The US is anxious about its temporary gains and losses. One minute it wants Sino-US exchanges, but the next it worries China is taking advantage. Its relevant policies are bound to change all the time. Its latest decision is like the trade war. Washington’s purpose is to drag Beijing down, but it will mostly hurt itself.

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America First? China Is Dominating Global Technology

Vanishing Jobs Growth Spells Deep Trouble for South Korea


 

 
Not-so-nice figures: Moon has seen his popularity slide amid criticism that he’s hurting employment by
aggressively increasing the minimum wage. — AP

Unemployment and jobs growth in South Korea haven’t looked so bad since the wake of the global financial crisis, undermining President Moon Jae-in’s economic agenda.

Data released Wednesday show the unemployment rate jumping to 4.2 percent, the highest since early 2010, and much greater than any economists forecast. Jobs growth slumped to just 3,000 last month, also the worst figure in more than eight years.

Moon, who came into office pledging to create jobs and raise incomes for regular workers, has seen his popularity slide amid criticism that he’s hurting employment by aggressively increasing the minimum wage.

While pay hikes planned for this year and 2019 are here to stay, Finance Minister Kim Dong-yeon said the government would consider adjusting some policies.

He conceded that the jobs market wouldn’t improve much anytime soon.

Disappearing Jobs Growth

  • Number of jobs added: South Korea added just 3,000 jobs in August, the least since 2010

Source: Statistics Korea

Moon’s administration points to the fallout from corporate restructuring and the shrinking working-age population as the source of the problems in the labour market. Businesses counter that hiking the minimum wage 16% this year, with another bump of almost 11% to come next year, has made job layoffs inevitable.

Small business owners in particular, from convenience stores to fast-food franchises, have shed workers.

Adding to the economic unease in South Korea is the risk that US President Donald Trump may hit car exporters with auto tariffs, even after Seoul agreed to renegotiate its trade deal with the US.

Unemployment Spike

South Korea’s unemployment rate in August reached the highest since 2010
  • Seasonally adjusted unemployment rate
Source: Statistics Korea

South Korean bonds climbed and the won fell after jobs figures, which appeared to squash any near-term prospect of the central bank raising interest rates.

The finance minister said economic policies that are geared toward wage-based growth are moving in the “right direction”. Yet the government also acknowledged the need for more communication and market analysis in order to gain trust from companies and the people, he said.

The presidential office described the recent increase in unemployment as inevitable pain that accompanies a change in the structure of the economy, Yonhap News reported.

Like many other countries, South Korea is experiencing a widening gap between the rich and the poor. It’s confounding policy makers and exacerbating political divisions. — Bloomberg

Tariffs won’t make US firms produce in US


“It would not be profitable to build the Focus Active in the U.S. given an expected annual sales volume of fewer than 50,000 units,” automaker Ford Motor Company said in a statement on Sunday.

US President Donald Trump tweeted earlier on Sunday that “‘Ford has abruptly killed a plan to sell a Chinese-made small vehicle in the US because of the prospect of higher US Tariffs.’ CNBC. This is just the beginning. This car can now be built in the USA and Ford will pay no tariffs!” Ford quickly clarified the facts, evidently rebuffing Trump’s tweet.

Likewise, tech giant Apple Inc. wrote a letter to US Trade Representative Robert Lighthizer, saying that a proposed 25 percent tariff on $200 billion of Chinese imports would cover a “wide range of Apple products.”

In another tweet, Trump told Apple to make their products in the US instead of China. Apple hasn’t responded.

According to the US media, the price of iPhone may increase to $2,000 if the company does as told.

The multinational companies that produce automobile and mobile phones have different manufacturing and sales layouts. Car manufacturers tend to produce their products where they are sold, while mobile phone manufacturers optimize their production chain costs worldwide. That’s the natural law of economic globalization which can’t be easily changed by a country’s government.

The White House lacks understanding of the global production and value chains. “Make your products in the United States instead of China” seems naive. Instead of coercing companies to follow demands, imposing tariffs will only scare them off.

Simply making US companies produce in the US can’t deal with the complicated global industry today. We have also learnt from history that neither side will gain in a trade war.

China is the world’s largest automobile and mobile phone market. Setting tariff barriers between Beijing and Washington won’t make US companies give up on China for the sake of their own country. As long as China doesn’t make things hard for US companies, it’s unavoidable that they will place production operations in China. The Chinese market can help them make money, but the White House can’t.

Most American high-tech companies will face difficulties if they leave China. The larger the market is, the higher return the companies will get from their research and development. High-tech companies, if they can’t grow to be giant, don’t usually survive for long, and it would be fatal for many of them to lose the Chinese market.

There hasn’t been a previous US government that dares to instruct multinational companies in production layouts, and the current administration has overestimated its executive power. The global industrial chain today is formed by market rules established over decades and can’t be easily changed by one government.

It would be the White House’s dream to expect that the US is not only the world’s technology and financial center, but also the world’s factory that sells its products globally. If the US doesn’t want to wake up from this dream, then the outside world has to step in and rouse Washington.

Source:Global Times

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The “five-no” and “four-can’t” are truly inspiring. They correct the concepts of rights and point to the justice of the day. President Xi’s points will definitely leave a deep mark on the history of relations between the African continent and China, and the entire world.

 

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The US, South Korea and Japan must clarify what exactly they want on the Korean  Peninsula. They cannot have everything, especially things that contradict each other. If the US wishes for denuclearization and peace on the peninsula, it would see the value of China-North Korea ties and support them.

Governance woes behind US trade war


 

Illustration: Peter C. Espina/GT

For now, there is still no end in sight to the brewing trade war between the world’s two economic heavy hitters. Ignoring voices of objection at home, the Donald Trump administration announced that the second tranche of tariffs on $16 billion in Chinese goods will take effect later this month. Though Trump has yet to fulfill his campaign promise to levy a 45-percent tax on Chinese goods, his logic on trade policy refuses to change.

The reason why the US has provoked and intensified the trade war lies in the incapacity of the global system. Specifically, division of labor in the globalized era has led to the exodus of the US manufacturing industry out of the country. Meanwhile, the US claims that China’s “predatory” economy has developed itself into the biggest beneficiary in the system.

That’s why the Trump administration insists on attacking China’s “stealing” practice in the name of “safeguarding US national interests,” regardless of the cost of torpedoing the existing international order.

The robust stock market and economic growth of the US as well as the decline in unemployment have further boosted Trump’s confidence in escalating the trade war. His trade policy has gained more acceptance among Americans. However, the logic behind his trade war can hardly hold water.

The era of globalization has been an inevitable development of human society. As people in the global village are more interconnected, trans-regional flow of finance, technology, information, service and talent has re-optimized global production resources, inspiring the development of countries and regions.

The unprecedented development of productivity and international division of labor has prompted developed countries which boast capital and technology advantages to transfer their low-end industries to other countries where labor and land costs are relatively low. Then a great many multinationals have mushroomed, which has objectively precipitated the growth of developing countries.

Economic liberalism has become a paragon of democracy with which developed nations dwell upon with relish. It’s also an important pillar for the postwar international order. When developed countries sat on the top of the industrial chain to reap benefits, they never complained about the unfairness of the system but instead became its most powerful defender.

Ironically, the US – the founder of the global system – has now become its most proactive opponent. The Trump administration attacks the “unfair” global system and views China as being complicit in bringing about the fall of the US manufacturing industry and loss of jobs. Such rhetoric has led people to believe that the stature of the US has fallen to a third world country’s.

Globalization is not without problem. Apple is a paradigm of a globalized industrial chain, but it’s not a nice story. Developing countries at the low end of the industrial chain can only get disproportionally meager profits while lucrative gains flow to developed nations. In this way, the US deficit is far less than the book figures.

More severely, low-end manufacturing has worsened the environment, putting the health of the public in jeopardy. But the US-led developed world just passed the buck.

Emerging economies like China are resigned to be just a factory of developed countries, so they work hard to develop hi-tech and produce high-value-added products to create a level-playing field with developed countries. This is the law of market economy, which, however, has become a threat to its national security and an enemy of its economy in the view of the US.

The strange logic can hardly justify itself.

Denying others a share of the spoils is not the essence of the era of globalization. If developed countries think there’s something wrong with the global system, they can appeal to international organizations to carry out reform, instead of resorting to short-sighted practices like threatening with tariffs.

Trump’s trade war actually stems from domestic conundrums notably industrial hollowing-out and loss of everyday jobs. The problems are not a result of globalization but of domestic mismanagement. It seems that forcing jobs back home will create jobs, but it can’t last long because it will fail to stimulate the fundamental driving force of industrial development. If Trump can make more efforts at boosting the real economy instead of waging a trade war, he may get closer to “Make America Great Again.”

Credit: By Zhang Tengjun Source:Global Times Published: 2018/8/15
The author is an assistant research fellow at the China Institute of International Studies. opinion@globaltimes.com.cn

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