How Can China’s Trade Go Steadily into the Future?
In 2018, global trade tension, protectionism and unilateralism surged. The international trade and investment landscape and the rules and norms for multilateral trade and investment are shifting radically. Overall, the series of policies and initiatives of the United States were the main cause for the injury of global economic growth and alterations of international economic and trade rules.
The impact of Sino-U.S. economic and trade friction on China’s foreign trade is foremost. At present, the United States has imposed additional tariffs on US$250 billion of Chinese products, including an additional duty of 25 percent on products worth US$50 billion and an additional duty of 10 percent on over US$200 billion of other products. The United States delayed a tariff increase to 25 percent from 10 percent on US$200 billion of Chinese products that was slated to occur since the beginning of this year, but added that whether the tariff hike would resume depended on the progress of Sino-U.S. trade negotiations. These tariffs in all affect nearly half of China’s exports to the United States.
These measures will negatively impact China’s exports in three aspects: First, China’s exports will be reduced as the competitiveness of its export prices is weakened; Second, the uncertainties brought by economic and trade friction will affect business investment decisions and further affect exports; Third, Sino-U.S. trade friction will affect the world’s overall economic and trade situation, and so damage China’s foreign trade. China’s countermeasures will also lead to decreased imports from the United States. If the Sino-U.S. economic and trade consultation can achieve win-win results, it will strongly encourage China’s foreign trade development.
Apart from Sino-U.S. economic and trade friction, China’s foreign trade is also under pressure from the adjustments in international economic and trade rules and norms. Today, regional trade agreements adopt high standards. Tariff reductions are aimed at zero tariffs, and non-tariff barriers are reduced substantially, which have even caused adjustments in domestic rules. High-standard large-scale regional trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and the EU-Japan Economic Partnership Agreement have come into force, and the United States-Mexico-Canada Agreement has been signed. Meanwhile, members of the World Trade Organization (WTO) have reached consensus and set out plans for the reform of the organization. Various economic and trade rules formulated by the United States that target at China and agreed regulations among high-standard regional trade agreements will gradually be integrated into the WTO reform. Economic and trade rules and norms form the structure of the operation of foreign trade and influence the development of every country under its framework, and China is no exception. This will provide a rare opportunity for China’s foreign trade development, but many challenges will also come. Active participation will be the key for China to turn these challenges into opportunities.
Nonetheless, China’s foreign trade has enough flexibility and margin for adjustment. Against the backdrop of Sino-U.S. economic and trade friction in 2018, China’s foreign trade still achieved remarkable results. China’s goods trade volume totaled US$4.62 trillion, up 12.6 percent year-on-year. Exports jumped by 9.9 percent to US$2.48 trillion, and imports grew by 15.8 percent to US$2.14 trillion, suggesting that China’s foreign trade is becoming more resilient under adverse conditions. In the first two months of 2019, China’s foreign trade fell by 3.9 percent year-on-year. Although there may be negative influence from Sino-U.S. economic and trade friction, the real depressing factor is the Spring Festival holiday. Deducting the Spring Festival factor, China’s foreign trade rose by 3.9 percent year-on-year in February, with exports increasing by 1.5 percent and imports increasing by 6.5 percent, respectively. In addition, China’s foreign trade will gain momentum toward high-quality development and trade liberalization. There is also ample room for the adjustment of China’s policy of stabilizing foreign trade, which can still be aligned with international economic and trade rules.
This year’s annual sessions of the National People’s Congress and the National Committee of the Chinese People’s Political Consultative Conference, popularly known as the “two sessions,” focused on two “improvements” of foreign trade: one is to promote stable and higher-quality growth of foreign trade; the other is to promote trade liberalization and facilitation. Encouraging quality growth calls for market diversification, expanding imports, and exploring cross-border e-commerce and other new forms of business. Stabilizing foreign trade will support employment and steady growth, and improving the quality of foreign trade will enhance the stability and increase the added value of foreign trade. China will promote trade liberalization and facilitation by actively participating in global trade governance, further docking domestic regulations with international economic and trade rules, and prioritizing opening up based on fine-tuned policies. In short, China is going steadily into the future and integrating with high-standard economic and trade rules.
The author is an associate researcher and deputy head of the International Trade Department of the Institute of World Economics and Politics, Chinese Academy of Social Sciences.