Phoenix TV:

The trade row has been lasting since March last year. The United States, on many occasions, including during Donald Trump's presidential election campaign and after he took office, has stressed that the US has a huge deficit in its trade with China, which is as high as $500 billion, and saying that the US has lost millions of jobs in its manufacturing industry, and the US has suffered losses in its trade with China. How do you respond to, and comment on these voices? Thanks.

Wang Shouwen:

I have heard these voices, claiming the U.S. suffers huge deficits in trading with China. In fact, whether it is trade deficit or surplus is not related to one side's loss or of being taken advantage of by the other. For instance, the US maintains surplus in its trade with Australia, while Australia enjoys a surplus with China, and China with the U.S. In this circulatory process, there are trade surpluses as well as deficits. Then who loses? And who gains an extra advantage by unfair means?  

It cannot be simply concluded that there is any relationship between trade surpluses and profiting at the expense of the others, or between trade deficit and suffering unfair losses. You mentioned the huge American deficit in trade with China. In fact, the US seriously overestimates its trade deficit with China. For instance, the U.S. sets its trade deficit in goods with China at $419.2 billion. However, is that figure of $419.2 billion accurate? According to research of a statistics team formed between the commerce ministries of China and the U.S., the American figure is usually 20 percent higher than the actual level. So, it is necessary to somewhat discount the US data. Meanwhile, we need to consider that, in Sino-U.S. trade, there are large amounts of processing trade, in which China imports parts from other countries or economies and assembles them before exporting the finished products to the United States. So, China's trade surplus with the U.S. should not be all identified as being China's gain.

Besides, we should take the bilateral trade in services into account. China does indeed have a surplus in goods trade with the U.S. However, according to American estimates, it maintains a huge surplus in services. If all these factors are considered, our conclusion is that, combining the trade in goods and services, the American deficit is only $150 billion, nothing like the alleged $410 billion-plus. Even the $150 billion trade deficit cannot be interpreted as China using unfair means to gain at American expense. This is because in China's trade surplus with the United States, 54 percent stems from the activities of foreign ventures, and 53 percent from processing industry trade. In the latter, China only profits from the processing costs. What does America gain? The products are designed by the U.S., and many key parts are provided by the U.S., which is also in charge of marketing. So, the U.S. side also obtains huge profits from China's trade surplus. When Chinese commodities are exported to the United States, because of their cost advantage, they help lower the burden on American consumers, and helps create a lot of jobs in the wholesale, retail and logistics sectors on the American side. So, it cannot be simply said that imports from China harm American interests.

You mentioned that imports from China have destroyed American manufacturing jobs. In fact, some U.S. research institutes assert that the country started losing manufacturing jobs before China entered the World Trade Organization in 2001. The main reason for this is the advancement of science and technology and the improvement in labor productivity. It is baseless and totally unreasonable to blame China. The American economic structure has changed. Although there are fewer jobs in manufacturing, jobs in the service sector have seen a steady rise, and this has brought the unemployment rate in the U.S. today down to a level not seen for decades. So, whether in service trade or goods trade, no matter who has surplus or deficit on one or the other, Sino-U.S. trade is mutually beneficial and is good for the world as well. Thanks. 

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