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Zhang Jixing: Coping with Obama administration trade policies

发表于 zhangjixing

1. Characteristics of Obama administration trade policies

(1) Reinforcing the restraint of “rules” and advocating “fair trade”

As a democrat, Obama represents the benefits of lower middle class and laborers, and holds “fair trade” concept of the Democratic Party of the United States. Obama and his cabinet members emphasize that the key of US trade policy is to open overseas market for US products, emphasizing that trade agreements should require working conditions and environment standards. Obama also said that he would strengthen the role of trade agreement through WTO and propose to adopt actions to prevent and sanction other nations’ unfair trade activities. In Obama’s first term of office, US brought many actions against China for violating WTO agreements and launched dozens of trade remedy measures against China exports to US. In 2012, US government established a cross-departmental trade inspection center, which mainly focuses on investigating the unfair trade actions of countries like China.

In Obama’s campaign speech, he said that US will make all the trade partners, especially China, follow international trade rules and make use of  WTO mechanisms to ensureChina can follow the “rules”. Thus it can be seen that, US will continue to maintain and strengthen the trade enforcement on China.

(2) Promoting export and forcing RMB to appreciate

One important part of Obama administration trade policy is to promote export. From 2009-2012,US trade policy has always been committing to advocating export and restricting import, and opening overseas market through various channels such as trade negotiation. From 2009, the targets of US trade agenda are closely related to employment: the target of 2009 trade agenda is creating trade jobs for American families;that of 2010 is making trade work forAmerica’s working families; that of 2011 is bringing trade’s benefits home to American families and businesses while that of 2012 is advancing trade to support American jobs. In the first year of Obama’s second term, the priority of UStrade policy is also supporting jobs and economic growth through trade.

It is obvious that, Obama administration makes use of trade policy to fulfill its domestic task of boosting economy and creating jobs, for which US government will take a series of actions. In the State of the Union in 2010, Obama set the goal of doubling exports and creating 2 million jobs in next five years; and in the annual meeting of Import and Export Bank, Obama announced to establish “National Export Initiative” in order to serve the goal of doubling exports. As the biggest sourcing country of U. S. trade deficits,Chinawill be the main target for the US to improve its trade condition.

In the view of Obama Administration, the lower valuation of RMB is the main cause of US trade deficit against China. So in his first term of office, he required the appreciation of RMB and even threatened to label China as “Currency Manipulator”. Meanwhile, the achievement of doubling exports needs the support of “weak dollar”, so Obama administration will continue to put pressure on China government in order to make RMB appreciate. It is foreseeable that in Obama’s second term of office, RMB exchange rate will also be the main target of US trade policy towardsChina.

(3) Returning to the Asia-Pacific region and competing with China in this region

Obama always emphasizes the Asia-Pacific region and is committed to opening Asian-Pacific market by means of bilateral and regional agreements. In November 2009, Obama pointed out, in his speech on Asian policy, that US can export more products to Asian-Pacific region and through which US can create more jobs. As an important part of US strategy of “Returning to the Asia-Pacific Region”, US announced to join and promote “Trans-Pacific Partnership” (TPP), and in December 2010, US reached a consensus with South Koreaon “US – South Korea Free Trade Agreement”. The pace of US returning to Asiain trade field is accelerating.

(4) Adopting the strategy of “reindustrialization”, China enterprises and products will face more obstacles while entering US market

Obama has always been committed to bring manufacturing industry back to the US in order to create new job opportunities. So the US adopted “reindustrialization” which constitutes of developing high-end manufacturing and bringing manufacturing back, while the former one aims to improve US manufacturing by means of supporting high-end manufacturing and the latter one encourages overseas enterprises to invest in the US by providing preferential policies such as expiration of the tax. In the context of these policies, the US will continue to protect its manufacturing and strategic industry, as a result, it will be difficult for China enterprises to invest in the US and “going out strategy” will be faced with many kinds of obstacles. As US economy keeps recovering, the US demand of China products, especially manufacturing products, will shrivel.


2. Policy Suggestions

(1) Making full use of strategic dialog mechanism, defending the legitimate interests of China

In the present stage, the international trade dispute is not only confined to economic field, but most often is the embodying of political games in the field of trade.China’s economic strength and international status has been improved rapidly and it has played a critical role in political and social force in the world. Therefore, our government should state our case and interests unequivocally to exert pressure to U.S. government through diplomatic activities, China-U.S. Strategic and Economic Dialogue and China-US Joint Commission on Commerce and Trade, opposing the U.S. trade protection policy, urging America to loosen its restrictions on high-technology exports to China. At the same time, to maintain the interests of China’s export enterprise, our government should frustrate any plans of American protectionism by using the relevant rules of WTO during the negations on WTO rules and trade frictions.

(2) Building four-sector mechanism to deal with China-U.S. trade friction

Though China entered WTO 11 years ago, it is still quite immature in construction of earlier warning of trade friction and establishment of system construction, lacking effective system and coordination among governments, overseas offices, business associations and enterprises. Thus, it is urgent to strengthen four-sector mechanism, forming a mature system of early warning, responding and countering. Firstly, governmental overseas offices should work on earlier warning mechanism to buy time for the domestic enterprises. Secondly, government should encourage enterprises to respond to trade friction actively and strengthen enterprise training in response, for many enterprises still lack experience in responding to trade friction. Thirdly, business associations should play the role of connection, assisting government in organizing enterprises to respond to actions actively. Lastly, it is essential to encourage enterprises to establish organized, large-scaled organizations to deal with trade friction, reaching to a high unity of works on trade friction.

(3) Perfecting the formation mechanism of RMB exchange rate, reducing the pressure on the appreciation of the RMB

RMB appreciation can’t change the US’s trade deficit against China. Accusations and pressure do not help to promote bilateral economic and trade relations between China and U.S., instead, it can easily lead to worsening trade friction. Chinese government will insist on the principle of autonomous, controllable and progressive, regulate the rhythm of RMB appreciation flexibly and perfect RMB’s exchange rate forming mechanism.

To reduce the pressure on the appreciation of the RMB, China should make US realize its own problem and loosen its restrictions on high-technology exports to China in order to reduce the US’s trade deficit to China. At the same time, to meet the needs of economic development, we will increase the import of strategic material reserve and high technology products from theU.S.to decrease U.S. trade deficit and loosen the pressure on the appreciation of the RMB.

(4) Readjusting China’s import and export strategy

By means of TPP, Obama administration enhances the regional economic cooperation in Asian-Pacific region and negotiates with many Asian-Pacific countries for FTA, by which the US aims to expand its political and economic influence in this region, lead the process of Asian-Pacific regional economic integration, and compete with China in this region. Its “reindustrialization” strategy will promote the revitalization of US manufacturing, thus reducing US demand of China products, especially manufacturing products and causing difficulty on China enterprises investing in US.

    Facing “Returning to the Asia-Pacific” and “reindustrialization” of the US, we should readjust our import and export strategy, adopt new strategy of market diversification. While stabilizing the cooperation with EU, Africa, emerging economies and so on, we should emphasize on exploring the Asian-Pacific market and foster FTA negotiation with the Asian-Pacific countries especially East Asia. For instance, we should enhance trade cooperation with South Korea and promote China-ASEAN FTA.