Published in Organiser
The US and China on the trade
front, ever since the Presidential election in the US, is quite likely to
escalate into a full-blown trade war,
as the US President Donald Trump has already slapped
tariffs on $50 billion (Rs 3.25 lakh crore) worth of its imports from
China. But, scared of losing the
lucrative American Market, China has initially declared counter tariffs at over
American goods worth mere $3 billion. China is shy of facing a full-blown trade
war with the US, with which it has a trade surplus of $375 billion. So, China
has the most to lose in a fierce trade war between the two. The Sino-US trade
and investments are so intertwined that both sides are likely to suffer. The fast burgeoning trade deficit of the US
has grown from $100 billion in 2001 to 375 in 2017 which is more unsustainable
for the US, compared to the losses of a trade war.
Compromising China
From further escalation of the
trade war, China wants to avert it. Chinese Premier Li
Keqiang has already offered, before the representatives
of “Fortune 500 companies”, on March 26
that he would
further expand imports from the
US and has also assured to pragmatically
tackle on the trade front through dialogue and negotiations.
The Chinese Premier has also gently agreed that China will further open
its markets to foreign investors, including the US. Indirectly conceding the
accusation of the Trump government of resorting to “unfair trade practices”,
China has agreed to be more flexible. According to the Forbes magazine, the Chinese
officials have conceded that China will now import more semiconductors and
other intermediates from American sources to balance the trade. Li had also
offered on March 20 of phasing out tariffs on drug imports from the US. China’s
official Xinhua News Agency has also taken cognizance of Washington’s demand to
reduce its trade surplus by at least$100 billion. The US officials allege China
has also acted unfairly on technology transfers and intellectual property
rights.
Perilous Trade War
The US is bound to suffer
severely if the trade war escalates. A selling
China-bound American exports,
including automobiles, civilian aircraft and numerous other products. There is
a major risk for several hundreds of US companies if China hits back. Though
China runs a far more economic risk than the United States, China’s response to
US tariffs has
been a mixture
of indignation and bluster,
and the actions taken
have been fairly restrained. China has more to lose
from a sharp escalation in tariffs. The US President Donald Trump had in
its election campaign
itself threatened to impose 35 to 45 percent tariffs on Chinese imports,
to force China into renegotiating on trade balance with the US. He had even
branded the spurt of Chinese imports as economic aggression.
Deglobalisation is Imminent
This incidence is slapping
tariffs by the US and China on each other’s exports is not an isolated, sudden
and sporadic incidence. It is a natural
fallout of the grave inequalities that and job-creation across the globe, out
of deep globalization forced by rich countries since the early 90s, aimed
at the
elimination of geopolitical barriers in the way of their
trade and investments.
Consequently, today more than
85 percent of
the world manufacturing has got
concentrated with China, US, EU, Japan, Korea and Taiwan (i.e. among these 33
out of 230 countries of the World,
as per UNCTAD). China alone has
captured 22.5 per cent
share in world manufacturing followed by the
US—17.5 per cent,
Japan 10 percent, Germany 7 percent, and so on. The
industrialised nations have pursued deep globalization to capture the
markets, manufacturing and investment opportunities in around 200
developing and other countries. Bharat too has badly suffered; which now has a
mere 2.1 per cent share in world manufacturing. The MNCs, after taking over the
manufacturing sector in India have shifted technology intensive activities out
of the country and have been running only their assembly lines. But, now China
has turned the tables against the industrialised countries and has begun to
flood the markets of all the industrialised countries with Chinese goods. So,
the rich nations ranging are poised for deglobalisation by raising barriers in
free movement of people as well as goods. Bharat had to bring down its import
tariffs manifold and had to dismantle the phased indigenisation programme as
well as the dividend balancing clause. All of these have
affected domestic manufacturing
as well as the balance of payments.
Bharat’s Gain
Bharat has greater real trade
deficit with China, then the
US. The US deficit at $375
billion is only 1.87 percent of the American GDP. But, our trade deficit with
China is 2.25 percent of our GDP for 2016-17, and is slated to grow in 2017-18,
which has exceeded over $30 billion in the first six months
of 2017-18, against
at twelve months’ deficit of $51 b in 2016-
trade war, the Chinese appear to
have learnt a lesson and have turned more agreeable to
our demand forredressing the trade deficit of Bharat as
well. So, now when China is facing a tariff war with the US, it has turnedsofter
with Bharat and has also openly conceded of having an unjust trade surplus with
Bharat, and had also very gently agreed to curb this vast Sino-Indian trade
deficit only recently on this March 26.
The Chinese government, under
pressure of alooming trade war with the US, is
now more readily agreeing
that the massive imbalance in its
trade with India is “unsustainable” for long-term trade growth, and is also
agreeing that it needs to be addressed. It was a major trade victory for Bharat
when on March 26, visiting Chinese Commerce Minister Zhong
Shan shared this sentiment. He has clearly stated
this,after his meeting in the Commerce and
Industry Ministry, and
even welcomed Indian investments
in China. It has promised to fully addressthe trade deficit of India. So,
it is the time, when Bharat can secure a more balanced and
accommodative Chinese response, in the aftermath of the escalating
Sino-Us war.
(1) (PDF) Locking Hours. Available from:
https://www.researchgate.net/publication/324331218_Locking_Hours [accessed Nov
27 2018].
(1) (PDF) Locking Hours. Available from:
https://www.researchgate.net/publication/324331218_Locking_Hours [accessed Nov
27 2018].
