Watch Out for America’s “Combination Punches” on Trade Issues

Recently, instead of its previous “get tough” approach to trade with China, the U.S. has adopted a multifaceted approach of “combination punches” using tough and soft, overt and covert tactics. Although the tension has eased, it is still very likely that America will keep punching, even with heavy blows. Therefore, China should remain on high alert.

Talking about softness, the U.S. delayed the decision on whether to brand China “a currency manipulator.” The Chinese Ministry of Commerce also confirmed, on April 17 at the Canton Fair, that China and the U.S. have reached a preliminary agreement through negotiation — Chinese foreign trade policy and the exchange rate would remain basically stable. However, the U.S. has no intention of giving up its tough approach on issues such as Chinese export subsidies. There are still senators threatening to unveil a bill to impose trade sanctions on China at any time. The U.S. overtly expresses its willingness to negotiate on various occasions. Geithner’s visit to China is one example. However, the U.S. also works covertly with the E.U., Japan and India behind China’s back, in an attempt to set up an “international united front” to challenge China’s current exchange rate policy.

We can say that America’s “combination punch” is caused by the diversity of interests in America and the complexity of Sino-U.S. relations. So far, it is mainly the traditional manufacturers, labor, Congress and the Department of Commerce who have been calling for a “get tough” approach to China. Because the U.S. has relative superiority in Sino-U.S. economic trade relations, it can use our dependence on “Made in China” in the U.S. market to launch an attack. However, China’s economic strength has increased rapidly since entering the WTO. The U.S. would have lot to worry about if it stubbornly keeps being tough. Therefore, the U.S. has no other choice besides “combination punches,” which best conform to its current national interests.

Obviously, “combination punch” does not mean that the U.S. will not punch on trade with China. Its strength will not weaken either, but the tactics are more diverse and subtle than before the financial crisis. Meanwhile, under the banner of “restoring global economic balance”, the U.S. also purposely encourages other countries to put pressure on China to internationalize the Sino-U.S. trade issues. It makes China not only have to face the pressure from America, but also international pressure as well, thereby making it harder for China to deal with American protectionism.

However, if the U.S. continues to stick to its “get tough” policy, China would face limited options in this trade bout. Now, the “combination punch” has broadened China’s coping strategies. I think that, in addition to conventional coping strategies such as speeding up industrial restructuring, strengthening proprietary intellectual property rights of exports and expanding domestic demand, we can also take some unconventional means. In American society, given that the U.S. focuses on manufacturing jobs, China can encourage domestic enterprises to invest in America and create employment for local people — especially in northwestern America, which is the manufacturing center and fortress of trade protectionism. China can expand procurement, trade and economic exchanges in some of the states, such as Illinois and Pennsylvania, keeping their distance from trade protectionism to China, at least not to echo some people’s tough approach.

Similarly, at the level of government dialogue, China needs to highlight its recent monthly trade deficits, calling for America’s attention that its imports and exports to China have moved toward balance on the whole. China also needs to make it clear to America that China will never relax its vigilance and will take countermeasures against America’s disguised “combination punch.” If the U.S. made sanctions unilaterally, China would retaliate against the U.S. This would bring serious consequences to the U.S. and the global economy. Using an “international united front” to pressure China would only be America’s wishful thinking.

Note: The author is an associate professor at the Institute of International Studies at Zhongnan University of Economics and Law.