Chinese think tank suggests 10 steps to ease China-US trade tensions
The US President Donald Trump signed a memorandum on March 23 that could impose tariffs on up to 60 billion US dollars of imports from China and restrictions on Chinese investment in the United States. 
 
In response, the Chinese Ministry of Commerce reacted with retaliatory measures against 128 categories of US goods worth up to $3 billion in imports from the US. China will take measures against the 128 US goods in two stages if it cannot reach an agreement with Washington, the ministry said, adding that it could take legal action at the World Trade Organization.  
 
While the recent moves have raised concerns over a “trade war” between the world’s two largest economies, the CCG (Center for China and Globalization), a Chinese independent think tank based in Beijing, has suggested 10 measures to ease the ongoing China-US trade tensions and promote stable bilateral trade relations. 
 
1. There should be a new method for analyzing trade effects that would more accurately reflect how much US companies gain from the bilateral trade deficit, given the forces of the global value chains; and we should insist on including trade in services in which China runs a large deficit with the US, such as tourism, education spending, and immigration-oriented investments in the trade deficit analysis. 
 
In 2016, the US trade surplus with China in sectors of education, tourism, intellectual property rights, transportation, commerce, as well as financial services amounted to $55.7 billion, 40 times of 2006, and occupied 23.1% of China’s total service sector trade deficit, according to a report by China’s Ministry of Commerce in May 2017.
 
2. The US should lift the excessive export limits, especially on high-tech products from American companies. This could be beneficial for US enterprises and would help balance the trade deficits of both nations. 
 
3. China should increase imports from the US, including consumer goods, energy, and agricultural products while reducing tariffs on goods such as automobiles and other high-value-added American products that are not central to the national economy, therefore fulfilling China’s WTO commitments. 
 
In the automobile industry, for instance, according to tariff policies introduced when China entered the WTO in 2001, foreign automakers’ share in a joint venture with Chinese partners couldn’t surpass 50%, while tariffs on imports of foreign automobiles remains at 25% until today.
 
While such policies might have been helpful when China first entered the WTO, adjusting the tariff seems necessary now in order to encourage China’s domestic enterprises to innovate and enhance competitiveness in the face of rising spending power.
 
4. China should improve business environment and implement policies that have been long overdue to reduce barriers of market entry for US companies. 
 
In the past five years, China’s utilization of foreign capital surpassed $600 billion, and the number of headquarters and research centers of foreign multinational companies reached over 2,800 in China. 
 
However, while the number of foreign enterprises is less than 3% of China’s domestic companies, they have provided 10% urban employment and contributed 20% of tax revenue.
 
Therefore, foreign capital is an important element for China’s ongoing opening up policy, and a key factor in making China richer and greater.
 
5. The two sides should promote the agreement between China and the US on cross-border e-commerce to benefit small businesses and consumers in both countries with substantial employment opportunities. 
 
China has around 400 million middle class consumers. In 2017, online shopping sales revenue reached $40.5 billion during the “Double Eleven” online shopping carnival. Connecting shopping platforms in the US with Chinese consumers could increase the US exports of goods to China and help reduce US trade deficit with China.
 
6. China should extend the protection of intellectual property rights to foreign companies or take foreign IP regulations into account. 
 
7. China should consider the establishment of an investment fund to help the US upgrade its infrastructure, capitalizing on China’s advanced technology and expertise in the field. 
 
China has invested around $11 trillion in infrastructure in the past 10 years, which is nearly 11 times of the $1 trillion investment proposed by US President Donald Trump. 
 
Cooperation between Chinese and the US companies in terms of infrastructure would benefit companies from both countries.
 
8. China should enlist the participation of American companies in Belt and Road projects as third party partners. 
 
While many American companies have shown interest in participating in China’s Belt and Road Initiative, there is some opposition from politicians to the project. 
 
In 2017, China’s import and export volume with the Belt and Road countries reached over 7.37 trillion yuan, up 17.8% from the previous year, among which exports increased by 12.1% and imports by 26.8%. Joining the Belt and Road Initiative could mean huge opportunity for the US companies.
 
9. China should seize the opportunity to join the TPP discussions and facilitate the progress of multilateral trade systems building such as WTO and RCEP to sustain the momentum for global free trade. 
 
TPP which focuses on intellectual property rights protection and trade in the service sector shares common interests with China which is seeing rapid development in the service industry, e-commerce as well as IT industry. Joining TPP can help China win more overseas market and gain intellectual property rights protection for the development of its service sector. 
 
10. China should appeal cases of US violation of the WTO rules to the appellate body.
 
Even though China is the largest source for US trade deficit, the US current trade actions in reducing trade deficit would either directly or indirectly harm many other countries, including Brazil, Australia, European Union and so on, which provide raw materials to China. It could also harm US allies including Japan and South Korea who see China as buyer of their high-tech products. 
 
It is equally important to fully engage the think tanks and non-governmental trade committees in both China and the US in promoting dialogue between the two countries in resolving trade conflicts.

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