GT Voice: China-US trade underlines cooperation over conflict
Published: Feb 27, 2022 09:55 PM
China US Photo: GT

China US Photo: GT

Monday is set to see the 50th anniversary of the issuance of the Shanghai Communiqué, the first joint communiqué issued by China and the US on February 28, 1972 that opened a new chapter for bilateral relations. Since that day, China-US relations have maintained overall stability despite twists and turns, which also enabled bilateral economic and trade cooperation to expand rapidly over the past 50 years.

Fifty years on, the bilateral economic and trade relationship is standing at a new crossroads and there has been much talk of the growing risk of a "decoupling" between China and the US. Against this backdrop, looking back at the development of China-US economic and trade cooperation may still have relevance in terms of understanding the current situation.

In 1972, the Shanghai Communiqué identified bilateral trade as "another area from which mutual benefit can be derived," and agreed that "economic relations based on equality and mutual benefit are in the interest of the people of the two countries." But it was not until 1979 that China and the US established diplomatic relations, with the most-favored-nation trade agreement signed between the two countries. During the decade from 1979 to 1989, China acquired dollar reserves desperately needed by its economy from its trade with the US, while the US diverted its excess dollars to a new reserve nation after the collapse of the Bretton Woods system, helping maintain the dollar's stability.

During the decade from 1990 to 2000, China and the US held a series of negotiations on a wide range of issues, such as trade relations, intellectual property rights protection, and accession to the WTO.

In December 2001, China became a member of the WTO, and started to enjoy the normal trade relations treatment in its trade with the US, a major boost to the China-US trade since then. While bilateral trade surged from $80.48 billion in 2001 to $583.7 billion in 2017, China's trade surplus with the US saw a sharp increase from $28.08 billion to $275.8 billion during the same period, which precipitated frequent trade frictions between the two countries.

The year 2018 saw the start of a trade war between China and the US. It was during a series of struggles and confrontations that the US came to realize that it is unrealistic to pursue a "decoupling" from China that is now playing an important role in the world economy.

The China-US economic relationship has developed on the basis of mutual benefit, and that cooperation is not one side begging the other. It is true that trade with the US is an important part of China's foreign trade, but the dependence of the US on China has also been on the rise, with China being a huge market for growing American goods and service exports. A large number of American companies, such as Apple, have raked in huge profits by developing in China. Also, made-in-China has kept US inflation low for decades, a fact that many have come to realize when the US is facing the challenge of rising inflation. Without made-in-China, there is no way to bring down US inflation.

As for the problems of China-US economic and trade relations, China is accelerating its opening-up pace to reduce its trade surplus with the US. However, addressing the China-US trade problems is not completely China's responsibility. If the US can relax its restrictions on technology exports to China, the trade imbalance problem may be solved properly.

If the US insists on regarding China as a strategic competitor and limiting Chinese companies' access to high-tech products, it will do as much damage to the US economy as it does to China's. And the huge cost of acting against an approach toward balanced trade  is actually unbearable for the US economy.

Fifty years ago, the most crucial component of the Shanghai Communiqué was that China and the US decided to work toward cooperation not confrontation. Fifty years on, despite the enormous challenges facing bilateral relations, the world struggling in a post-pandemic recovery still looks forward to the growth momentum created by China-US cooperation.