US, China at risk of trade war: expert

The United States cannot push China on the path to real market economy in the short run, even though it has taken a series of trade actions to punish China's "unfair" trade practices, according to an expert.

Scott Kennedy, director of the Project on Chinese Business and Political Economy at the Center for Strategic and International Studies, made the remarks during a recent interview with Sino-US.com, after US President Donald Trump approved broad tariffs on imports of solar cells and washing machines, most of which come from China, at the beginning of 2018. It marks Trump's first major trade action of this year and fulfills his protectionist promise to get tough on America's trading partners including China.

Kennedy said that Trump's move would trigger Chinese retaliation, which would put the US-China relations at risk in the following months, adding that after rounds of games China would likely push for a certain agreement with the United States to end the trade conflict. But the expert stressed that it is uncertain if Trump would accept China's proposal.

Amidst such developments, Kennedy predicted that it would be impossible for the two countries to reach the Bilateral Investment Treaty, as the United States is reluctant to see China take part in the making of international trade and investment rules.

The United States and China are at risk of starting a trade war at present, and if the trade war begins, the previous trade investigations launched by both countries would become real trade policies, which might disrupt bilateral trade, noted Kennedy.

The year 2017 has seen a toughening of American trade policy toward China. In April, the US launched an investigation on imports of steel and aluminum from China, invoking Section 232 of a national security law passed in 1962 during the Cold War. Section 232 authorizes US presidents to limit imports which are considered to be causing damage to the national security. Four months later, US Trade Representative Robert Lighthizer started a probe into China's policies and practices about intellectual property and technology transfer under Section 301 of the Trade Act of 1974. Section 301 is dubbed as a "nuclear weapon" that grants US presidents the right to set restrictions on imports that might pose threat to American businesses.

The trade actions that were taken in the name of Section 232 and 301 were unilateral sanctions, which would lead to China's retaliation, in which the world's second-largest economy could use economic and political leverage to impair America's economic interest, according to Kennedy.

As to how tough the punitive measures that China would take against the United States would be, Kennedy said that it would depend on what trade actions the United States would take against China. The expert went on to say that China's countermeasures might target certain American industries which involve US exports and American investments in China.

Kennedy said that America's trade actions could be driven by its intention to prompt China to act as a real market economy, adding that the United States is putting more pressure on China by trying to convince the European Union, Japan and South Korea of China being the source of the global economic problems.

In late-2017, the Trump administration formally opposed China's bid for recognition as a market economy in the World Trade Organization, a position that could lead to significantly lower anti-dumping duties on Chinese goods by prohibiting the use of third-country price comparisons. The opposition came as trade tensions between the United States and China heightened due to America's major trade actions on what it called "unfair trade practices" by Beijing.

During this year's World Economic Forum annual meeting in Davos, Switzerland, Liu He, a member of the Political Bureau of the Central Committee of the Communist Party of China and a top economic policy adviser to Chinese President Xi Jinping, pledged that China would take newer and bigger economic reforms. But Kennedy said that Liu's statement did not draw enough attention at the forum because China had made many similar promises before and few could become reality.
 


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