On June 2, the State Council Information Office published a White Paper entitled “China’s position on the China-U.S. economic and trade consultations”. It elaborates in three chapters that the economic and trade friction provoked by the U.S. damages the interests of both countries and of the wider world; that the U.S. has backtracked on its commitments in the China-U.S. economic and trade consultations; and that China is committed to credible consultations based on equality and mutual benefit.

The fundamental interests of the Chinese and American peoples and the prosperity and stability of the whole world are at stake, the White Paper argues. Differences and friction are inevitable in the commercial cooperation between the two countries, but by adopting a rational and cooperative attitude previous conflicts have been resolved. But since taking office in 2017, the new U.S. administration provoked friction with its major trade partners and China had to take forceful measures to defend its interests and at the same time engaged in multiple rounds of consultations, says the White Paper. China’s position has been consistent and clear – that cooperation serves the interests of the two countries and that conflict can only hurt both. China is willing to work together with the U.S. to find solutions, but cooperation has to be based on principles and there are bottom lines in consultations. The White Paper sends a clear warning to the U.S.: China will not compromise on major issues of principle. China does not want a trade war, but it is not afraid of one and it will fight one if necessary.

The White Paper accuses the U.S. of “causing disruption to the global economic and trade landscape” and of imposing additional tariffs and investment restrictions on China. Accusing China of intellectual property theft and forced technology transfer is utterly unfounded. “Historical records confirm that China’s achievements in scientific and technological innovation are not something we stole or forcibly took from others,” the White Paper asserts, firmly rejecting the accusation that China is stealing intellectual property and affirming that China is committed to intellectual property protection consistent with international rules. It notes that concern among foreign investors over IP has dropped and that In terms of some key innovation indices, China is already among the world’s leading players. In 2017, total R&D investment in China reached CNY1.76 trillion, ranking second in the world.

The White Paper rejects the accusation that the U.S. has “been taken advantage of” by China and asserts that the Chinese and American economies are highly integrated and bilateral trade and investment are mutually beneficial. “Equating a trade deficit to being taken advantage of is an error.” Trade in goods between China and the U.S. grew from less than USD2.5 billion in 1979 when the two countries forged diplomatic ties to USD633.5 billion in 2018, a 252-fold increase. During the ten years from 2009 to 2018, China was one of the fastest growing export markets for American goods.

Two-way trade in services rose from USD27.4 billion in 2006 to USD125.3 billion in 2018, a 3.6-fold increase. In 2018, China’s services trade deficit with the U.S. reached USD48.5 billion. Over the past forty years, two-way investment between China and the U.S. has grown from near zero to approximately USD160 billion, and the total annual sales revenue of U.S.-invested companies in China was USD700 billion, with profits exceeding USD50 billion. “Therefore, if trade in goods and services as well as two-way investment are taken into account, China-U.S. trade and economic relations are mutually beneficial, rather than the U.S. “being taken advantage of”, concludes the White Paper.

Concerning the tariff measures the U.S. imposed, the White Paper says that they harm others and are of no benefit to the U.S. The measures led to a decrease in China’s exports to the U.S. by 9.7% year-on-year in the first four months of 2019 and the uncertainty resulting from the trade friction made companies in both countries more hesitant to invest. Direct investment by Chinese companies in the U.S. was down by 10% in 2018 and U.S. investment in China increased by only 1.5% in 2018 compared to 11% in 2017.

The trade war has not “made America great again” as the tariff measures have not boosted U.S. economic growth, but have significantly increased production costs for U.S. companies, the White Paper argues. The tariff measures also lead to domestic price hikes in the U.S. and have a negative impact on economic growth and people’s livelihood. U.S. GDP will decrease as a result. 25% additional tariffs on all imported Chinese goods will lead to the loss of 2.16 million jobs and additional annual expenses of USD2,294 for a family of four. The tariff measures also impose barriers to U.S. exports to China. During the past decade, 48 U.S. states increased their exports to China, but in 2018 the number was only 16, while 34 exported less to China.

China is not the only victim, U.S. trade bullying harms the whole world, threaten economic globalization and undermine the multilateral trading system, the White Paper states. The tariff measures are plunging the world economy into the “recession trap”. Both the World Bank and the IMF reduced their projections for world economic growth. Moreover, the U.S. moves disrupt global supply chains, hurting all the multinationals that work with Chinese companies, driving up the costs of supply chains and undermining their stability. The U.S. tariff hikes will only make things worse and China is firmly opposed to them.

In a second chapter, the Chinese government says that the U.S. has backtracked on its commitments in the China-U.S. consultations after the two sides agreed on most parts of the deal. After preliminary consensus was reached on expanding China’s imports of agricultural and energy products from the U.S., the U.S. government falsely accused China of “IP theft” and “forced technology
transfer”, and imposed additional tariffs. Ten days after both countries agreed to refrain from fighting a trade war, the U.S. tore up the consensus and criticized China’s economic system and trade policy.

After the U.S. delayed the imposition of additional tariffs for 90 days and progress was made in the negotiations and agreement was reached on most of the issues, the U.S. government resorted to intimidation and coercion and persisted with exorbitant demands, “irresponsibly accused China of backtracking” while the talks were still ongoing, and imposed additional tariffs. The more the U.S. government is offered, the more it wants, the White Paper concludes. “The U.S. government should bear the sole and entire responsibility for this severe setback to the China-U.S. economic and trade consultations.”

One prerequisite for a trade deal is that the U.S. should remove all additional tariffs imposed on Chinese exports and China’s purchase of U.S. goods should be realistic, while ensuring that there is a proper balance in the text of the agreement. Finally, the Chinese government reiterates that it is committed to credible consultations based on equality and mutual benefit and its only intention is to reach a mutually acceptable deal. Cooperation is the only correct choice for China and the U.S. and win-win is the only path to a better future.