The root of the U.S-China trade conflict according to analysts

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By VOA News [Public domain], via Wikimedia Commons

The spectre of the trade conflict started by the U.S. President Donald Trump continues to haunt the world. While recently Trump attempted to ease the fears by somewhat softening his stance, the international community still anxiously observe this looming trade dispute.

Claiming the U.S.’s dependence on steel and aluminium imports threatens national security, Trump has imposed heavy tariffs on imports of these commodities. Yet, the root of U.S-China trade dispute lies in the competition for dominating the influence of the world market space.

This conflict in trade is, therefore, a “market war” vying for the commercial interest of the participating countries, and the core of such warfare is commercial space; it is no less destructive than the war waged with artilleries and fighter aircraft and can lead to the collapse of a country.

Market as Space
The current reactions of various countries show that no country accepts “obstructing national security” as the reason for a trade dispute.

Wang Hejun, director of China’s Trade Remedy and Investigation Bureau of Ministry of Commerce, said in a statement earlier that most of steel and aluminium products imported by U.S. were low-and- middle-end products for civilian use.

In the investigation, stakeholders in the European Union, Canada, Russia, China, South Africa, South Korea, Vietnam and other countries and regions also proved to the U.S. that their steel and aluminium products exported to the U.S. had not harmed its national security.

Japan, an American ally, also said it was hard to accept the decision. Reuters report that the Japanese trade minister Hiroshige Seko said, “I don’t think exports of steel and aluminium from Japan, which is a U.S. ally, damages U.S. national security in any way, and we would like to explain that to the U.S.

Anbound, an independent think tank specializing in public policy research with headquarter based in Beijing, pointed out that the size and influence of the market space determines the condition and the balance of the world.

This means the market supports economic growth, therefore the more developed a country is, the more of its economic growth would be depending on consumer demand and on its market space.

The essence of the U.S-China trade dispute is in fact, a competition for the control of market space.

The term “market” conveys two meanings, the first is trading venue, as in the  traditional market and stock market that we are familiar with; the second meaning includes broader sense, that is the behaviors and rules for trading.

Core Values of Market Space and Economic Growth
When we speak of market space, it is crucial to know that the size and influence of the market space will determine the shape and balance of the world. Large markets can effectively support economic growth. This also means that the economic power represented by economic growth determines the strength and world status of a country.

Economic growth needs market space; therefore a country’s leadership depends on the market.

Market space is of course, related to globalization. Globalization has led to the recombination and distribution of world capital and wealth. However, the progress of globalization in the world has not been easy.

It could be said that there are many obstacles, with the forces of anti-globalization are now unprecedentedly strong and this trend is becoming increasingly apparent.

To the capital, the market space is also always full of temptations. The market attracts capital and the capital supports market expansion.

Capital is interrelated with production, and production can only be sustained with the support of an effective market.

Consumption too depends on space. The growth of consumption is usually relatively stable and it is unlikely that there will be a sharp increase, especially for mass consumption.

To promote the rapid growth of consumption, space would need to be expanded within the shortest time, and this is usually done through urbanization.

If the market space is large, the total economic output will be large as well. In particular, the expansion of market space can then accommodate more capital, and the capital is favourable for stimulating economic growth.

Avoiding risks and economic crisis requires space

Capital surplus leads to a large number of problems. Some of the negative effects of economics are described as "bubbles.

However, the root reasons are still the problems caused by overcapacity. If there is more space, which is obviously conducive to digest capital, digest overproduction and inventory, it will help to avoid the financial crisis and economic crisis.
Results of “Market War”

If the “market war” erupts, the world market will be fragmented due to the pressure of the “war” and the prevalence of “de-globalization”.

Large-scale global market space and the overall market space may be disintegrated into a region or relatively independent market space.

That is to say since globalization cannot continue, globalization will retrograde in the direction of fragmentation and may gradually be replaced by regionalization. Brexit is an example of such outcome.\

Under such situation, smaller countries will find themselves the necessity of being attached to the larger market space. It is only through forging cooperation and transferring some national interests; such countries will be able to obtain their own living space.

Therefore, it is inevitable for smaller countries to lose some of their rights to speak.

On the other hand, different countries in the world, not necessarily smaller countries, will also see themselves transferring part of national interests.

The most typical example in this regard is the European Union where the participating countries have surrendered monetary sovereignty because of the existence of the Euro. Another example is Latin America, in which the Latin American countries are relying heavily on the U.S. market.

Countries that once opposed globalization and the world market because of their own interests may therefore have to pay a higher price.

“Trade war” not the solution
Yet, initiating trade dispute to dominate market space will not have much effect in changing the trade imbalance between China and the U.S.

Anbound’s chief researcher Chen Gong has pointed out that China’s manufacturing industry is an “embedded industry”, which means that its production and assembly industry is embedded in the global industrial chain; therefore trade dispute cannot solve any issue of structural imbalance.

In an opinion piece published in the New York Times, American economist Paul Krugman wrote that much of the big deficit between the U.S. and China is
“statistical illusion”.

Like Chen Gong, Krugman mentions that China is more of an assembler and that many Chinese exports are actually put together from parts produced elsewhere.

To reduce this huge deficit, there should be a completely economic system, and that will be highly improbable. The opinions and analysis of both Krugman and Chen Gong point towards one thing: trade dispute will not solve the U.S.-China trade imbalance issue.

The trade conflict will have no final winner; as Krugman said, “almost everyone ends up losing economically”. The key to maintaining world peace and stability in the future lies in the continuous promotion of global amalgamation and allow globalization to move from a simple pursuit of economy and wealth to a stable, balanced social development.

Global Amalgamation
As China expands its international development space and promotes its Belt and Road Initiative, Chen Gong and his research team has already been conducting researches on this New Silk Road for more than a decade, and they have since published a series of reports and articles, focusing on the establishment of “Common Market” as the solution of trade issues.

Economic common market refers to a unified market space, which means that the complementarity of advantages, interconnectivity and interoperability, and would bring economic growth in the impoverished regions of the world.

Anbound has proposed that the establishment of common market is not only about infrastructural construction projects, but also paving the way for the market economy to build bridges.

When one talks about the common market, it is inevitable that the topic of globalization would be brought to the discussion. Globalization has brought about the expansion and reorganization of the market space.

It is generally believed that globalization is the process of international integration brought about by the exchange of worldviews, products, concepts and other cultural elements.

Progress in infrastructures such as transport and telecommunications in all countries, including the telegraph and the rise of the Internet since then, has contributed to globalization and the cultural and economic interactions among different nations.

Globalization is only a beginning; according to Anbound it will be followed by global amalgamation.

Global amalgamation refers to the integration of countries under conditions of gradual consensus on politics, culture, morals, law and economy.

Global amalgamation, based on consensus, is not based on religion and ideology. This would mean that the governments around the world would need to share the market, capital, and technology to achieve to truly realize the mutual benefits.

The key of maintaining world peace and stability in the future is to continue promoting global amalgamation and allow globalization to move from the pursuit of economy and wealth towards a more stable and healthy balanced social development, and from the pursuit of efficiency and commercial competition to full global integration and consensus.

Therefore, the direction of global amalgamation is objective, and it also transcends states and ideology.