Expert says bilateral trade deficit should not matter in U.S.-China ties

Updated 2017-04-19 10:30:55 Xinhua

The bilateral trade deficit "should not matter" in the development China-U.S. relations, said an expert on U.S.-China Relations.

"I hope there's an understanding on the part of the Trump administration that bilateral trade deficits are not particularly meaningful," Stephen A. Orlins, president of the National Committee, told Xinhua in a recent interview at his office in downtown Manhattan.

"I've been doing business with China for more than three decades. The U.S. used to have trade deficits with Japan, South Korea and Southeast Asia. What happened over these years is that a lot of the semi-finished goods would go to China (for China to export), so what's happened is the trade deficit we used to have with those other countries has been transferred to China. Now that is not China's fault and we should not blame China for that," said Orlins.

Orlins said there are domestic factors in the U.S. that better explain the trade gap.

"It relates to a lot of these things that can be solved in part by America dealing with its own savings problem. So if we save more as a country, then we wouldn't need to import so much capital to do things. There are a lot of answers here which don't really relate to U.S.-China relations. They relate to what the United States must do itself," he said.

The China-U.S. trade deficit is overstated, if judged from the perspective of the global supply chain.

Headline figures suggest that China accounted for about half of the U.S. trade deficit in 2015. But Deutsche Bank's economists have found that on a value-added basis, only 16 percent of that deficit came directly from China, slightly higher than the 13 percent which originated from Japan.

"Having said that, there are many areas where China can open its market more to U.S. goods and U.S. investment. There are lots of tariff barriers and non-tariff barriers which can be reduced and will aid U.S. exports to China," Orlins said.

The amount of U.S. service exports to China is often overlooked when calculating the balance of trade. In this area, the United States has a surplus with China. The U.S. edge in service trade has huge potential to grow bigger in China as the world's fastest-growing consumer market is poised to open its service sector wider to the United States.

Orlins, a strong advocate for constructive China-U.S. cooperation for more than four decades, said that his early doubts and worries about the future development of the bilateral ties were dispelled following the successful meeting between Chinese President Xi Jinping and U.S. President Donald Trump at the Mar-a-Largo resort earlier this month.

"I think the relationship is really quite strong," said Orlins, who speaks fluent Mandarin Chinese.

"There was real understanding that was developed (during the meeting)," he said. "The development of a relationship between President Xi and President Trump is important for U.S.-China relations and for the world."

Orlins said that a piece of direct proof is the one-hour telephone conversation made between Xi and Trump within five days after the meeting ended.

"I would say that without the meeting, that telephone conversation would not have been as productive and constructive as it was, so that's already a symbol of the progress," Orlins said.

Orlins noted that Trump's acceptance of Xi's invitation to visit China is also a "very good sign."

"In my experience, when presidents of the United States visit China, they understand better how the Chinese government functions and the problems the Chinese government are confronting, and are able to craft policies which are more constructive to the U.S.-China relationship," he said.

Orlins emphasized that China-U.S. bilateral relations are of global relevance as "there will be global problems in the future which require the two countries "to talk together to help resolve."

The top two world economies have already set examples by working together in tackling major global issues like climate change, cyber security and counter-terrorism, he said.

The creation of a new cabinet-level framework for negotiations, which includes dialogues on diplomacy and security, economy, law enforcement and cybersecurity, and social and cultural issues, "should help resolve issues" between the two countries, said Orlins.

He said the latest positive development is that the U.S. government decided not to brand China as a currency manipulator.

"China is not and has not for many years been depreciating its currency, so President Trump simply realized the reality," he said.

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