Counterpoint: Don't exaggerate range of global protectionism

Illustration: Liu Rui

Trade disputes between China and the US have become increasingly intense lately. Such conflicts will inevitably have an unforeseeable impact on the recovery of the global economy, especially considering the sizes of the two countries' economies. In the short term, protectionist sentiments may get momentum from this.

Although protectionism may be justified in order to balance countries' international revenues and expenditures, the ultimate result will be a continual downsizing of global economy. In the longer term, trade disputes will disrupt countries' resource distribution, and subsequently hinder the efficient development of the world economy. However, the US, in order to secure its unilateral interests in globalization, has disregarded these risks and waged trade wars against its global counterpart, China.

One of the reasons is that the financial crisis has disrupted the US economy and amplified its unemployment problem. The US has had to give its technology and finance sectors, its primary competitive advantages in the global market, more incentives to promote innovations in order to survive the current crisis, but this comes at the cost of even more low-end jobs.

Thus, only when the US economy and its domestic purchasing power have fully recovered, can jobs for unskilled workers start to rise in turn. But time is short for the Obama administration since this is an election year. Many of the unskilled workers have been voicing their dissatisfaction on the street, such as in the Occupy Wall Street Movement. Thus, US President Barack Obama will have to start his reindustrialization plan right now, taking low-end labor back from China to ease the pressure and recover popularity.

Besides, since the financial crisis, the US has been mired in a debt crisis while China, as the biggest creditor nation of the US, has strengthened its economic position on the global stage.

The measures that China promotes to reform the international monetary system, including the yuan internationalization strategy, present the US with great challenges. Therefore, reducing the trade imbalance between China and the US and avoiding a weaker dollar have become the top priorities of the US. Curbing China's trade surplus is seen as also curbing China's threat to the US economy.

A trade war against China would undoubtedly badly affect China's industrial development. One prominent example is it could lead to a hollowing-out of the Chinese manufacturing industry. Due to trade frictions, Chinese exports are frustrated. Many Chinese manufacturers have chosen to withdraw from the industry as they have suffered great losses.

 Chinese small and medium-sized enterprises already face difficulties in financing. Coupled with frustrated exports, they would have to withdraw from the market. China hopes to reduce its dependence on external demand by boosting domestic demand, but in fact, the domestic consumption ability of the Chinese public remains inadequate.

Facing a trade war against China under the US-dominated world economy, China should stick to the free trade concepts it always promotes. The US and European countries once highlighted free trade in order to give their enterprises and financial institutions a dominant place in global competition.

But now they are changing the game rules. It's not fair. Almost all nations are discussing economic structural adjustment nowadays. If everyone adopts balancing trade surplus as the main means to achieve structural adjustments and sticks to protectionism, the economic scale will shrink.

US protectionism would have severe effects on China's economy. China should be cautious in any trade battle with the US. China should keep its comparative advantages, since the country's market vitality and economic growth are supported by trade and investment. It should also take measures to increase imports from the US, and even adopt policies or subsidies that help the US create job opportunities. Otherwise, even if the world economy really recovers, China will see asset bubbles due to hollowed-out industries.

The author is deputy director of the School of Economics, Fudan University. opinion@globaltimes.com.cn

Counterpoint: Don't exaggerate range of global protectionism