People along the Mediterranean should be able to understand it much better. Over the past 4,000 years, it was the bustling inter-state trade across the Mediterranean that nurtured the Phoenician, Egyptian, Jewish, Greek, Roman and Arabic civilizations.
Since World War II, the global trade and economy have moved onto a fast track thanks to the free trade system. According to the World Bank, global economic dependence on trade rose from 17.5% in 1960 to 51.9% in 2017. After the 1990s, international trade was further accelerated by information technology and globalization, reaching an annual growth rate of 6.5%.
Israel was also part of this history. After reaching its first free trade agreement with the European Common Market in 1975, Israel has inked a series of FTAs with countries across the world. Powered by trade deals, the combined value of Israel’s export and import has surged 934% and Israel’s GDP has increased by 15 times.
However, over the last two years, the country that created the free trade system has veered off the course and embarked on a perilous road. Under the slogan of “make America great again,” the current US administration initiated trade frictions not only with China, but also with the EU, Canada, Mexico, India, etc. The measures taken by the US undermined the authority of the multilateral trading system, and seriously disrupted global industrial and supply chains. As a result, the anemic global economy has hit a wall of iron. The World Bank has to further downgrade the global growth prospects in 2019 to 2.6%.
Moreover, trade disputes are not making America “great again.” According to Deutsche Bank, such disputes have cost US stock markets more than $5 trillion.
Thirty-four American states have witnessed losses in their exports to China in 2018, with 24 of them seeing a double-digit decrease.
The US agriculture sector was impacted most severely, with an estimated loss of more than 33%. The export of US soybeans plummeted by 50%, and 84 soybean farms in the Midwest have filed for bankruptcy. The whole US soybean industry is experiencing its worst period since the 2008 global financial crisis.
Trading Partnership, an American think tank, calculates that if the US imposes 25% additional tariffs on all imported Chinese goods, America’s GDP will decrease by 1.01%, with 2.16 million job losses and an additional annual burden of $2,294 on a family of four.
Faced with these escalating trade frictions, China’s position has stayed the same: we have to resolve the issues through negotiation and consultation. However, Beijing will not succumb to the pressure, will not accommodate the exorbitant demands and will by no means accept the mandatory requirements concerning China’s sovereign affairs.
China is open to negotiation, but will also fight to the end if needed. The negotiation must be carried out in the principle of mutual respect, equality and mutual benefit. Parties must come to the table with goodwill and sincerity, and must respect the other side’s dignity and sovereignty.
From the 1950s to the 1970s, the US has orchestrated and maintained an extreme political, economic, technological and military blockade against China. But it has failed to bring China to its knees. On the contrary, China has relied on itself and managed to establish a complete agricultural and industrial system. It was during that harsh blockade that China successfully tested its first atomic bomb and its first hydrogen bomb, and launched the first satellite. Those who live in the 21st century while keeping the old mentalities of the last one are bound to fail. And those who wish to obstruct China’s national rejuvenation are also bound to fail.
Whatever the future might bring, China is confident of meeting challenges head-on, turning risks into opportunities and opening new chapters.
Over the years, China has substantially decreased its reliance on export. Its trade dependence has dropped from 48.8% in 2010 to 33.5% in 2018. Domestic consumption has been the largest driving force for five consecutive years, contributing 76.2% to China’s GDP growth. According to Standard Chartered, the US market contributed 6.3% of China’s GDP in 2006, but in 2017, the number had dropped to 3%.
Despite the external pressure, China’s economy remains robust. In 2018, China’s GDP and exports grew by 6.6% and 9.9%, respectively. In the first quarter of 2019, China’s GDP registered an increase of 6.4% and exports further expanded by 1.4%.
Nonetheless, China is still a popular destination for foreign investment. In the first four months of 2019, the country saw an increase of 6.4% in the actual inflow of foreign direct investment. China is also steadily moving ahead with structural reforms, so as to further unleash the competitiveness of Chinese companies and products. Room for fiscal and monetary policy maneuvers will be sufficient. All of these are contributing to the long-term sustainable growth of China.
Trade is supposed to be mutually beneficial, but wars are doomed to end in mutual destruction. The two words should never be put together. Dialogue and consultation is the only way to resolve economic and trade frictions. A win-win trade deal will serve the interests of all parties and meet the expectations of the world.
The writer is Ambassador of the People’s Republic of China to the State of Israel.