China Appeals To US Voters In White Paper: “Trump’s Trade War Has Not ‘Made America Great Again'”

Nobody gets particularly excited about the release of a white paper.

In fact, white papers are, almost by definition, yawners.

So it’s probably not a stretch to say that China’s white paper on the trade war (called “China’s Position on the China-US Economic and Trade Consultations”) was one of the more hotly-anticipated white papers in recent memory. The bar for “hotly-anticipated white paper” is pretty low, and given the high-profile nature of the trade conflict, anything Beijing says officially about the spiraling Sino-US conflict is big news. Seen in that light, the paper is 18 pages worth of headline fodder.

Beijing teased the release of the paper on Saturday around the same time reports indicated China was launching an investigation into FedEx. That probe suggests China will aggressively utilize a new “entities list” to punish foreign companies for complicity in the Trump administration’s blacklisting of Huawei.

Read more: Congratulations FedEx! You Will Now Join ‘Great Patriot Farmers’ On The Frontlines Of The Trade War

At a press conference held in conjunction with the release of the white paper, Vice Commerce Minister Wang Shouwen said it may be an “over-interpretation”, to assume that China will indiscriminately wield the entities list as a weapon in the trade war. He reiterated that foreign companies operating within Chinese law are welcome in the country. Wang called claims that China’s FedEx investigation is a witch hunt (sorry) “groundless”. That’s a silly contention. The FedEx probe is absurd, and indeed, that’s probably the point: To show Trump just how petty this can get. The Canadians will tell you that in addition to being petty, this dispute also has the potential to be dangerous.

The white paper finds China emphasizing that there’s more at stake here than Trump’s ego. “At stake are the fundamental interests of the two peoples, and the prosperity and stability of the world”, the paper reads, on the way to noting that “a mutually beneficial and win-win relationship with strong complementarity and interlinked interests has been forged [over the years], benefiting not only the two countries but also the entire world.”

China proceeds to lament the audacity and unilateral nature of the Trump administration’s broadside against America’s trade partners.

“Since it took office in 2017, the new US administration has threatened additional tariffs and other measures and provoked frequent economic and trade friction with its major trading partners”, the paper says. 

Contrary to the narrative from the White House, China continues to claim that its position has never changed. Rather, the US continues to push the envelope, treading into territory that China has always maintained is off limits.

“Concerning their differences and frictions on the economic and trade front, China is willing to work together with the US to find solutions, and to reach a mutually beneficial and win-win agreement [but] cooperation has to be based on principles”, the paper chides. “There are bottom lines in consultations. China will not compromise on major issues of principle.”

Beijing reiterates that while China doesn’t want a trade war, the country “is not afraid of one and it will fight one if necessary.” Xi’s position on China’s preparedness for an economic war “has never changed”, the paper says.

Next, China proceeds to defend itself against charges of rampant intellectual property theft. That discussion starts with a history of China’s contribution to the development of technology going back thousands of years. At one point, China says the following:

China is fully committed to intellectual property protection. It has established a legal system for the protection of intellectual property that is consistent with prevailing international rules and adapted to China’s domestic conditions. China values the leading role of judicial measures in protecting intellectual property, and has achieved impressive results. The understanding of the importance of intellectual property among the general public and business community in China has increased, the value of royalties paid to foreign rights-holders has risen significantly, and the number of intellectual property applications and registrations has surged.

Undoubtedly, the most headline-friendly section of the paper is a four-point critique of the notion that the trade was has “made America great again”. Beijing invokes Trump’s catchphrase and proceeds to dismantle it in the context of the trade spat. Here’s are the four points, verbatim:

1. The tariff measures have significantly increased production costs for US companies. The Chinese and US manufacturing sectors are highly dependent on each other. Many American manufacturers depend on China’s raw materials and intermediary goods. As it is hard for them to find good alternative suppliers in the short term, they will have to bear the costs of the tariff hikes.
2. The tariff measures lead to domestic price hikes in the US. The import of value-for-money consumer goods from China is a key factor behind the long-term low inflation in the US. After the additional tariffs were imposed, the final selling price of Chinese products increased, leaving American consumers effectively bearing some tariff costs. According to research by the US National Retail Federation, the 25 percent additional tariffs on furniture alone will cost the US consumer an additional US$4.6 billion per year.
3. The tariff measures have an impact on US economic growth and people’s livelihood. A joint report by the US Chamber of Commerce and the Rhodium Group in March 2019 showed that, under the impact of China-US economic and trade friction, US GDP in 2019 and the next four years could decrease by US$64-91 billion per year, about 0.3-0.5 percent of total US GDP. If the US imposes 25 percent tariffs on all Chinese goods exported to the US, US GDP will decrease by US$1 trillion in the next ten years cumulatively. According to a research report in February 2019 by Trade Partnership, an American think-tank, if the US imposes 25 percent additional tariffs on all imported Chinese goods, US GDP will decrease by 1.01 percent, with 2.16 million job losses and an additional annual burden of US$2,294 on a family of four.
4. The tariff measures lead to barriers to US exports to China. The 2019 State Export Report, published by the US-China Business Council on May 1, 2019, stated that in the ten years from 2009 to 2018, US exports to China supported over 1.1 million jobs. The Chinese market continues its importance to US economic growth. Forty-eight states of the US have increased their goods exports to China during the last decade — 44 of them by double digits — while in 2018, when economic and trade friction worsened, only 16 states increased their goods exports to China. Thirty-four states exported fewer goods to China, with 24 of them seeing a double-digit decrease. The Midwestern agricultural states were hit particularly hard. Under tariff measures, exports of American agricultural produce to China decreased by 33.1 percent year-on-year, including a 50 percent drop in soybeans. US businesses are worried that they might lose the Chinese market, which they have been cultivating for nearly 40 years.

There’s not much there that’s debatable. That’s not to say there aren’t intelligent counterarguments that make the case for extraordinary measures aimed at changing trade patterns with China. It’s simply to say that, to date, the US administration doesn’t seem particularly keen on emphasizing legitimate counterarguments, opting instead to dispatch Peter Navarro and Wilbur Ross to make the TV rounds and argue the unarguable.

The white paper proceeds to emphasize that US “trade bullying” harms the entire world, something Europe surely agrees with and a sentiment that is most likely shared by all countries, even if they aren’t in a position to say it explicitly by virtue of not being large enough to risk Trump’s ire by speaking out.

“The US measures are undermining the authority of the multilateral trading system, threaten[ing] global economic growth and disrupt[ing] global industrial and supply chains”, the paper says. Here’s what China has to say on the supply chain point:

China and the US are both key links in global industrial and supply chains. Given the large volume of intermediary goods and components from other countries in Chinese end-products exported to the US, US tariff hikes will hurt all the multinationals — not least those from the US — that work with Chinese companies. The tariff measures artificially drive up the costs of supply chains, and undermine their stability and security. As a result, some businesses are forced to readjust their global supply chains at the expense of optimal resource allocation.   

Obviously, a lot of this is self-serving, but that doesn’t mean it’s wrong. We’ve written voluminously about the dangers inherent in Trump’s efforts to upend globalized supply chains and so has everyone else.

“For globally integrated value chains, the re-establishment of trade barriers between the US and China amounts to building walls within a factory, preventing the free flow of parts along the assembly line”, Barclays wrote last month, adding that “medium-term misallocation of capital, together with short-term frictions and the fixed costs of supply chain adjustment, suggest that the world economy will grow less.” At the same time, the bank warned that “negative confidence effects, adverse financial market developments and idiosyncratic weaknesses could amplify the drag by a multiple”.

Read more: America Can’t Escape The Reality Of Trump’s Trade War Forever

China also offers a play-by-play account of what it claims are three instances of US “backtracking”. Beijing then says it’s not prepared to give any further ground when it comes to “issues of principle”. The definition of that isn’t clearly spelled out, but one assumes it’s tied to US demands that Xi alter Chinese law in an effort to placate the US.

Amusingly, China also promises to act in the best interest of the “American people”, a hilarious nod to the idea that when it comes to who US workers should trust in this ongoing charade, it’s Xi, not Trump. That said, Beijing explicitly says that China will “fight to the end”, if that’s what Trump wants. To wit:

China will act rationally in the interests of the Chinese people, the American people, and all other peoples around the world. However, China will not bow under pressure and will rise to any challenge coming its way. China is open to negotiation, but will also fight to the end if needed.

The paper ends on a constructive note. “It is hoped that the US can pull in the same direction with China and, in a spirit of mutual respect, equality and mutual benefit, manage economic and trade differences, strengthen trade and economic cooperation, and jointly advance China-US relations based on coordination, cooperation and stability for the well-being of both nations and the world”, Beijing concludes. 

Hours after China released the white paper, Trump opened his Twitter app and extolled the virtues of wielding the tariff gun to drive other countries to ruin in pursuit of his personal agenda.

“Either [Mexico] stop the invasion of our Country by Drug Dealers, Coyotes and Illegal Immigrants… or our many companies and jobs that have been foolishly allowed to move South of the Border, will be brought back into the United States through Tariffs”, Trump said.

Nothing further.

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