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Ambassador Wu Xi's Article on China-US Trade War

On 9 June 2019, the New Zealand Herald website published a signed article by Ambassador Wu Xi entitled No One Wins a Trade War. The full text is as follows:

New Zealand, like China, is a firm supporter of open and rules-based global trade. It has allowed New Zealand, as a small trading nation, to prosper and punch well above its weight on the world stage. China has benefitted by raising the living standards of millions, modernising our economy and building strong connections with the international community.

Despite the differences between China and New Zealand, the nature of our economies means we both continue to support open and inclusive trade. This is why recent China-US trade frictions and talk of a looming ‘trade war’ have raised eyebrows here, just as they have in other like-minded trading nations.

Until recently, China and the United States were making considerable progress addressing each other’s trade concerns, concluding 11 rounds of trade talks and negotiations. Despite this momentum, the US announced a jump in tariffs on US$200 billion worth of Chinese goods from 10 percent to 25 percent, and threatened to impose additional tariffs on US$300 billion of Chinese goods.

This isn't the first time the United States has unilaterally chosen to put up trade barriers while talks have been underway. In May and December of 2018, it changed its mind on tariffs overnight, despite a tentative deal having been reached.

While all countries remain sovereign, it's the chilling effect on the principles of transparent and open trade that should concern us. This is compounded by US moves to exclude Huawei and other Chinese companies under the guise of ‘national security’, disrupting market certainty, putting jobs at risk and undermining fair competition.

The US does not have a monopoly on the advancement of humanity through the development of science, technology and good ideas. What the actions against Huawei do is threaten global supply chains and further delay the rollout of 5G. This technology has the potential to drive innovation, improve productivity, and enhance the quality of life in many countries, including New Zealand. Seeing this put at risk for the sake of an ‘America first’ approach is regrettable.

More broadly, the US is going against the established norm that trade disputes should be solved by negotiations. Their decisions have disrupted the international trading order, triggered strong fluctuations in financial markets, and undermined multilateralism. Simply put, they are inconsistent with the expectations of the international community.

Recently, China has issued a White Paper about our position on the China-US economic and trade consultations. We have made it clear on many occasions that trade problems can’t be solved by raising tariffs. Starting a trade war will be even more harmful; not only to others but also to the country that starts it. As a strong advocate for open trade, China doesn’t want a trade war, but if one is brought to our doorstep, we will have no choice but to fight it, to defend and safeguard the legitimate rights and interests of Chinese companies.

At the same time, China has chosen to respond with calmness and composure. We believe negotiation, dialogue and consultation are the right ways to resolve differences. Good deals are only made when both parties can benefit, show respect, and are treated equally. This requires effort from both sides.

In the short term, a trade war started by the US will hurt the Chinese economy, but it will not stop China’s long-term development. As President Xi Jinping has pointed out, the Chinese economy is not a pond, but an ocean. After enduring numerous winds and storms, a pond may be irreversibly damaged, but the ocean will still be there.

Take China’s GDP for example. In the first quarter of 2019 it grew by 6.4 percent year on year, which is better than expected. Given the IMF recently downgraded its outlook for global economic growth to 3.3 percent while upgrading China’s growth to 6.3 percent from 6.2 percent, China stands out as a good news story among major economies.

This won’t be surprising to people who visit China regularly or know the country well. We have a highly developed industrial base, a growing reputation for scientific and technological innovation, the world’s largest middle-income population and a huge market for domestic consumption and investment. There is a real sense of energy and optimism in China, and following our own timetable and roadmap, we will continue to implement reforms, open up and pursue high-quality growth for steady and sustained progress.

This path will benefit not only China, but every country that remains committed to cooperation and open trade as means to develop, grow and prosper. In a world where solving problems takes more partners than ever before, trade protectionism and unilateralism can only be unhelpful.

New Zealand has been a strong advocate for and supporter of global free trade. One of the greatest illustrations of this was that the first bilateral Free Trade Agreement China signed with developed countries was with New Zealand.

This makes New Zealand’s position at this moment all the more important in the world. All countries, including New Zealand needs to stand up for the strength and integrity of multilateral institutions like the WTO that keep global trade open and fair.

No one wins a trade war. The only mutually beneficial path for every country is to support sustainable and inclusive economic development through free and open trade for all.

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