Tong Hui │ There's no need to be overly pessimistic about Sino-US trade relations. The importance of
On the morning of December 9, 2018, the academic seminar on "International Trade Relations and the Restructuring of the Global Economic Governance System," jointly organized by the Center for International Finance and Economics Research (CIFER) and the Center for Monetary Policy Research of the National Institute of Financial Research at Tsinghua University, successfully concluded at the PBC School of Finance, Tsinghua University. Ezra Vogel, Professor at Harvard University and former Director of the Fairbank Institute for East Asian Research, delivered a keynote speech at the closing ceremony. Following this, Dr. Tong Hui, Senior Research Fellow at the International Monetary Fund, participated in the panel discussion and delivered a speech. Dr. Tong Hui elaborated on the close relationship between China and the United States from an economic perspective, comparing today's trade relations with the trade war of 100 years ago. He analyzed the importance of current structural factors, pointing out that while caution is indeed needed in the current trade relationship, excessive pessimism is unnecessary, and emphasizing the necessity of multilateral consultation.
The following is Dr. Tong Hui's remarks during the guest discussion:
I am very grateful for the invitation from Tsinghua University. I learned a lot from Professor Fu's speech this morning. I have some personal thoughts, which are my personal opinions and do not represent the official views of the IMF.
Professor Vogel's remarks were very enlightening. I feel that Professor Vogel views Sino-US relations from political, economic, and human perspectives. I think the third point, the human perspective, is particularly important. The personal backgrounds and experiences of think tank members, as well as the personal philosophies of leaders, all influence trade policy formulation. Therefore, as economists, when analyzing such economic policies, we must consider the "human" factor. This is a point I particularly learned from Professor Vogel's remarks.
Since I don't know much about politics, I'll offer some thoughts from an economic perspective.
First, the economic relationship between China and the United States is very close. We have financial ties; for example, China was once the largest holder of US Treasury bonds. There is also a strong and direct trade relationship between the two countries, and a global industrial chain has been formed. At the same time, China has a significant spillover effect; for example, China's economic growth has a certain impact on global commodity prices. Furthermore, in 2015, when China's economy experienced some fluctuations, it affected the interest rate policies of some central banks.
Secondly, we can discuss trade wars. The US also experienced a trade war in 1930. When the US increased tariffs (the Smoot-Hawley Tariff), the business community strongly supported it because they wanted to exclude products from other countries, such as Britain, from the US market. A century later, the situation is somewhat different. In the current US-China trade relationship, a significant portion of the US business community does not support a trade war. Comparing the trade war of 100 years ago with the current trade relationship, we can see that due to the existence of global supply chains, many US multinational corporations actually hope that the US market remains open. These structural factors are also very important. We just mentioned the influence of individual think tank members on trade policy, but such individual factors cannot completely negate or ignore the structural factors of global supply chains.
Let me give you an example. Everyone knows about the steel tariffs, which have had a very negative impact on the United States. Just last week, a new US jobs report showed that current employment is lower than expected, but that's not the main problem. The main problem is some structural changes. Looking at US employment, the steel industry has indeed increased, but downstream industries that use steel as a raw material have been impacted. These negative impacts are not something US policymakers can easily ignore. Therefore, we do need to be cautious about current trade relations, but due to structural factors in the industry, there's no need to be overly pessimistic.
Third, multilateral consultations remain crucial amidst current trade tensions, and cooperation among WTO members is also helpful. Why do I say this? For example, last year I organized a joint IMF/World Bank/WTO meeting where we looked beyond just US-China trade; we considered global trade as a whole. While the US and China are indeed two very large economies, we shouldn't overlook the spillover effects of US-China trade on other countries, such as Europe and emerging economies. The meeting also recognized the positive effects of trade, but also acknowledged some issues that need further resolution, such as the distributional effects. Therefore, I want to emphasize that in the context of US-China trade tensions, greater development and emphasis should be placed on cooperation with multilateral organizations, such as the WTO.
