The following is Lou Jiwei's speech:
The topic we are discussing today is: "Sino-US economic and trade relations: partners, rivals or rivals?" I'll observe it a little before I make a conclusion. My observation is that both China and the United States are facing domestic problems, which should be solved mainly through structural reform. At the same time, due to their different international status, China and the United States will observe the outside world from different angles and adopt different policies, but they should both bear positive external responsibilities. President Trump's recent statement shows that by observing the outside world, the US government believes that there are three problems that are unfair to the United States: First, the huge trade deficit has caused the United States to lose a large number of employment opportunities; Second, the existing WTO rules are unfair to the United States; Third, the United States occupies a leading position in the global high-tech field, and it is unfair for other countries to benefit from American technology trade. Moreover, the United States believes that these three kinds of injustices mainly come from China, or China has benefited the most from them.
I want to talk about the first two points. First, the US trade deficit is inevitable, and the root of the Sino-US trade problem is the US policy choice. I think there is something wrong with the position of the current US administration or President Trump. Last Saturday, when I participated in the Development Forum to discuss Sino-US trade issues, I mentioned the triffin Paradox. It is no stranger that all of you here are scholars and experts, but I still want to explain. Triffin Paradox refers to the dilemma faced by the world's major reserve currency countries: to maintain the status of reserve currency countries, the economy must be solid and stable, but at the same time, countries must maintain trade deficits and financial deficits, and balance the balance of payments with capital investment, otherwise their currencies will not become major trade settlement currencies, international reserve currencies and financial safe-haven currencies. But this position will in turn erode the firmness and stability of the economy and form a paradox.
At present, only one country occupies such a position, which naturally brings some advantages, mainly in two aspects: first, low household savings and high trade deficit, which is equivalent to the American people enjoying a higher living standard by overdrawing the global credit of US dollars. In other words, as a global public product, the dollar has benefited the American people. The second advantage is that the moderate fiscal deficit is sustainable, which means that the US government can arrange more resources by overdrawing the global credit of US dollars.
No country has such an advantage as the United States, but there is no such thing as a free lunch. If you have an advantage, you have to take responsibility. According to triffin's paradox, this kind of overdraft is limited. If it is serious enough to affect the firmness and stability of the American economy, it will cause disaster to itself and the global economy. The household savings rate in the United States dropped from about 8% in the 1990s to 1.75% in 2006, and was negative in the first half of 2007. The federal debt ratio of the United States dropped from 49% in 1994 to 34% in 2000 and rose to 70% in 2006. Excessive overdraft of US dollar's global credit, coupled with high-level innovation on Wall Street, eventually led to the global financial crisis.
Therefore, the U.S. government should realize that the U.S. trade deficit and fiscal deficit are inevitable and privileged, and no other country has this advantage, but this privilege cannot be abused. Last year, the household savings rate in the United States dropped to 3.6%, and the federal debt rate exceeded 100%. In my opinion, it is in a state of excessive overdraft, but President Trump does not think so. Is the US$ 800 billion trade deficit he said caused by other countries? In fact, it is caused by the low household savings rate and the high federal debt rate in the United States.
Second, it is in the interest of the United States to embrace and promote globalization. Only when more countries participate in the international trading system and strengthen financial deepening can the international settlement, payment, trading and reserve functions of the US dollar be fully exerted, and the United States, as a global banknote issuer, can gain more advantages. The Bretton Woods system, including the WTO, is beneficial to the United States. President Trump believes that WTO rules are unfair. It is necessary to realize that this rule is the result of extensive international knowledge and global public welfare. Trying to unilaterally and forcibly modify it will only be resisted by most member States and will not work.
Under the current system, the United States has priority. For example, the intellectual property clause in WTO rules, namely TRIPS, actually originated from the 30 1 clause of the United States, only for the benefit of developing countries. On the basis of * * * knowledge, the WTO has made some modifications. This actually reflects that the United States has occupied a priority position. If you want to seek extra priority, it is unrealistic to think of "winner takes all". I can also give an example to remind the United States of its global responsibility. Just mentioned that in 2000, the debt ratio of the US federal government fell to 34%, which was in the late Clinton administration, when the fiscal surplus reached 237 billion US dollars, accounting for 2.5% of GDP. In this case, the issuance scale of US debt is not enough to meet the demand of global reserve assets and risk hedging assets. Therefore, in addition to its own financing needs, the United States issued an additional debt of $654.38+000 billion and paid interest. This is that the United States is fulfilling its global responsibility as a reserve currency country.
Let me talk about China's idea. First of all, in the field of trade and opening up, China's commitment to the WTO is very high, exceeding the general level of developing countries, and it has fully fulfilled its commitments, surpassed its commitments and expanded its opening up.
The first is a high degree of commitment. When China joined the WTO, the highest bound tax rate was 65%, far lower than other major economies. For example, the highest binding tax rate is 300% in the United States, 800% in South Korea and 260% in Japan. After China's entry into WTO, China fulfilled its duty of tax reduction for the first time in 2002, and the average tariff level dropped from 15.3% to 12%. China's WTO accession promises that the level of agricultural subsidies will not exceed 8.5% of its agricultural output value, while the average level of other developing countries is 10%. China promised to open 100 service trade departments, and now the opening level far exceeds the promise, close to developed countries and far higher than developing countries, reaching 120. By 20 10, the duty of tariff concession has been fulfilled, and the overall tariff level has dropped from 15.3% to 9.8%. In terms of trade system, the China government has cleared more than 3,000 laws, regulations and departmental rules, and local governments have cleared more than 90,000, forming a more transparent, standardized and predictable trade system.
In addition, there is a special situation in China, that is, processing trade excluding tax accounts for a large proportion. According to the import structure in 20 17, general trade imports accounted for 59. 1%, processing trade accounted for 23.4%, and the rest were duty-free imports to low-income countries and duty-free equipment imports. Import duties are mainly aimed at general trade. If calculated according to the proportion of tariff revenue to total imports, the effective tax rate is 2.4%, which is close to or lower than that of some developed countries. Sino-US trade is special, and processing trade accounts for a larger proportion. In 20 17, the processing trade surplus between China and the United States accounted for 59% of the total trade surplus, indicating that the actual tax rate in the United States was lower. Therefore, in terms of trade and services, China is not overprotective.
Second, the recent trade war in the United States, of course, I think it is an outpost war. It is not clear whether it is a bluff or a real fight. It's already started anyway.
First of all, in theory, the current American government is untenable and will cause damage to its own interests. The huge deficit is caused by our own policies, the household savings rate is too low, and the fiscal deficit is too large, which is an abuse of the privileges of the note-issuing countries. At the same time, attracting domestic attention to the world is populist hype.
Second, the United States should embrace globalization, including international agendas such as cooperation to address climate change. Globalization and technological progress will definitely lead to structural unemployment and unfair income distribution, which need to be solved through structural reforms and policies. China faces the same problem. With the transfer of comparative advantage, a large number of labor-intensive industries and manufacturing industries have been transferred overseas, and jobs have been lost, especially the agricultural transfer population has lost their urban jobs. We are solving this problem through a series of structural reforms and policies. At present, China's current account surplus accounts for less than 1.5% of GDP, and the trade surplus of goods only accounts for about 3%. This proportion has been basically stable in the past five years, while the contribution rate of consumption has increased from 54.9% to 58.8%, and the proportion of added value of service industry has increased from 45.3% to 5 1.6%, which shows that China's economy is more dependent on domestic demand and less dependent on investment. Solve your own problems, just like China is doing now.
Finally, the United States should treat people as equals, and there are things that can be negotiated and reasoned. It is ineffective and rude for China to resort to a trade war or use a big stick. On the one hand, China is required to be more market-oriented; on the other hand, China is required to reduce its surplus with the United States by issuing indicators under the planned economy. China is increasingly downplaying quantitative growth indicators, such as the planned GDP growth rate in the past, and later changed to the expected growth rate, and the expected tone is getting weaker and weaker, from requiring the expected growth rate to above 7%, and then changed to between 6.5% and 7%. This year's government work report has been adjusted to about 6.5% as expected, with more emphasis on unemployment rate indicators, reducing unemployment rate and expanding employment.
The United States has also used the so-called "mirror tariff", which is not in line with common sense. For example, China imposes a 25% tax on automobile imports, while the tax rate in the United States is very low, which should be exactly the same, completely ignoring the gap in development stages. China is a developing country, and its tariff level is lower than that of Brazil and other developing countries, even lower than that of South Korea, which is not a developing country. If the United States engages in mirror tax, it can mirror German and Japanese, but not China. This truth is very clear to all of you here, and I don't need to say more. Some practices in the United States are really unreasonable. China people's point of view is that people who don't understand Confucius don't need to be gentle, humble and frugal. You should deal with a man as he deals with you, which is the wise saying of Sun Tzu's art of war. If the United States forces China to violate its WTO commitments, then we have no choice but to answer blows with blows.
Intellectual property has nothing to do with triffin's paradox, but it is the most important issue for both sides. We can sit down and talk it over, clear up misunderstandings and reach a consensus. The United States believes that the China administration has interfered with the operation of American enterprises in China, limiting their bargaining rights. I understand the American idea. On the issue of technology transfer, China thinks so. The United States joined forces with its allies through the Paris Coordinating Committee to stop the export of technology to China. On the one hand, the United States, including the West, gains profits from China's huge market, on the other hand, it does not transfer technology. Even the technology in Sino-US joint ventures has to be purchased from the American parent company, and it is unfair to keep paying for intellectual property rights. The rules of the Foreign Investment Review Board led by the US Treasury Department are highly opaque and full of uncertainties. There are too many examples in this regard, and I met many in CIC. China's products, even the products of American corporations with China shares, have been treated unfairly in the United States, and I have done a lot of consulting. It is unfair for the United States to directly intervene in other countries with domestic laws that are higher than international rules.
On the other hand, it is an inherent need for China to protect intellectual property rights, otherwise we will not be able to establish a credit society and make technological progress. China has made great progress in this respect, and Americans can also observe it, but why not say so? According to statistics, the success rate of foreign companies filing patent infringement lawsuits in China has reached 80%. The amount of compensation stipulated by the state was from the previous 6,543.8+0,000 to 6,543.8+0,000 to 6,543.8+0,000 to 5 million, and three intellectual property courts were established. The institutional reform in the State Council and the re-establishment of China National Intellectual Property Administration will be integrated with the functions related to intellectual property protection, which is conducive to solving the problems of difficulty in obtaining evidence, long cycle, high cost and low compensation for intellectual property protection. It is required to complete the institutional reform task before this year.
These are the obvious progress we have made, but there are still some problems that have not been solved. For example, the intellectual property court is not professional enough and tends to local protection, which is also mentioned in the US 30 1 survey report. This is a problem of the national governance system. Why is this happening? It is also because we are inexperienced and still exploring. I think we should walk faster. During my tenure as Finance Minister, I helped solve some problems, made Sino-US economic relations fairer, especially in China, and promoted the process of reform and opening up. We can win, but we must have the will.
Conclusion:
First of all, as an economist and a former government official, I have a lot of communication with the US government. China and the United States should still solve the problem through consultation. We respect the United States very much and have learned a lot from the United States in terms of system. But when I deal with Americans, I deeply feel that they have a sense of superiority, but the advantage of Americans is that as long as you tell him the truth clearly and you know better than him, he will obey you and accept you. However, China cannot be threatened or required to immediately eliminate the surplus of $654.38+000 billion. The United States once threatened the Japanese in this way, and it worked, but it didn't work for China. In the final analysis, we still have to return to negotiations, which is something we can do.
Second, what do other countries think? What do you think of the current Sino-US relations? President Trump, who the American people gradually got used to from the beginning, was not used to it, but he was not always used to it. Europe and Japan were not used to it at first, and now they are used to it, but they are still not used to it and are not convinced. This will form a mentality, hoping that China and the United States will have a fight and suppress the arrogance of the United States. The second mentality is that after the war between China and the United States, everyone expects fairer trade and fairer intellectual property rights. Yes, but I want to remind Europe and Japan not to hitchhike. If you take a fair car, you don't call it a lift, but if we fight between China and the United States, you will benefit. For example, Europeans have great complaints about the platform economy and punish Amazon, Facebook, Twitter and Google. How to break the new monopoly has not been cracked. A large part of these platforms are American, and now China has come in. Europeans want to hit them and squeeze them to some extent. However, the United States also specifically said that if the platform economy continues to expand, the cost will be lower and lower, and China people will try to rob Americans of their jobs. That was not the case. Everyone knows this and should work together to find a solution.
Finally, we are well aware of the problems in intellectual property protection in China. These are all problems that we need to solve. Besides, we should understand each other during the negotiation. Some things were not intentional by China. We have solved these problems, which is good for China, good for the United States and good for the whole world.