China in the eye of US, EU trade storms

It's not for nothing that the United States of America makes the trade issues between her and China a major and familiar singsong.

And to live up to their dare, on May 18, US announced restrictive tariffs and other limiting measures on China's steel export.

An understanding of the tussle and stiff competition in world economies and politics and who dominates the rest makes us know why a nation like the US would not feel so comfortable that China has come so strong and moves like it is poised to topple every traditional world economic force and system that exists.

If you look at the statistics of the trade relationship between the two giant economies in the past 30 years that has sustained a tradition, it becomes very easy to understand the unease in US about China.

Last year like in a tone of frustration, President Barack Obama lashed out that it is not proper that China should write the rules of world trade because it's US duty and right to do so. Actually, I am yet to locate the fact of this outburst. I know that though the World Trade Organisation has its office in Geneva, it is an offshoot of the Bretton Woods institution with office in US and dictated to by the whims of US.

Therefore the US writes and continues to write the rules, not China. China just joined the WTO in 2001, six years after the rules codified by the US had come into force in 1995.

For the years since 1985, the trade balance between the two has moved in one direction – surplus for China and sustained deficit for the US. Changes in policies and so many others have not made any difference. That is what the ledgers contain.

Through about four presidents, the game has remained stable and in the same tradition. Bad enough, even after the bookmakers had predicted otherwise this year, the slide has looked worse since the year began, especially between March and April, and in response with the same old frenzy, US media screamed murder again.

Since the days of Bill Clinton, China's economy and trade with US has remained the most favorite issue of campaign and propaganda.

In recent times, Obama has always reserved time for the China trade imbalance tirade. And bad enough, the way US discusses the matter sends the impression that China practices a form of magic with which in enchants US and keeps taking the benefits of the trade between them.

But if the facts would be viewed more dispassionately, the figures and the facts that give rise to them might not agree with the position of US that the indices favor China always and in all meanings.

It is not in dispute that the ledgers of trade between the two have always in 30 years tilted in favor of China. And from the first quarter of 2016, there doesn't seem to be any difference coming. But is that all there is to the relationship? These issues are compelling again with the renewed bashing of China by the US and later the European Union (EU).

Now as US warms up to elect a new president, the old refrain rings louder on how China cheats, dupes and arm-twists US. Worse words have been deployed especially by Donald Trump, the GOP presidential candidate hopeful. He tagged it rape. His conclusion is that China rapes US, trade wise. Even his fellow countrymen argued that the choice of word was rather absurd. But with Trump, such words are just normal having traded with worse epithets in the past in reference to other countries, peoples and individuals.

Unfortunately, while US keeps lamenting over the imbalance, they don't seem to do anything about it as the trend continues – a reason to question the validity of those selective figures pushed out for whatever intention.

What has however been ignored by the US is the truth that it contributes to the problem if it should be called that. When China opened up to the world to boost her economy, US was head over heels in wooing the largest country of the world with investment outsourcing. They celebrated in euphoria their new found cheap labor market where their goods would be produced and brought back to their country at cheaper cost and good quality. And US never told the world the gains it made by retaining her social stability in providing their consumers adequate goods from the mills of China's cheap labor and probably some tax evasions and other corner cutting deals. They haven't told us either of the stability they used China to achieve in beating over capacity that was a problem to their economy. Yes, China benefitted. But did US walk back home or remain in China investing in empty hands? Reciprocity and mutual gains have always remained the thrust of business especially that between countries.

But US seems to give the world and themselves a fraction of the facts involved in the economic relationship between the two world powers. It still befuddles the mind why US suddenly woke up from its euphoria to complain about the benefits China is making from the trade between the two.

Sometimes I see the tantrums from US about China as more of propaganda to get at a nation her growth took US by surprise. If we agree with the facts that US investments catalyzed China's economic miracles, then we have to go a step further to ask how. The how is that US invested heavily in China. And in those foreign investments, did US go without any profits and still continued to invest in China as form of charity and not business? It's hard to even imagine. So why, apart from propaganda, does US present to the world and her citizens one side of the figures of China US business deals? What the world is shown is the trade data. But is trade all of the economic relationship of countries? No.

If US would make the records accurate, the country should go beyond the trade data between them and also make known the gains they made in repatriated profits to their country from their investments in China. What about the value of those investments in China that are still owned by the US citizens and the value appreciation every year? Why would US not take stock of the totality of the economic relationship between two of them and stop bandying half facts? Where would US place the profits of their citizens who have worked in China these years supervising their investments and consulting in China?

The traders involved in the trade that always favored China and left US sore, have they all been Chinese citizens, leaving out US? What about the freighting of the goods to US from China, what had been the quota of handling between US and China? There is the shipping and freighting rule of the WTO for such trade called the 40:40:20 quota – where the trading partners must provide at least 40% of the cargo handling apiece leaving 20% to third parties. Did China in 30 years flout these rules against powerful US that wrote them and US kept quiet over such breach? Where do you place those profits, and can they ever be made public so that the vilifying of China like a deliberate intention to cause disaffection between the two would have an end?

Yes China gains from the businesses, and US is never a loser in the deals otherwise they would have pulled back over the years they started complaining. We are yet to know when US shed her capitalist identity to keep losing to China in the past 30 years and never stopped trading with China. They are facts they have not made known to the world that keep them clinging to China and complaining about China cheating them.

Lately, the two presidential hopefuls in the coming race have as usual made the China-US trade figures the usual winning point. Hillary Clinton, the Democratic Party presidential candidate joined Trump in entertaining the American voters with the same slogan.

At last, I found reason to confirm my doubts about the half truths in US campaign against China in an article by Zackary Karabell. I know he is American. He asked: "But what if the numbers we've been working with are wrong"? His position reinforced my old views that US might probably be intentionally citing these figures to incite anger against China among her citizens. Otherwise, why would egoistic US be using the official website of the US Census Bureau to publish and admit that she lags behind China every year since 1985 when the deficit was just about USD6m to when it peaked between 2007 and last year?

Karabell exposed further the details aligning with my thoughts that: "The big problem with these numbers: They assume that each finished product is made in a single country."

According to the "rules of origin" established by the World Trade Organization, a finished good is ascribed to the country where it underwent its last "substantial transformation. Today, however, almost nothing—not T-shirts nor Boeing Dreamliners nor Nike shoes nor iPhones—is made in one place.

Take the iPhone or the iPad. They are, for the most part, assembled in factories owned by a Taiwanese company called Foxconn in southern China. They are then shipped to the Port of Long Beach, Calif., where they enter the US as imports. Every iPhone that Apple sells in the US adds roughly $200 to the US Chinese trade deficit, according to the calculations of three economists who looked at the issue in 2010. By 2013, Apple's US iPhone sales alone were adding $6–$8 billion to the trade deficit with China every year.

But are iPhones really "made in China"? More than a dozen companies from at least five countries supply parts for them. Infineon Technologies in Germany makes the wireless chip; Toshiba in Japan manufactures the touch screen; Broadcom in the US makes the Bluetooth chips that let the devices connect to wireless headsets or keyboards.

The notion of a "country of origin" is an anachronism, but its effects distort our sense of what's what.

Analysts differ over how much of the final price of an iPhone or an iPad should be assigned to which country, but no one disputes that the largest slice should go not to China but to the US, where the design and marketing of such devices take place at Apple's headquarters in Cupertino, Calif. The largest source of an iPhone's value—and this goes for thousands of other high-tech products—lies not in its physical hardware but in its invention and the work of the individuals who conceived, designed, patented, packaged, and branded the device.

Taking these facts into account would leave China, the supposed country of origin, with a paltry piece of the pie. The Asian Development Bank estimates that as little as $10 of the value of every iPhone or iPad actually ends up in the Chinese economy.

Now magnify this across hundreds, even thousands of finished goods.

At China's opening up, it was US that reaped the major benefits by swooping on China with outsourced investments to an extent that they almost made nothing they consumed. Apart from the commodity mentioned by Karabell, there are over hundred other such goods manufactured in China but in the factories of US foreign investors and allies and shipped to US, including all TVs used in all homes in America since the 80s. Because these products get into US as China exports, the bookkeepers count them in favor of China, and that is just the trade figures, and intentionally excluding other gains and profits that accrue to US from their investments in China.

As the US argument continues, the European Union (EU) parliament has given time within which to declare China's economy a non-market economy, and that entails defining sanctions against trading with China. But while the enforcement of this intention is doubtful since there is no country known as EU that trades with China, the coincidence with US loud pronouncement against China in trades a little after Obama's visit to the UK and Germany feels rather uncomfortable. Many that think the way I do would ask if trade with China was part of the discussions Obama had with the biggest EU economies last month. In a trade matter by the EU, where would Germany stand when the country's trade with China is in its favor?

Yes, the EU parliament decision though according to it is from its investigation of China on anti-dumping rules, is hardly enforceable because China relates with individual countries and not an EU. Every country is at liberty according to its trade and economies to relate with China likewise. Again, the EU would be just be blowing hot air because it is still doubtful where they have found a market to replace China's 1.4 billion people and when more European companies keep coming to China to invest and form partnerships. The facts that touch home are that any move by the EU against China would have two-way effects.

But while all these happen, and it might not take overnight for the US to uproot the manufacturing lines in China or stop the products from reaching their country since they have no ready alternatives, yet, the jostles should be wake up call for China never to allow itself be caught unawares.

Arguments on what form of market China operates have never made much sense to me. But I know it does for western propaganda. One of the reasons they make it a big issue is because China has over the years resisted their bullying to fall in line with their dictates like Africa prematurely did and is suffocating.

Before Europe and US championed the market economy starting from the late 1970s, they had built enough backbone from state powered economies. They had laid the foundation and raised enough infrastructure and the right environment to make their new trend possible. They immediately commenced bullying everybody including those that never had any defined economy into jumping on their bandwagon so that they would bring their powerful multinational firms to buy the countries over. Their institutions like the IMF and World Bank became enforcers.

It is only China that resisted them till now and unfortunately for them, China has already attained the world power status, world's second largest economy; and what they see as strange economy was admitted into the WTO, a puppet body of the US and EU. Since China met the economic conditions to be admitted why the hushed conspiracy now? China should not take chances with a resolve to exist in its own way and style of economy to provide some other struggling worlds the hope of an alternative to US and EU, and also the hope that one can defy the tradition of economic tyranny and grow like China did.

Ikenna Emewu, Fellow of the CPDA in Beijing, is senior editor with The Sun Newspaper, Nigeria and wrote from the CAPC