Apr 10, 2018 01:50 PM

Editorial: Consumers Should Not Be Made Victims of Trade War

Sino-U.S. trade friction has escalated, as the two sides last week exchanged threats of tariffs worth hundreds of billions of U.S. dollars. The U.S. has targeted about 1,300 Chinese products, including electronics, machinery, chemicals and metals. China hit back with pending tariff hikes on 106 U.S. products, including soybeans, automobiles, aircraft and beef.

As was the case in previous trade conflicts among many countries, the interests of some manufacturers are the key elements affecting the U.S. government’s protectionist decision-making. But the voices of consumers are rarely heard in officials’ statements, observers’ analyses or media reports. This imbalance must be changed. As initiator of the trade spat, the U.S. government must first respect the consumers’ interests and rights, and needs to listen to their voices in order not to make the consumers of both countries the victims of a trade war.

The trade policies of a country should cater not only to manufacturers, but also the consumers — simple as that. Some even emphasize so-called consumer sovereignty, arguing that it is the consumers who decide the need of goods and services. However, in reality, the interests of the majority of a population may often be overruled by a few lobbyist groups, as American economist Mancur Olson pointed out. In the case of trade issues, most consumers tend to keep quiet, and have little say as producers do, especially big manufacturers.

The absence of consumers’ voices does not mean their interests are not hurt. The absence is mainly because their voices are scattered and it is difficult for them to form collective voices. They also lack proper channels to voice their concerns. The manufacturers, however, are sensitive to their own interests and have stronger lobbying power to affect government policies. Such a situation has led to protectionism in many countries. Consumers’ interests are often compromised and taken for granted.

Since the global financial crisis in 2008, the protectionist trend has been picking up steam in many countries, especially in the U.S., where its president, Donald Trump, upholds the slogan of “America first.” The protectionist actions against China have been stepping up in the past few months as the U.S. has launched a series of investigations against China’s alleged dumping, government subsidies and intellectual property thefts. The so-called Section 232 probe in the name of national security resulted in tariff hikes in imported steel and aluminum. Although it is meant to protect the U.S. steel- and aluminum-makers, it treads on multilateral trade rules and hurts U.S. consumers’ interests. The latest tariff list appears to target China’s technology products, but it will also hurt American consumers’ interests.

The trade protectionist measures are the wrong prescription to a stubborn illness in the U.S. The trade deficit is rooted in the nation’s low savings rate and high-consumption habits. The restriction over its own high-tech products to China has enlarged the export and import gap between the two countries. The difference in the development stage and economic structure are other reasons. American workers’ wages have not grown much in the past 40 years, and the proportion of middle-class Americans has been dwindling. All these added to the U.S. public’s feeling of a loss and an eagerness for change. However, the current situation is not a result of China stealing away job opportunities from the U.S.. — launching a trade war will not solve the problem. Actually, affordable products China supplied to the U.S. have kept the U.S. inflation low over the years, and that the average Americans can still afford to improve their lives without seeing their incomes grow. Chinese products have benefited the American consumers, not hurt them.

China remains a passive actor in the latest round of trade confrontation. Up till now, China has shown restraint in its responses to U.S. threats and has left space for negotiations. But negotiations need compromises from both sides. If the U.S. barges ahead and create more friction, China will have to fight back. It will certainly hurt Chinese consumers as well. No one who advocates free trade wants to see such a result. The U.S. has to take the major responsibility for the grim outlook. Because of the difference in consumption power in the two countries, U.S. consumers will suffer even more if the new tariffs were to materialize.

U.S. Ambassador to China Terry Branstad recently said if China restrict the imports of U.S. soybeans, it will hurt Chinese consumers. His words do make some sense. But it also works the other way with U.S. tariffs on Chinese products. The U.S. government should pay more attention to its consumers. The American people will have to shoulder the cost of higher taxes on their imported products. These consumers, along with the manufacturers who are not covered in this round of tariff hikes, will both suffer losses and may change their attitude toward trade measures against China.

In the face of trade friction, China must stay confident. While trying its best to protect its consumers’ interests, China should not exclude the option of countermeasures against U.S. threats. But the tough stance should be aimed at an eventual negotiation for peace. In addition, China should actively improve its own business and trade environment by strengthening intellectual property protection, pushing ahead the reforms on the state-owned enterprises, continuing to embrace globalization and free trade, and fulfill its promises of expanding opening-up, so that the outside trade protectionists will find it hard to point their fingers at China. China should also watch out for the return of nationalism, which may stall its progress of reform and opening-up.

A peaceful and smooth trading relationship will benefit both China and the U.S.; years ago, when the two countries’ relations were at stake, then-Chinese leader Deng Xiaoping said in 1989 that China and the U.S. should eventually reach a rapport. The feeling of the average people should be the top concern for the politicians. Finger-pointing at each other won’t help their own people have a better life. Only by managing the disputes and showing concerns for each other’s interests can Sino-U.S. trade ties and diplomatic ties get back on track.

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