Россия и ВТО: присоединение и его последствия / Текущая аналитика / Perspective of Sino-US Trade Friction Based on the Global Value Chain -Rethink of the Global value chains in a changing world. Edited by Deborah K. Elms and Patrick Low. By student ITS18-Xuhui(Emma)

Perspective of Sino-US Trade Friction Based on the Global Value Chain -Rethink of the Global value chains in a changing world. Edited by Deborah K. Elms and Patrick Low. By student ITS18-Xuhui(Emma)

After Trump came to power, the US government pursued the strategy of "manufacturing return" and "anti-globalization" trade protection strategy, and provoked trade frictions between China and the United States on the grounds that the United States had a huge trade deficit with China. Similar to previous trade frictions, the United States still provoked the trade frictions by the excuse of huge deficit with China, but the difference is that the scope of tariffs imposed by the government of United States includes more medical devices, high-speed rail equipment, biomedicine, new materials and products with relatively high levels of technology, such as information technology and aviation equipment, which targets "made in China 2025". This shows that although the trade friction between China and the United States is directly caused by serious trade imbalances, it is more due to the structural contradictions in Sino-US economic and trade relations. In particular, in recent years, the rising position of China in division system of the global value chain has increased the competitive components and reduced the complementary elements in the trade between China and the United States. In order to maintain its hegemonic position in the international division of labor, the United States has once again raised the banner of protectionism to contain China's technological progress and the rise of china’s global value chain status.

Under division system of the global value chain, the world trade between countries has changed from the original simple final product trade to the intermediate goods trade and the division and cooperation in production link. After suffering a serious external impact, a certain production link will be quickly transmitted to other production links, resulting in a chain effect, which will spread to the whole global value chain. Imposing tariffs on China, building high trade barriers, and provoking trade disputes between two countries, the United States will not only curb the development of trade between two countries and also promote the transfer of production links, break the existing division system of the global value chain, and force the reconstruction of the global value chain.

Under the division system of the global value chain, driven by the law of market economy and economic interests, transnational corporations will arrange production costs and consumer markets on the basis of multilateral, regional and bilateral trade relations, distribute the production links and design, research, sales, packaging and other additional business. Provoking trade frictions, imposing punitive tariffs on exports of relevant Chinese products, and imposing restrictions on Chinese investment, the United States has challenged the multilateral trading system represented by WTO, moreover, directly changed the relevant factors that affect the layout of the production links of transnational corporations, and it will certainly urge the relevant transnational corporations to re-examine the industrial layout and development strategy, and re-select the optimal place of production processes on a global scale, which force the existing division system of the global value chain to break and reconstruct.

1.Sino-US trade frictions force the reconstruction of global value chains by challenging multilateral, regional and bilateral trading systems

China accounted for 47.2% of the US trade deficit in 2017. As the largest source of trade deficit in the United States, Sino-US trade friction is the concrete embodiment of the strategy of "manufacturing return" and "anti-economic globalization" in the United States, and its essence is the resurgence of trade protectionism in the United States. Protectionism is the biggest threat and challenge to the global multilateral trading system and the rapidly developing regional and bilateral trading system. As far as the strategy of "manufacturing return" is concerned, it is obvious that the United States forces the multinational corporations to transfer some of the production links to the United States, which is obviously a serious damage to the division system of the global value chain. The multilateral trading system represented by WTO can not meet the development requirements of division system of the global value chain. Sino-US trade friction destroyed the development of multilateral, regional and bilateral trading system, further increased the current WTO reform and the impact and interference for the division system of global value chain.

2.Sino-US trade friction forces the reconstruction of global value chain by influencing producer behavior

Multinational corporations are the direct constructors and participants of global value chains, and their behavior will have a direct impact on the division system of global value chains. Trade friction between China and the United States affects the behavior of transnational corporations through the uncertainty of trade costs and investment, which leads to the destruction and reconstruction of global value chains.

2.1 Sino-US trade frictions increase producer trade costs and promote the reconstruction of global value chains

Tariff is an important part of trade cost, tariff rise will directly increase the trade cost of enterprises. Under division system of the global value chain, Sino-US trade friction will have different influence on the trade cost and import and export trade of other countries concerned. According to an analysis by the Korea Institute of Industry, if Sino-US trade frictions force Chinese exports to the United States to shrink by 10 percent, China's imports from South Korea will fall by about 28.26 billion US dollars, accounting for 20 percent of China's total imports from South Korea. Among them, the electrical equipment industry with more intermediate links has been the most affected, and imports will be reduced by 10.92 billion US dollars. Therefore, in the context of Sino-US trade friction, the increase of production costs, the decline of profits, and the weakening of the competitiveness of related industrial chains and production processes will be high probability events. In the face of the loss of China's competitiveness under the division system of global value chain, some transnational corporations may accelerate the transfer of the production links involved by China in the industrial chain to countries or regions with lower production costs, such as Southeast Asia. Global value chains have been forced to reconstruct.

2.2 Sino-US trade frictions increase the uncertainty of producer returns and promote the reconstruction of global value chains

First of all, under the uncertain prospect of Sino-US trade friction, the uncertainty of corporate profits will increase significantly. The uncertainty of profit reduces the confidence of investors to engage in production and management, and increases the risk and uncertainty of investors' production and operation. This uncertainty of future income expectation may directly affect the decision of production and management, or through the capital market to the investment behavior and then has an impact on the production and management activities of transnational corporations.

Secondly, trade frictions between China and the United States will reduce China's exports, which are the main components of China's balance of payments surplus, and then it will worsen the current account and threaten the relative stability of Yuan. Since the reform of RMB exchange rate formation mechanism in 2005, the RMB exchange rate has basically maintained an upward trend, the trend of RMB depreciation after 2014 is obvious, and the RMB exchange rate changes more frequently since 2016: it shows two-way fluctuation of appreciation and devaluation. In fact, the trade friction between China and the United States also directly affects the foreign exchange market, especially, the psychological shock is far more than the real impact, and the two-way fluctuation of RMB exchange rate is obviously aggravated. In 2018, the RMB exchange rate against the US dollar gradually strengthened as high as 6.259, but after mid-April the depreciation was as low as 6.973.

Therefore, the trade friction between China and the United States will increase the in come uncertainty of the transnational corporations in the Chinese market through the capital market and the foreign exchange market, and it is likely to force the transnational corporations to shift the production links to countries or regions where the production cost is lower and the capital market and the foreign exchange market are more stable. So it will promote the restructuring of the global value chain.

3.Sino-US trade friction forces the reconstruction of global value chain by influencing consumer markets

Price is the most important factor affecting demand, and the change of commodity price will have an important impact on the consumer market. With the development of traffic information technology, although the impact of consumer market on the production layout of transnational corporations is gradually reduced under the division system of global value chai. However, the change of consumer demand will still have a certain guiding role in the layout of production links under the division system of global value chain by affecting producer income.

The United States mainly uses the means of raising tariff rate and constructing tariff barriers to provoke trade friction against China, and China takes corresponding counter-measures. Tariff barriers will increase the price of imported goods to a certain extent. The increase in the tariff rate by the United States will raise the price of American imports from China and reduce the demand of American consumers for Chinese imports. The consequences are: on the one hand, reducing the profits of multinational companies in the distribution of production links in China and guiding multinational corporations to distribute production links and their additional parts in Canada, Mexico, Europe and other countries or regions with strong bilateral or plurilateral trade relations with the United States, and promoting the reconstruction of global value chains. On the other hand, China is forced to further open up markets in West Asia, Europe and other places, so that the reconstruction of global value chains also has a certain push. In particular, China has taken countermeasures to impose tariffs on imports from the United States, mainly in the fields of soybeans, corn and other agricultural products. Because China is a populous country, it has a large demand for agricultural products and a strong dependence on agricultural products, and most of them lack the price elasticity of demand. The rise in the prices of agricultural products and their products will also promote the reconstruction of global value chains by forcing China to broaden the import channels of agricultural products or transfer the relevant food processing industries to countries or regions with lower agricultural costs.

It can be seen that the trade friction between China and the United States has brought about the destruction and reconstruction of the division system of the global value chain by challenging the multilateral, regional and bilateral trading systems and influencing the behavior of producers and consumers.

Россия и ВТО: присоединение и его последствия

Кафедра мировой экономики экономического факультета Санкт-Петербургского государственного университета, которая является единственным в России и на постсоветском пространстве институциональным партнером Всемирной торговой организации и реализует проект "Кафедра ВТО", при поддержке Министерства иностранных дел Великобритании представляет Вашему вниманию информационный портал "Россия и ВТО: оптимизация последствий присоединения". Он призван обеспечить надлежащую подготовку правительства, таможенной службы и бизнес-сообщества в Северо-Западном и других регионах России к операционным изменениям и изменениям в регулировании, которых требует присоединение России к ВТО.