US claims reduced trade with China could be positive

A sharp decline in trade with China could be a positive development, a top US trade official told the BBC.

Catherine Tai said this is “not necessarily a negative thing. It could be a positive sign of diversification on both sides.”

The amount of goods sold to each other by the world's two largest economies fell by 17% last year.

This happened amidst deepening divisions in the global economy.

The move comes as the United States announced an investigation into the potential national security risks posed by Chinese-made cars, citing concerns that high-tech connected cars could collect personal data or be remotely controlled. The differences were once again exposed.

While Chinese car companies are expanding their presence in other parts of the world, they have virtually no presence in the United States, where they already face a 25% import tariff.

The White House said the move was “unprecedented” and a fair response to China's policies imposing restrictions on foreign car companies.

Last year, the value of goods the US bought from China fell by just over 20% to $427bn, and by 4% to just under $148bn (£117bn).

In recent years, household appliances, machinery, and clothing have become some of the best-selling products.

As tensions between the two countries rise, William Reinsch, a trade expert at the Center for Strategic and International Studies, says, “The decline in U.S.-China trade over the past year does seem to be a sign that the two economies are drifting apart from each other.” .

“But if you look at the increase in imports from Southeast Asia into the United States, a large portion of that increase is due to Chinese companies that have either relocated production to avoid tariffs or are simply moving their products through third countries. or other restrictions. ”

“China's economic development is creating a lot of competitive pressure around the world,” the Thai ambassador said.

Speaking at a major World Trade Organization conference in Abu Dhabi, she said the organization was “showing its age” and needed to be reformed to better cope with these pressures.

The meeting of world trade ministers has been extended to five days with the aim of reaching an agreement on updating global trade rules.

However, reaching an agreement is complicated as it requires the agreement of all 166 member states.

Fishing subsidies, extending the ban on e-commerce tariffs, and reforming the WTO itself are among the issues being discussed.

The United States has led calls for WTO reform in recent years.

Under President Donald Trump, he crippled the dispute resolution body by blocking the appointment of new judges, arguing that the system and its rulings favored China at the expense of the United States.

The lockdowns and calls for reform continue even though President Joe Biden's team has made little public disclosure of the changes it wants.

“The WTO is here to serve the interests of all member countries, large and small,” the Thai ambassador said.

Trade relations between the world's two largest economies have deteriorated under the Biden administration, with both the United States and China imposing new barriers to trade, including export restrictions on computer chips that have recently been in short supply.

“Maintaining the healthy and steady growth of China-US economic and trade relations is in the fundamental interests of both countries and their peoples,” Liu Pengyu, a spokesperson for the Chinese embassy in Washington, told the BBC. This will lead to global economic growth.”

Liu added that the two countries should cooperate on global challenges and hoped the United States would move in “the same direction.”

Ahead of the meeting in Abu Dhabi, World Trade Organization Director-General Ngozi Okonjo-Iweala told the BBC that the organization was seeking to help resolve some of the differences between the United States and China.

Both countries are seeking to expand their economic influence in parts of Africa and Asia to secure access to natural resources and build resilience in supply chains.

This has raised concerns that the world is splitting into two trading blocs, with Dr. Okonjo-Iweala saying, “We need to be very careful as this could cause major damage to the global economy if things continue like this.'' “There is,” he warned.

According to a WTO study, such fragmentation could cost the global economy 5% of GDP. “This is huge,” she says, at a time when growth is struggling due to rising interest rates and inflation.