US-China trade war to get worse before it gets better: Experts

Peace forum panellists split over who bears bigger blame for spat

The trade war between China and the United States will get worse before it gets better, experts said at a high-level security forum yesterday.

While the discussion at the World Peace Forum here showed deep divisions between US and Chinese analysts over which country bears greater responsibility for the spat, there was consensus over how to eventually resolve the differences.

For starters, President Donald Trump will likely make good his threat to impose tariffs on another US$200 billion (S$273 billion) worth of Chinese goods, said Eurasia Group chairman Clifford Kupchan.

Further escalation is also likely when the US Congress grants the Committee on Foreign Investment in the US greater powers next month that are aimed specifically at China, he added.

Although Mr Trump's trade war and agenda for dismantling the World Trade Organisation (WTO) stems from his personal ideology, Mr Kupchan and Professor Paul Gewirtz of Yale University said China shares the blame, for revealing the WTO's inadequacies by adhering to the letter, but not the spirit, of its rules.

"China has to acknowledge some share of responsibility, primarily regarding subsidies and closed markets," said Mr Kupchan. "You can't control a huge per cent of global GDP (gross domestic product) and consider yourself an emerging market. Its size and political influence are just too great for that."

Chinese experts on the panel, however, said the charges were unwarranted, noting that WTO members had praised China's contribution to global growth at the country's seventh trade policy review last Friday.


You can't control a huge per cent of global GDP (gross domestic product) and consider yourself an emerging market. Its size and political influence are just too great for that.


"Just like in football, good players sometimes commit fouls, but sometimes a foul is called because someone pretends they have been kicked hard when they were not," said Professor Zhang Yuyan of the Chinese Academy of Social Sciences.

But Singapore's Ambassador to China Stanley Loh - the only panellist not from China or the US - noted that both sides have reaped handsome rewards from the rules-based multilateral trading system. The WTO's rules enabled the US to become the largest exporter of services, worth nearly US$800 billion last year, he noted.

Another study found that since China joined the WTO, the same rules opened up foreign investment and trade that today accounts for close to one-third of the country's total GDP created since 2001, said Mr Loh.

"The framework is not perfect and certainly can be improved, but there's presently no better alternative, The WTO dispute resolution system provides a common set of rules - and I must say agreed rules - that apply to all of us," he said.

"This is especially important for small countries, and the big countries have also benefited."

Chinese panellists said immediate retaliation against the US was unnecessary, but stressed that China was not out of ammunition.

Prof Zhang said China wants the WTO to evolve and for its rules to be modernised to cover blind spots such as labour regulations, and that it is open to the creation of a new category between emerging countries and developed ones that better suits China's current condition.

Professor Lin Guijun of the University of International Business and Economics said China should not lose sight of its end-game of becoming the world's biggest market, and that a policy of reciprocity, such as tariffs on US soya beans, will only cause self-harm.

"When you are a small country, you have to mind what others think of you, but when you grow big, you should be less sensitive," he said. "So, whoever is more sensitive comes across as small."

A version of this article appeared in the print edition of The Straits Times on July 16, 2018, with the headline 'US-China trade war to get worse before it gets better: Experts'. Print Edition | Subscribe