Theoretical thinking on the Trade friction between China and the United States. By student from ITS18-Xuhui
After the second World War to the outbreak of the global financial crisis in 2008, driven by the developed countries led by the United States, the rapid development of economic globalization and the smooth progress of trade and investment liberalization have led to the prosperity and development of the global economy for decades. While global wealth has soared and people's lives have improved dramatically, countries have formed closer ties through trade and investment. It can be said that the interconnections and interdependence between countries are more frequent and closer than in any previous historical period. However, this process was broken by the sudden global financial crisis in 2008, highlighted by unilateralism, trade protectionism and the spread of anti-globalization. Especially since 2017, showing obvious protectionism, unilateralism and anti-globalization tendency, the United States provoked trade frictions with China with an escalating trend. And why?. According to the existing representative point of view, there are three main reasons for the reversal of the attitude of the United States towards economic globalization: one is to obtain more trade benefits through a trade friction, the other is to transfer domestic contradictions through a trade friction; the third is to curb the development of other countries by a trade friction to continue to safeguard their dominant position in the global economy. It should be said that these views are justified to a certain extent. However, the causes for the changes and adjustments of the United States will still need to be discussed in depth on the theoretical level.
It is an undeniable fact that in the current division system of the global value chain, the United States and other developed countries occupy the high end of the global value chain and they still the biggest beneficiaries of economic globalization. Although emerging and developing countries, such as China, are also the beneficiary of this round of economic globalization, but in the global value chain, it is obviously in the middle and low end. Therefore, compared with emerging countries such as China and other developing countries, the developed countries such as the United States have obviously seized more dividends of economic globalization from the perspective of the distribution of interests. If the exclusion of political and ideological factors, and the above three aspects are indeed the reasons for the United States to provoke trade friction, then have some fundamental changes taken place in the current economic globalization? Or has there been new changes in contemporary economic globalization that are more conducive to developing countries?
1. Factor division: what are the new characteristics of economic globalization
Since 1980 s, the international division has undergone profound changes. On the one hand, the value chain of products has been decomposed, and different production links and processes have been allocated to countries and regions with different factor endowment advantages according to different factor intensity characteristics, which forms a global value chain; On the other hand, the transnational mobility of production factors is increasing day by day. Transnational corporations integrate and utilize resources in the global scope with capital as the link, and realize the internationalization of production. Compared with the traditional international division model with " final product" as the boundary in the past, this new international division model is based on "elements", that is, the full value of a final product is no longer entirely created by a country. It is the result of the participation of many countries with the "dominant elements". In other words, countries participate in international competition and international cooperation with factor advantage rather than product advantage. The economic globalization with "factor division" as the main content and manifestation has new characteristics compared with the past.
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- Transnational flow of factors as the essential feature of economic globalization
After the second World War, the economic globalization has been deepened, not only the commodity trade has been developed rapidly, but also the transnational liquidity of the production factors characterized by foreign direct investment (FDI) has been strengthened. Especially since the 1970s, as the most active industrial capital in the production factors, the growth rate of global foreign direct investment has outpaced the growth rate of global trade, and has become the most important driving force of economic globalization. Of course, in addition to FDI, such as the global diffusion of technology and the transnational movement of labor with the steady expansion and upward trend are the important manifestations of the enhancement of transnational mobility of factors.
1.2 Transnational corporations as the main body of international competition
The rapid growth of the scale of global foreign direct investment has brought about the globalization of production layout. Under the condition of global factor division, although comparative advantage and economies of scale still play an important role in a broad sense, they can no longer become the main basis for determining the division in international trade, because transnational corporations, as the constituent element of factor division, play a decisive role in the division and trade. Under the background of increasing transnational flow of factors, especially transnational flow of capital, on the one hand, due to the continuous reduction of barriers to factor flow, enterprises in domestic country can not enjoy the comparative advantage based on local resource endowment, but foreign transnational corporations can make full use of foreign direct investment to integrate local resource endowment into the competitive advantage of enterprises; On the other hand, domestic enterprises can also seize the opportunity of economic globalization through the form of foreign direct investment, and create the competitive advantage of domestic enterprises on the basis of integrating and utilizing global resources. It can be seen that the comparative advantage at the national level is actually a regional advantage that can be used by both domestic and foreign enterprises, and the comparative advantage is microscopized. As for who can carry out this kind of resource integration, it depends on which country has more internationally competitive enterprises. The more enterprises with competitive advantages, such as capital strength or technology, management and so on, the stronger the profitability of a country to make use of the international comparative advantage. Therefore, the essence of factor division is that transnational corporations rely on competitive advantage, with the help of transnational flow of production factors such as capital, to integrate and utilize the dominant resources on a global scale.
1.3 The remarkable integration of trade and investment
With the development of the international division from the division of products to the division of elements, the basis of international economic activities has changed, leading to the emergence of a number of new international economic phenomena, and the integration of trade and investment in the form of elements flow and recombination of global production on a global scale is the most important phenomenon. Under the condition of factor division, the essence of transnational flow of capital and other factors of production is to integrate and optimize the allocation of resources on a global scale, and to layout the value chain on a global scale. At the product level, there are many transnational flows of intermediate products and the global circulation of final products, which is characterized by the integration of trade and investment. Some studies believe that a basic law and characteristic of contemporary economic globalization is that investment surpasses trade. The integration of trade and investment has two meanings, one is the expansion of trade to promote the expansion of investment, the other is the expansion of investment to further promote the expansion of trade. Under the background of factor division, the scale of intermediate trade continues to expand, which leads to the decrease of transaction cost in intermediate market and the reduction of the cost of coordinating intermediate production, and it will attract the continuous inflow of capital and further promote the globalization of production. Different from the investment purpose revealed by the traditional international investment theory, the main purpose of these capital inflows is not to seize a country's market, but to make full use of the "dominant elements" of the host country. The products produced by transnational corporations are destined to face the global market, so that a lot of investment is bound to lead to a lot of trade.
1.4 Increasing indistinct of the boundaries of transnational corporations
Under the traditional international division mode and the assumption that there is no transnational flow of production factors, the boundary of the enterprise is clear, or the enterprise has a clear "nationality". At this time, although there are enterprises engaged in foreign trade, that is, export-oriented enterprises and the production and management activities of enterprises exceed the boundary of a country, as far as the boundary of the enterprise itself is concerned, it still does not exceed the boundary of the state. In other words, enterprises have clear national characteristics and national attributes. However, when the international division evolves to the factor division, transnational corporations optimize the allocation of resources on a global scale, and the production layout is internationalized. Therefore, the boundaries of enterprises cross the national boundaries, thus becoming more and more globalized. In other words, the "nationality" of the enterprise is becoming more and more blurred. It is already difficult to tell which country a multinational company belongs to, because its subsidiaries may be located in multiple countries and regions and become local "residents" of the host country. Thus subsidiaries and branches and head offices belong to different "residents" of different countries, with different nationality. Even by dividing it according to the so-called "corporate headquarters", there is also great uncertainty, as multinationals may have more than one headquarters and distribute in different countries and regions. In a word, although the product card has "nationality", when multinational corporations travel around the world on the basis of capital and other production factors, it becomes more and more difficult to define their boundaries according to the national attribute.
- Dividend distribution: who is more beneficial to the current economic globalization
Economic globalization is the inevitable result and trend of technological progress and productive forces development of human society. Economic globalization has greatly promoted the progress of human society, such as the continuous growth of global wealth, the continuous expansion of trade activities, the gradual reduction of the number of people living in absolute poverty in the world, and the continuous improvement of human life expectancy. But at the same time, we should also see that although economic globalization has created huge dividends on the whole, the distribution of benefits has never been fair and balanced.
The dividend of economic globalization, which is mainly manifested by trade interests, is mainly divided into two kinds: one is static interests, that is, the static interests of division and transaction, the other is dynamic interests, that is, the dynamic interests of promoting economic development and social progress. If under the condition of traditional international division, both static and dynamic interests are more beneficial to developed countries, then under the condition of factor division, has the dividend distribution pattern of economic globalization changed at a turning point? To be more precise, has the dividend of economic globalization achieved a change in both developed and developing countries, or even a pattern of distribution of interests that are more beneficial to developing countries? We believe that under the system of factor division, as far as the distribution of static interests is concerned, it is still beneficial to developed countries such as the United States. Because the United States and other developed countries occupy the high value-added production links and stages of the global value chain, that is, the majority of value added creation in the value chain. But in terms of dynamic interests, it seems that it has begun to tilt towards developing countries. The key of the question is, why will developing countries gain more development opportunities after the fundamental change in the international division to the division of elements? This can find the answer from the new characteristics of economic globalization under the condition of factor division.
One of the basic characteristics of factor division is the global decomposition of product value chain and the cross-border flow of production factors. The global decomposition of product value chains has lowered the threshold for developing countries to integrate into the global division system, for example, developing countries originally did not have a comparative advantage in "whole machine" products, or developing countries are unable to produce because of insurmountable technical obstacles at a certain stage of production, now because they can specialize in one or more specific links in the value chain, thus, have the comparative advantage of integrating into the global production division system, and obtain the opportunity of industrial development. This is because the essence of the transnational flow of factors is the global integration and optimal allocation of production and resources factors, which may lead to the use of production factors that are originally "idle" or even "useless" in a country then transformed into the reality of comparative advantage and productivity. Generally speaking, the production process is a combination of two or more production factors, obviously, when one production factor is extremely rich and the other or more production factors are extremely scarce, most of this rich production factor will be idle, or even useless. At this time, although it has the comparative advantage in the macro sense of the country, it is difficult to realize the actual productivity in the micro sense. Because of its low cost, the "idle" or even "useless" production factors will become the "dominant factors" of their own countries under the condition of transnational flow of production factors. The "dominant factor" will have a strong attraction to the production factors in other countries, especially the production factors with strong liquidity, that is, the "microcosmic" of the comparative advantage, as pointed out earlier. It is means that the "advantage elements" of domestic country will be integrated and utilized by transnational corporations, thus become the "comparative advantage" at the level of transnational corporations. With the inflow of corresponding production factors in other countries, the problem of matching the number of factors in the process of production has been continuously solved. The "idle" and "useless" production factors have "the opportunity to exert their talents" in the combination of production factors from other countries, which has been transformed into real production capacity and promoted industrial development. In fact, not only the role of domestic production factors has been brought into play, thus to promote industrial development, but more importantly, the inflow of foreign production factors, especially the inflow of advanced factors has played an important role in promoting the development of domestic industry and even the transformation and upgrading. In short, the microcosm of comparative advantage not only means that the productivity of domestic production factors can be released, but also means that the use of foreign production factors will accelerate the formation and promotion of advanced development of productive forces. It should be pointed out that although the transnational liquidity of production factors is increasing, the liquidity differences of different production factors still exist. For example, as the "dominant factor" of developing countries, the mobility of low-skilled labor is relatively poor, while as the “dominant factor” of developed countries, such as capital, technology, knowledge, information and other high-end elements, liquidity is relatively strong. The so-called global factor division is usually the production factor with strong liquidity chasing the production factor with relatively poor liquidity.
Under the development trend of the integration of trade and investment and the increasingly blurred boundary of transnational corporations, developing countries will integrate into the system of global factor division, and the opportunities for industrial development will be more obvious. This is because industrial development in developing countries benefits not only from traditional trade mechanisms, but also from foreign direct investment promotion mechanisms. The inflow of foreign direct investment (FDI) undoubtedly plays an important role in realizing the host country industry from zero to excellence. The effect of this mechanism is extremely limited in the traditional form of international division. However, under the new form of international division, the importance of the above mechanism can not be ignored. More importantly, under the background of the integration of trade and investment, the mechanism of pulling and promoting the development of industry by trade and investment will have the effect of one plus one more than two. Since trade creates investment and investment creates trade, it means that in the context of the global division of elements there is a strong interaction between trade and investment and the mechanism of promoting industrial development between the two has the effect of interaction and strengthening. The transnational corporation with the increasingly blurred boundaries become an important part of the national economy of the host country, which realizes the integration and consistency of the interests of transnational corporations and the host country to some extent. In this sense, although the technical guidance and training of multinational corporations to the local enterprises of the host country are all out of their own interests, they also bring opportunities for the development of the host country.
The trade friction with China provoked by the United States is essentially protectionism, a unilateralism, a destruction and trampling on global economic and trade rules and the multilateral trading system, and a serious hindrance to the progress of economic globalization. It should be noted that international trade under the conditions of the global division of elements is no longer a pure trade issue, but involves the layout and restructuring of global value chains and the change and adjustment of the global production pattern and the overall problem of industrial and economic development. Therefore, the thinking and policy measures to deal with trade friction should also break through the original thinking concepts and policy tools, and should be guided and promoted by the healthy development of economic globalization with advanced ideas. We should not only allow economic globalization to increase the total amount of global wealth to a greater extent, but also enable the fruits of economic globalization to better benefit the people of all countries in the world.