Sino-US Trade Frictions: Influential Factors And Countermeasures

Historical experience shows that countries in the recession are more inclined to takeprotectionist measures. Influenced by the US subprime mortgage crisis of America in the yearof2008, the world economy is facing a new round of economic recession. Especially thewestern developed countries have a high unemployment rate and their domestic markets areweak. In order to get rid of domestic weakness, many countries pay great attention tointernational market. The new wave of trade protectionism is thus arised. Countries withexport oriented development strategy, such as China, are heavenly affected by various tradefrictions.The US is the second largest trade partner of China. The two countries trade frequentlyand trade scale is large. Trade frictions will greatly influence economic situation, and evenpolitical relations. It has not been a long time since China joined World Trade Organization.We have not completely mastered its rules and we can’t use it adequately. What’s worse, weoften suffer from trade frictions from other countries. We nearly had no time and ability toinvestigate and punish unfair behaviors of the US. Consequently, trade frictions in this papermainly refer to trade investigation carried out by the US. With the development of Chineseeconomy, only according to the number of the anti-dumping investigation, anti-subsidyinvestigation and special protection measures, China are investigated for the reason ofdumping by the US by168times. The number since the time of China’s entry into WTO ismuch more than that of before China’s entry into WTO. The number of anti-subsidyinvestigation is few but increase since the broken of subprime mortgage crisis. Since specialprotection measures are difficult to find out, the number in this area is relatively small.The paper about influencing factors of trade frictions between China and the US is reallya lot and the analysis is very comprehensive. Through the study of history resources togetherwith relevant theories of international trade, we concluded the history and present situation ofSino-US trade. There are five factors affecting trade frictions, such as China’s trade surpluswith the US (called trade surplus in the following parts), marketization degree index of China(called marketization degree in the following parts), the economic scale of China (calledeconomic scale in the following parts), unemployment rate in the US (called unemployment rate in the following parts), the exchange rate of RMB (called exchange rate in the followingparts). From the American’s perspective, before the year of2000, export from China not onlyled to trade surplus, but also grab its domestic market as the result of low price and greatamount. Its domestic enterprises are facing fierce competition from those in China. Since theprice of labor force and the traditional production cost are higher than those in China whichgreatly affect competitiveness of its production. After the year of2000, exchange rate of RMBis becoming a new factor or excuse. They think the Yuan is undervalued and ask appreciationof RMB. In these years, they often use it to make trade frictions and punish China. But we canfind that through these behaviors the real purposes are to hinder the export and devastatefinance industry of China to promote the export of the US. In addition, the scale and rapidgrowth of GDP are located in the forefront of the world. The US is so afraid of the rising ofChina that they often provoke trade frictions directly or indirectly.In this paper, we established VAR model, impulse response function and variancedecomposition to analyze trade frictions and the influencing factors. We find that there is along equilibrium between trade frictions and their influencing factors, namely theunemployment rate, trade surplus, marketization index, economic scale and the exchange rateof RMB. It indicates that unemployment rate, trade surplus, marketization index, economicscale and the exchange rate of RMB can really affect trade frictions. Impulse responsefunction and variance decomposition show that effects of influencing factors on trade frictionsare obvious in the previous period. Change of exchange rate of RMB, unemployment rate,economic scale and trade surplus has a great contribution to trade frictions. While themarketization index’s contribution to them is relatively lower.Through the analysis, we find that in order to reduce bad effects of trade frictions onChinese economy, gradually reduce the degree of external dependence is important. In theface of the two markets, the development and demand of domestic market are more importantthan those of the international one. In the future, there are five aspects as follows we shouldespecially care. Firstly, we should improve the quality of foreign investment in China andencourage our domestic enterprises to invest in foreign countries. Through investment inforeign countries, we can make our enterprises more competitive. Secondly, we should payattention to social security system, narrow the income gap, boost domestic demand. Thirdly, the long-term development of economy is important. Adjusting the industrial structure isnecessary. Fourthly, the market reform of exchange rate and interest rate is the key point offinancial reform in China. We should catch the opportunities to promote inernationalization ofRMB and enhance the international influence of RMB. Last but not the least, in order to avoidand reduce negative impacts of trade frictions, early warning system should be establishedand consummated to provide timely feedback.