BIOFUEL PRIORITY: Researchers of a biofuel team at the University of Kentucky explain how they cultivate algae with waste carbon and heat emissions to develop algaeoleum, a third-generation biofuel. The U.S. Government has invested heavily in similar algaeoleum projects (LIU XIN)
In the 2010 State of the Union Address in January, U.S. President Barack Obama set a goal of doubling U.S. exports over the next five years, "an increase that will support 2 million jobs in America." The export expansion strategy will undoubtedly have a profound impact on the trade relationship between the United States and major exporters, and China as one of them has to make preparations for such a change as soon as possible, said Zhang Yansheng, Director of the Institute for International Economic Research at the National Reform and Development Commission, in a China Securities Journal article. Edited excerpts follow:
The United States has established industrial chains through U.S.-headquartered multinational companies that have subsidiaries and factories across the globe. Internal links between these parent companies and their subsidiaries have given the United States an advantage in dominating world trade.
The decrease in exports by U.S. registered or incorporated companies conceals the fact that the United States actually owns an increasing number of trading goods, which may be produced by U.S. wholly or partly owned companies outside the country. Additionally, the United States has long led the world in terms of cross-border services and has been running huge trade surpluses against other countries in this aspect.
The 2008 financial crisis created a downturn larger than the 1997 financial crisis in Asia and the 2001 Internet bubble burst. It will not only put an end to the high-growth and low-inflation development phase of the world economy, but will also affect international politics, its development pattern and its governance structure in the future.
The United States can no longer count on increases in private consumption and investment to fuel its economic growth, as American households again embrace the tradition of living within their means and cutting back on their credit spending. The country's low-carbon pursuit will also lead to changes in Americans' spending. While U.S. companies reduce investments to mend their balance sheets, U.S. banks are beefing up liquidity supervision and limiting the financial leverage ratio.
Deficit financing will also become a restraint on U.S. public expenditures, as the deficit for the current fiscal year is expected to reach $1.6 trillion, an unprecedented "fiscal crisis" as Greenspan called it.
The United States will also have to relax its goal of inflation control in order to get rid of the high unemployment rate and high fiscal deficit rate. In doing so, export expansion will then become a viable option for the U.S. economy to regain its growth momentum.
Naturally, the United States will rely on sectors it already has a competitive edge to boost exports. But the United States may also shift its focus to hi-tech manufacturing, including new energies, new materials, and electric vehicles. Raw material suppliers, such as steel mills and chemical producers, will be equally important.
The lack of a growth engine has become the major reason for the current economic slowdown in developed economies, as financial globalization and technological revolution no longer provide the global economy with momentum. Meanwhile, the current crisis was a result of the global economic imbalance from 1990 to 2008. It's still impossible for emerging markets to survive the economic downturn intact and act as the growth engine for the world economy, even though more direct foreign investment are flowing into emerging markets.
Against the backdrop of shrinking demand worldwide, U.S. implementation of an export expansion strategy will intensify global competition and place pressure on direct competitors of U.S. manufacturers and traders. The United States will adopt any means necessary to tackle overseas markets—less impacted markets in particular will be targeted. Factors such as price hikes for energy and resources, high volatility of major currencies and uncertainties in the financial market, anemic demand and protectionist measures will diminish purchasing power for these countries' exports and further limit growth opportunities for exports.
Protectionism has been able to stage a comeback because of shrinking demand and overcapacity. Countries tend to resort to anti-dumping, anti-subsidy and other protectionist measures, as well as technical barriers to trade, when global economic growth slows. Anti-dumping lawsuits have increased remarkably—countries worldwide filed 101 anti-dumping investigations in 2008, up 38 percent, and 80 in the first three quarters of 2009, an increase of 8.1 percent. The number of anti-dumping investigations reached a record high of 37 in the third quarter of 2009.
Frictions between major countries with trade deficits (the United States, UK and France) and those with trade surpluses (Germany, China and Japan) have become even more noticeable. In its 2010 National Trade Estimate Report on Foreign Trade Barriers, the U.S. Government pledged to open markets for American goods and services, "either through negotiating trade agreements or through results-oriented enforcement actions."
This indicates protectionist tools will be a basic feature of U.S. export strategy to force other countries to shoulder the responsibilities of rebalancing global trade and to open markets for U.S. goods. At home, the United States will forge a base for innovations in emerging technologies such as new energies and new materials, and support companies in industries with competitive edges to expand worldwide.
China's solutions to the changing landscape will be a shift in its foreign trade growth model and sharpening the international competitiveness of its industrial sector.
First, we should put more emphasis on the role imports play in promoting economic growth, and increase imports of energy resources, technology and equipment, as well as overseas high-end services in order to transform and upgrade China's manufacturing and export sectors. Second, we should value the contributions direct investments in overseas markets make to expand exports, promote the establishment of an international cooperation mechanism, and upgrade the image of China's manufacturing industry from "Assembled in China" or "Made in China" to "Created by China." Third, we should support small and medium-sized private companies and encourage them to be part of the processing trade. Fourth, we should facilitate trade and mutual investment among East Asian countries and allow the free flow of commodities, capital and currency within the region to cut reliance on European and North American markets. Finally, we should explore new markets through efforts such as establishing development platforms overseas for moving production facilities, founding independent marketing channels and logistics centers worldwide, and encouraging domestic banks to offer financial services overseas to help Chinese enterprises with their overseas investments, and trade financing and settlements.