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The United States and China are likely to reacha trade deal, but this willhardly be the breakthrough that ends a deep-rooted conflict. Any deal is likelyto focus primarily on multi-year narrowing of America’s outsize bilateralmerchandise trade deficit with China, which hit an astonishing US$419 billionin 2018, nearly half the total US trade gap.


But there is no bilateral fix for America’s trade deficit with 102 countries last year.The multilateral imbalance stems from a profound shortfall of US domesticsaving, which will only worsen in the years ahead due to chronic and wideningfederal budget deficits.


Instead of popping champagne corks when such a deal isreached, government officials and investors should think ahead to unresolvedstructural issues that remain – overtechnology, intellectual property rights, state-sponsored industrial policy andforced technology transfer through joint venture arrangements.


Inasmuch as I donot expect China to capitulate on its core economic strategy, there is a stronglikelihood of a protracted struggle between two systems – call it “cold war2.0”. This, of course, would contrast with “cold war 1.0”, more of a militarystruggle between the US and the former Soviet Union.


Significantly, forthe US, its economy is in much weaker shape to wage a cold war today than wasthe case during cold war 1.0 from 1947 to 1991. During that earlier period,real US gross domestic product growth averaged 3.5 per cent per year. Bycontrast, since 2010, real US growth has slipped to 2.3 per cent. Similarly, during the first cold war, productivity growth averaged2.2 per cent per annum, while over the past nine years the pace has slowed to1.1 per cent.


America’s domesticsaving position is woefully deficient – a 2.5 per cent net national saving ratesince 2010 versus an 8.8 per cent average during cold war 1.0. Such a profoundshortfall raises serious questions about America’s wherewithal to fund theinvestments in physical or human capital required for competitive revival.


Contrasting global perspectives ofthe US and China were evident from the beginning of the Trump administration.US President Donald Trump said in his January 2017 inaugural address, “Protection will lead to great prosperityand strength.” Three days earlier, on January 17, Chinese President Xi Jinpinggave the keynote address at the World Economic Forum in Davos, suggesting thatChina “should adapt to and guide economic globalisation”.


Contrary to the view of the Trumpadministration, trade wars have no winners – especially between two codependent economies that rely so heavily on each other.Trump’s argument that the US has the upper hand in a trade war because China isalready hurting could be a serious miscalculation.


Yes, the Chinese economy is weakeningand likely to slow further in the months ahead. But in light of recentpolicy stimulus actions, both monetary and fiscal, thatweakening could run its course by mid-year. On the other hand, the sharp plunge in the US stock market in December 2018, inconjunction with a significant weakening in global trade, point to a test of USeconomic resilience in the months ahead.


Notwithstanding aprobable superficial deal between the US and China, it is hard to be optimisticthat a meaningful breakthrough is at hand. Nothing short of bold, courageousand strategic vision by leaders of both nations is required to restore trust andrebuild the relationship.


Stephen Roach, a faculty member at YaleUniversity and former chairman of Morgan Stanley Asia, is author of Unbalanced:The co-dependency of America and China. This article is based on a paperprepared for last month’s 20th Annual China Development Forum in Beijing.

耶魯大學(YaleUniversity)教員、摩根士丹利(MorganStanley)亞洲區前董事長羅奇(StephenRoach)著有《不平衡:中美共同依賴》(Balanced:TheCo Dependency of America and China)。本文是基于上個月在北京舉行的第20屆中國發展論壇上準備的一篇論文。