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The world may not revolve around the US-China axis, but both countries are increasingly finding that no bilateral relationship is more important. The chickens and coking coal at the heart of this week’s trade spats will not change that basic fact. While frictions may cool their relationship, they will not alter its basic nature.

Both countries’ largest trading partner is the European Union, but China-US trade remains the rockiest. The recession is fanning anti-Chinese flames in the US Congress. Chinese prickliness will continue: Beijing cannot appear to be taking lectures from Washington. Their trade disputes are mostly driven by domestic special interests, and the latest piece of cross-Pacific pugilism is no exception.

This week, the US, with the EU, complained to the World Trade Organisation about China’s export restrictions on coking coal, bauxite and other raw materials. Such restrictions lower input prices in China, making refined metals and manufactured goods more competitive. China is also expanding credit lines and tax rebates for exporters.

China, meanwhile, responds that WTO rules permit such policies for other members, while it had to accept extra restrictions to join the trade body. It is a reasonable point – but it is made less persuasive by China’s choice not to sign the Government Procurement Agreement, leaving “Buy Chinese” free of the restrictions that have contained the damage of “Buy American”.

What should be of most concern to both countries is the overall trade imbalance – which Washington fears and Beijing likes. Trade policies, however, more often target the composition of trade than its balance. China pushes exports away from raw materials towards finished goods; while the manufacturers who have Washington’s ear will gladly take China’s raw materials but keep finished goods out.

This is a dangerous confusion. As long as the US spends more than it produces, it must necessarily import more than it exports. China, until it decides to consume or invest all its income at home, must do the opposite. The illusion that changing the composition of trade alters its balance produces muddled policies benefiting only the politically influential.

The US must come to terms with its limited ability to muscle China into doing what it wants. China, which has learned that WTO protests are not acts of aggression but trade diplomacy, must keep adapting to a rule-based global trading order. The faster it does, the more China itself, the US, and the world economy will benefit.

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