By Dan Steinbock ( 1954 - ) | chinadaily.com.cn | Updated: 2018-04-19 15:40
In the trade war against China, the White House’s “America First” advocates are relying on trade instruments that contained Japan’s rise in the 1980s. But China is not Japan. It has ten ways to hit back.
On Tuesday, China said it would impose anti-dumping duties on imports of U.S. sorghum. As the largest buyer of U. sorghum - about $1 billion annually - China holds substantial leverage. Currently, China relies almost solely on the US for its sorghum. As bilateral trade relations erode, that kind of reliance may soon be a thing of the past.
Moreover, since sorghum is grown mainly in rural US South, the measure will penalize those Trump constituencies that supported his 2016 triumph. In the fall, their support will no longer be given in the midterm election.
How to subvert half a century of free trade in five weeks
Here’s how President Trump undermined five decades of freer trading in five weeks. In early March, he introduced a global tariff of 24 percent on steel imports, while launching a 10 percent duty on all aluminum entering the US.
On March 22, Trump directed his administration to make a case against Chinese technology licensing in the WTO, launched a slate of tariffs at $50 billion on Chinese products and proposed to step up restrictions on Chinese investment in key US technologies. That’s when China, in response to US steel and aluminum tariffs, imposed tariffs on $3 billion worth of US goods.
On April 2, China imposed tariffs of up to 25 percent on 128 US products, in response to steel and aluminum tariffs. The next day, the US proposed tariffs on $50 billion worth of Chinese electronics. Afterwards, China launched $50 billion in tariffs on more US products, including soybeans, cars and chemicals. And on April 5, Trump said he was considering an additional $100 billion in tariffs against China.
In the colonial era, Britain relied on the “divide and rule” principle to exhaust rivals and sustain its power. With substantial geopolitical leeway, Trump is playing targeted countries against each other. That’s why he granted “initial exemptions” to US NAFTA partners, Mexico and Canada, “temporary exemptions” to the EU, South Korea and others on steel and aluminum tariffs.
However, the Trump administration may be in for a cruel awakening. China will take corresponding measures of equal scale and strength against US products.
To protect its interests, China will resort to the WTO dispute settlement mechanism and continue to push for diplomatic negotiations, along with efforts to import more American cars, aircraft and natural gas, while promoting reforms in its financial sector. After all, bilateral compromise could pave way to new talks later if Republicans lose their positions in the Congress in the midterm elections.
Ten ways to hit back 中方Qiang力反击川普十大举措
First, China could defer trade and investment deals that were signed during Trump’s previous visit to China, as recent reports suggest China is slowing reviews of huge takeover deals being pursued by Qualcomm and Bain Capital.
Second, China could raise takes by banning the import of genetically modified products from the US, which are opposed by many countries. While US GMO crops remain stuck in the Chinese approval process, China’s domestic GMO sector has been catching up with the West.
Third, US unilateral tariffs could hit hard the constituencies that were vital for Trump’s triumph in 2016 and who remain critical to Republicans in the mid-term elections. These farmers and blue-collar voters gave Trump a mandate to negotiate better terms with US trade partners, but not a carte blanche, and certainly not a license for a trade war. Free trade is US farmers’ livelihood.
If the Trump administration will obstruct Chinese investments in the US, China could target US services. Reportedly, over half of the $39 billion US surplus with China in services comes from spending by the Chinese who are traveling and studying in the US. Should Beijing restrict Chinese tourism to the US, as Washington has blocked visas to the Chinese, that service surplus would shrink.
Fifth, there is the controversial issue of currency devaluation. After China was reportedly studying the potential impact of a gradual yuan depreciation, US Treasury Department declined to label China or other emerging economies a “currency manipulator” in its biannual report. Yet, the option remains on the table.
As US sovereign debt now exceeds $20.7 trillion (107% of GDP) and Trump’s infra-structure initiative is fueled by record-high leverage, trade war is undermining US revenue sources. At $58 billion in February, US has the biggest trade gap since 2008, while US budget deficit widened to $666 billion (3.5% of GDP) last year.
Seventh, as Trump’s trade war is escalating even though rising interest rates can no longer ensure a strong dollar, petroyuan is on the ascend. Since the decoupling of the US dollar from gold in the early 1970s, only petrodollar - OPEC oil denominated in US dollars - has sustained the postwar US hegemony. But even that era is now fading. In contrast, China has $3.1 trillion of foreign exchange reserves.
With $1.2 trillion of US debt, China remains the largest foreign holder of US Treasuries. If China or other major foreign holders of US debt - say, Japan, Brazil, Hong Kong, Korea, and Russia - decide to sell that debt, Washington would have to find another way to cover its sustained deficits.
Ninth, if Trump continues to broaden his trade war path, the latter would undermine US ties with its NAFTA partners, alienate EU allies while undercutting US alliances with the rest of its trade and security partners in Asia.
And finally, global growth prospects are not immune to the trade war. Before Trump’s tariffs, global investment flows remained well behind their peak a decade ago. World export volumes reached a plateau already in early 2015. In finance, global cross-border capital flows have declined by a 65 percent since 2007. US trade policies have potential to undermine the already-fragile global recovery, as evidenced by recent market plunges and rising economic uncertainty.
As the White House is toughening its stand, it is reviving the Trans-Pacific Partnership (TPP) plan that Trump buried during his first day in office over a year ago; but only on the condition that America can negotiate “more favorable” terms.
The preposterous assumption is that, through a re-negotiated TPP, US farmers would be economically compensated and thus politically contained because it would allow them to dump their heavily-subsidized agricultural surplus into Asia. In reality, Asian economies have trade goals of their own and subsidizing US agriculture is not one of them.
The worst is still ahead. Reportedly, the White House is planning to ratchet up the pressure against China.
Over a year ago at Davos, President Xi Jinping stressed the need for global cooperation to sustain global recovery. In a trade war, he said, “no one will emerge as a winner.” In the White House, that wisdom got lost in translation. Now the only question is how costly that policy mistake will prove - globally.
Dr Dan Steinbock is an internationally recognized strategist of the multipolar world. and the founder of Difference Group. He has served at the India, China and America Institute (USA) , the Shanghai Institutes for International Studies (China) and the EU Center (Singapore).
The original commentary was released by DifferenceGroup on April 15, 2018.
EU ambassadors to Beijing warn that Chinaˇs Silk Road project flouts international transparency norms and is aimed at furthering Chinese interests. The paper reflects Beijingˇs strategy to divide the bloc.
By
Dana HeideTill HoppeStephan ScheuerKlaus Stratmann
Published onApril 17, 2018 12:00 pm
No compromises. Source: DPA
Twenty-seven of the 28 national EU ambassadors to Beijing have compiled a report that sharply criticizes Chinaˇs ¨Silk Road〃 project, denouncing it as designed to hamper free trade and put Chinese companies at an advantage.
The report, seen by Handelsblatt, said the plan, unveiled in 2013, ¨runs counter to the EU agenda for liberalizing trade and pushes the balance of power in favor of subsidized Chinese companies.〃
The unusually biting contents, which only Hungaryˇs ambassador refused to sign, are part of the EUˇs preparations for an EU-China summit in July. The EU Commission is working on a strategy paper to forge a common EU stance on Chinaˇs prestige project to build roads, ports and gas pipelines to connect China by land and sea to Southeast Asia, Pakistan and Central Asia, and beyond to the Middle East, Europe and Africa. The new Silk Road will run through some 65 countries in six economic corridors.
¨We shouldnˇt refuse to cooperate but we should politely yet firmly state our terms,〃 said one high-ranking EU diplomat, adding that Chinese firms must not receive preferential treatment in the awarding of public contracts.
One German economics ministry official said the Silk Road initiative ¨must take account of the interests of all participants〃 and was still a long way off.
Chinese politicians have been banging the drum for the vast project, officially called ¨One Belt, One Road〃. Theyˇre mobilizing around $1 trillion in what would be the biggest international development program since the US launched the Marshall Plan after World War Two.
¨Chinaˇs ˉOne Belt, One Roadˇ will be the new World Trade Organization whether we like it or not,〃 CEO of German industrial giant Siemens, Joe Kaeser, told the World Economic Forum in January.
In their report, the ambassadors wrote that China wanted to shape globalization to suit its own interests. ¨At the same time the initiative is pursuing domestic political goals like the reduction of surplus capacity, the creation of new export markets and safeguarding access to raw materials,〃 it read.
They warned that European companiescould fail to clinch good contracts if China isnˇt pushed into adhering to the European principles of transparency in public procurement, as well as environmental and social standards.
EU officials said China was trying to divide Europe to strengthen its hand in relations with individual member states. Countries such as Hungary and Greece, which both rely on Chinese investment, have in the past shown theyˇre susceptible to pressure from China.
Whenever European politicians travel to China nowadays theyˇre put under pressure by their hosts to sign agreements for the joint expansion of the Silk Road. ¨This bilateral structure leads to an unequal distribution of power which China exploits,〃 their report said.
The Silk Road isnˇt the only issue between the EU and China right now. Like US President Donald Trump, the EU is also fed up with the obstacles China has put up for foreign investors, including the forced transfer of know-how to Chinese partners.
But the bloc isnˇt resorting to one-sided tariffs to push China to open its markets. Instead, itˇs working in an investment agreement with China. Progress has been painfully slow, but the EU hopes the looming global trade war may speed up the talks. Negotiators from the two sides plan to meet this week.
One EU diplomat said China was very good at exploiting grey areas in WTO law on the protection of intellectual property, for example, and didnˇt shy away from breaking rules. ¨When we point that out to our Chinese negotiating partners they always show a lot of understanding but in reality hardly anything changes,〃 the diplomat said.
In a speech last week, President Xi Jinping said the Silk Road project ¨isnˇt a Chinese conspiracy as some people abroad claim.〃 China, he insisted, has no intention of playing ¨self-serving geopolitical games.〃
However, China has yet to provide exact information on which foreign firms have so far directly benefited from the Chinese development program. The $40 billion Silk Road Fund was set up in 2014 to invest in countries along the road but itˇs unclear who is eligible for investment, and on what terms.
A German study released in February by the governmentˇs GTAI foreign trade and investment marketing agency and the Association of German Chambers of Commerce and Industry concluded that the Silk Road project was often focused on politically unstable countries with uncertain legal frameworks. GTAIˇs managing director said that around 80 percent of projects funded by Chinese state banks had gone to Chinese companies in the past.
German government papers seen by Handelsblatt indicate that China isnˇt interested in transparency when it comes to procurement. Last May, when former Economics Minister Brigitte Zypries traveled to Beijing for the grand launch of the Silk Road initiative, she and other EU officials were meant to sign a joint declaration with the Chinese government. It didnˇt happen.
The Europeans wanted to change much of the agreementˇs wording, saying it should guarantee ¨equal opportunities for all investors in transport infrastructure〃 as well as international standards of transparency.
The Chinese refused to incorporate any amendments.
Dana Heide is a political correspondent for Handelsblatt in Berlin. Till Hoppe is Handelsblattˇs Brussels correspondent. Stephan Scheuer is the head of Handelsblattˇs features desk. Klaus Stratmann covers energy policy and politics for Handelsblatt in Berlin. To contact the authors:heide@handelsblatt.com, hoppe@handelsblatt.com, scheuer@handelsblatt.com and stratmann@handelsblatt.com
Dana Heide
Till Hoppe
Stephan Scheuer
Klaus Stratmann
No compromises. Source: DPA
