More than a hundred years ago, the West including the United States used two Opium Wars and other military actions to force the Qing Dynasty to open up the Chinese market to trade.
Ironically, nowadays while China is becoming a strong advocate of international free trade and globalization, the “America First” Trump administration is steering US geopolitical strategy back toward protectionism, unilateralism and isolationism.
The current US-China trade war will clearly have profound impacts on the future economic and political order of our world.
So far, the US is being perceived as aggressive and offensive in the trade war, while China is seen as reactive, defensive and reciprocal. Many people believe that the trade war is not a zero-sum game, but a lose-lose game for both the US and China, and a tragedy for the whole world.
However, President Donald Trump thinks he has won a lot based on some very positive figures in the US, including 4.1% growth in gross domestic product in the second quarter of this year, the best showing since 2014, and solid voter support for his economic policies. This has given Trump confidence that he will win another term as president in 2020.
On the other side of the Pacific Ocean, China has indeed suffered a lot from the trade war. From March 22 to June 22, the overall market cap of the two Chinese stock exchanges shrank by more than 7 trillion yuan (US$1 trillion), while the total value of the US stock market increased by around $2 trillion. The trade war is thought to be slowing GDP growth and causing job losses in China.
As the “world’s factory,” China is a key trading partner for more than a hundred countries. Notably, more than 60% of modern international trade is in intermediate goods, with China being a major trader inter-linking the global value chains. Some of the key export-led economies in East and Southeast Asia have started feeling the spillover of the trade war, such as South Korea, Japan, Hong Kong, Taiwan and Singapore.
The trade war can affect those export-led economies in at least three aspects. The first is direct impact from increased tariffs, the second an indirect impact arising from disruptions to global supply chains, and the third is through a slowdown in overall global trade and its spillover effect on pessimistic business sentiment.
Because of the US-China trade war, recently South Korea’s exports of cars and electronic goods have fallen, and its GDP growth rate is now forecast to be lower than the earlier estimate of 3%. Taiwan is also revising its GDP growth forecast for 2018 from 2.6% to 2.4%, and Singapore’s GDP growth in 2018 may be dragged down by around 0.3 percentage point to 2.7%. No wonder Singaporean Prime Minister Lee Hsien Loong has said: “Nobody wants a trade war.”
However, some may actually benefit from the US-China trade war, such as the European Union, Russia and North Korea, because the balances among key global powers will inevitably be reshaped.
To counter China, the US has agreed to work with the EU toward a “zero tariffs, zero non-tariff barriers and zero subsidies” deal. Similarly, Trump has improved relations with Russia in a bid to contain rising China. Moreover, it will be more difficult for the US to persuade China to cooperate on the North Korean denuclearization issue.
Of course, China will try to strengthen its alliances too. In June, India and Pakistan joined the Shanghai Cooperation Organization as full members for the first time at the SCO summit in Qingdao, China. This month, China just hosted the Forum on China-Africa Cooperation (FOCAC) Summit in Beijing again. And in November, the first China International Import Expo (CIIE) will be held in Shanghai, a significant attempt to demonstrate China’s commitment to globalization.
Therefore, it is still too early to say that the US has been a winner and China will definitely be a loser in this trade war.
The Chinese government and many Chinese people believe that Trump’s trade war is ultimately aimed at curbing China’s technological development – particularly in light of its “Made in China 2025” strategy – to attempt to contain China’s rise as a great power.
China is re-evaluating its national capability and rethinking its development strategy, and it will likely become more vigilant and cunning when dealing with the US in the future. The short-term pain may be proved necessary for achieving the eventual “Chinese Dream.”
As for the US, it may have gained something economically from the trade war, but Trump is undermining his country’s credibility and giving up its global leadership by embracing nationalism, unilateralism, and neo-isolationism.
George Washington, the first president of the United States, said: “Observe good faith and justice toward all nations. Cultivate peace and harmony with all.” It is to be hoped that the Trump administration will agree with this motto.
But even if the world’s two leading powers cannot solve the trade war nicely, do not worry, as Deng Xiaoping, the chief architect of modern China, wisely predicted that “the China-US relationship can never be too good or too bad.”
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You think that is bad? Try this zinger:
"INTELLECTUAL PROPERTY
Absent a separate express agreement between Supplier and Company and after one year from date of importation of Merchandise into the United States which in any way relates to the goods or services covered by an Order, , Supplier will irrevocably grant to Company a full paid up, royalty free license to make, use, sell and offer for sale any such Merchandise free of any claim of infringement or misappropriation of any intellectual property of Supplier. The aforementioned paid up license will remain in effect until the expiration of any intellectual property relating in any way to the Merchandise." __________________
Can you imagine clauses like that imposed on Microsoft, or Intel, etc., by any Chinese entity without causing a fire and brimstone response?? Yet this sort of chicanery is imposed by major American companies in contracts of adhesion on hundreds of thousands of Chinese exporters year in and year out. The typical Chinese company simply is not in a position to bargain. As a result, China had been ROBBED of trillions of dollars of valuable IP over the decades. What is good must be universal. If IP is to be protected, everyone’s IP should be protected.
[Cont’d, 2 of 3]
No cause of action will arise on Supplier’s behalf for Company’s use of any confidential information disclosed to Company, and no damages whatsoever shall accrue to Supplier for Company’s use thereof. Supplier shall keep confidential any and all technical processes and information, economic and financial information, designs, data, marketing information, and any other business information that Company treats as confidential furnished to Supplier in connection with this order, agreement or contract and Supplier shall not divulge, export or use directly or indirectly, such information for the benefit of any other party without obtaining Company’s written permission. Supplier shall return all items belonging to Company and all copies of documents containing such confidential information in Supplier’s possession or under Supplier’s control upon request by the Company or termination of this Agreement." [Note how that "what’s yours ends up mine" language is craftily hidden in the middle of the passage. Typical American style drafting.]
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Just look at the typical T&C (Terms and Conditions) that the major American importers demanded of their vendors, and you will find similar provisions everywhere:
"CONFIDENTIAL INFORMATION; NONDISCLOSURE Supplier shall not at any time, during or after the Term of this Agreement, disclose to others, take or use for its own purposes or the purpose of others, any of Company’s confidential information, knowledge, designs, data, know-how, trade secrets, or any other information considered “confidential” or “proprietary” by Company. Supplier understands, agrees and recognizes that this obligation applies, but is not limited to, technical information, designs, marketing and financial information, and any business information that Company treats as confidential. Any confidential information, knowledge, designs, data, know-how, trade secrets, or any other information considered “confidential” or “proprietary” by Supplier which the Supplier shall have disclosed or may hereafter disclose to the Company and which in any way relates to the goods or services covered by this order, agreement or contract, shall, unless otherwise specifically agreed to in writing by the Company be deemed to be confidential or proprietary information and further shall be acquired by the Company free from any restrictions (other than a claim for patent infringement) as part of the consideration for this order, agreement or contract.
Big American importers have for decades mandated that Chinese exporters give up their IP (trade secrets, patents, TMs, copyrights, you name it) as a condition of selling into the American market. If there is to be a reconciliation of the IP lost to appropriation without due compensation, the deficit is a net of trillions of dollars of harm in suppressing the development of IP in China.
This should indeed be a WTO issue.
Don’t think that is true? Go read the "Standard Terms & Conditions" imposed by all major U.S. importers. Seller’s trade secrets can be freely used and disseminated by Buyer; after a short period after first import (say a year), Seller grants Buyer a perpetual license on all IP, and give up all rights of enforcement, until the life of the IP runs out.
The widespread practice suppresses and kills off nascent IP portfolios before they can be developed in China. Think of why a T-shirt with a Mickey Mouse graphic sells for 500 RMB in China, and one with a design by the same Chinese supplier sells for $5 retail in America. The damage is real and huge. Contracts of adhesion imposed upon hundreds of thousands of Chinese exporters, multiply that by 40 years. The damage is real and huge.
Brown Lyn US does not respect the IP of others, period, even today. Look at the hundreds of thousands of contracts of adhesion in which weaker export power’s companies are forced to fork over all IP (patents, TMs, copyrights, trade secrets) without compensation. America only protects its own IP.
Sun Xi inhabits an alternate universe in which the US has started a trade war and strives to deny China its dream of becoming a great power. He reasons, incredibly, that China must become "more vigilant and cunning" in its dealings with the US. Clearly, CHina has gotten by far the best of the bargain in recent decades with mercantilist trade policies, outright theft of technology, and other barriers to trade. Will "more cunning" policies induce the US (and others) to go along with more of the same?
Brown Lyn Keep drinking that comunist party cool aid.
George Washington also told future generation to avoid foreign entanglements.
Brown Lyn The REALLY stupid people are those who always think it is somebody else who is the stupid one…
Muhammad Fayyaz Shouldn’t you be somewhere terrorizing people?
Brown Lyn Calling him stupid doesn’t counter his factual statement. The stupid is 100% coming from you.
Brown Lyn I wouldn’t know (and you may be right). You can also say that U.S fought imperialistic wars with China 150 years ago.
What does that have to do with today’s world?
China is actively stealing intellectual property now, and it is in the U.S best interest to prevent it. If this means a trade war, so be it.
Also note, that I have the highest respect for Chinese culture and Chinese people (I am married to one).
Brown Lyn LOL. Then why does China protect it’s own markets? Are you seriously this blind to what China is doing?
Public comments on China tariffs expired yesterday. Why is Trump holding back? Weak, very weak, very very weak…..
Brown Lyn China should stop focusing on producing junk and start growing their own food and building their own consumption economy. An economy built on a trade surplus is destined for pain, Sorry, it’s just not sustainable and now you are seeing why.
you sound like a whoore
I bet you get asked that a lot.
Brown Lyn , seems by birth.
The Don twitting mad this morning. Threatens another $267 billion addition to the current $200 billion. Why is he pussying around? Man up!!
What is Trump waiting for? All the threats on China is useless. Slap on the tariffs now! No more huffing and puffing, just slap the tariff now! Anything less than the full $200 billion is a sham. The chinese are waiting….