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Politics & Religion

World events, politics and whatever (especially whatever)
WARNING: Posts may contain offensive content and red wine
09/11/2001 WE REMEMBER

"Fear is the foundation of most governments." - John Adams

"My family is more important than my party." - Zell Miller

With the arrival in Beijing this week of America’s top trade negotiators, you might think that the U.S. and China are about to enter high-level talks to avoid a trade war and that this is a story for the business pages. Think again. This is one for the history books.

Five days of meetings in Beijing with Chinese, U.S. and European government officials and business leaders made it crystal clear to me that what’s going on right now is nothing less than a struggle to redefine the rules governing the economic and power relations of the world’s oldest and newest superpowers — America and China. This is not a trade tiff.

“This is a defining moment for U.S.-China relations,” said Ruan Zongze, executive vice president of the Chinese Foreign Ministry’s research institute. “This is about a lot more than trade and tariffs. This is about the future.”

In one corner stand President Trump and his team of China trade hard-liners, whose instinct is basically right: This is a fight worth having now, before it is too late, before China gets too big.

And in the other corner stands President Xi Jinping of China, whose instinct may also be right — this is a fight worth having now, because it is too late — China is just too big.

Or, as one Chinese expert put it at a Tsinghua University dialogue on trade I attended, “No one can contain China anymore.” You hear that confidence in Beijing a lot today from Chinese: Our one-party system and unified society can take the pain of a trade war far longer than you Americans can. And there is a trade imbalance today because we’ve been investing in our future and you Americans have been eating yours.

A Chinese economist who worked in the West summarized it this way: “You brought China into the world and changed China,” but now China is in the world and it is becoming “self-propelled.”

Here’s how we got here: In Act I, U.S.-China relations were all geopolitics, with the U.S. and China against the Soviet Union. That lasted until the late 1970s, when Act II began: China shifted toward capitalism, becoming a huge factory and new market — and 30 years later turned into the world’s second-largest economy.

In large part this was due to the work ethic of the Chinese people, the long-term thinking of China’s leaders and the government’s massive investments in infrastructure and education. But in part it was also due to China’s willingness and ability to bend or ignore rules of the World Trade Organization and, at times, outright cheat.

In some cases China used industrial espionage to just steal innovations from the West. Other moves were more subtle: When China joined the W.T.O. in 2001, it was allowed in as a “developing nation,” subject to very low tariffs on its exports to our country but permitted to impose high tariffs to protect its own rising industries from U.S. and European competition.

The assumption was that as China grew, and the W.T.O. moved to a new regime, China would quickly cut its tariffs — like its 25 percent tax on car imports, compared with the 2.5 percent tariff imposed by the U.S. But the W.T.O. still has not completed a new trade round and China has refused to voluntarily lower its tariffs.

Moreover, China developed an industrial policy that often bent W.T.O. rules. The government gave away cheap land, and state-guided banks granted cheap loans for new industries, but foreign companies that wanted access to China’s market were forced to pay to play — to have a Chinese partner and be willing to transfer their advanced technology to them.

As a result, over time, Beijing was able to force multinationals to shift more and more of their supply chains to China, and grow Chinese competitors to Western companies in its protected market, and then, once they were big enough, unleash them on the world as giants.

Even when the U.S. protested to the W.T.O. — as in the case of how China unfairly kept U.S. credit card companies out, then lost the arbitration case at the W.T.O. — China still dragged its feet before following through on promises made 17 years earlier to open up. By then, Chinese companies, like UnionPay, so dominated China’s credit card market that U.S. companies, like Visa, were left with the crumbs.

Meanwhile, Chinese government-guided companies and investment funds went abroad and began to buy up strategic industries to bring their technology back to China — like Germany’s biggest and best robotics company, Kuka.

U.S. and European businesses tolerated all of this because they were still making money in China or were afraid to be frozen out of its massive, growing market — until a couple years ago, when more and more told their governments: This is not working anymore. That ushered in Act III.

ACT III opened in October 2015, when China announced its new long-term vision: “Made in China 2025,” a plan to dominate 10 next-generation industries, including robotics, self-driving cars, electric vehicles, artificial intelligence, biotech and aerospace.

When the U.S. and Europe saw this, they basically said: Wow. We were ready to turn the other cheek when your combination of hard work, cheating and industrial policy was focused on low-end industries. But if you use the same strategies to dominate these high-end industries, we’re toast. We need some new rules.

And I heard this as much from E.U. officials as U.S. ones. That is why many E.U. countries are now scrambling to pass new laws to prevent China from buying up their most advanced industries. And that is why China is telling E.U. countries, as one E.U. official put it, “Whatever you do, don’t join the U.S. camp” on trade. The last thing Beijing wants is a U.S.-E.U. united front demanding it play fair.

Don’t get me wrong. I am a free trader and genuinely not afraid of some state-directed 2025 plan beating Western free-market innovators. I welcome China focusing more on 21st-century industries. It could be better for everyone.

Economics is not like war — they can win and we can win. On one condition — we all play by the same rules: hard work and innovation, not hard work and stealing intellectual property, massive government interventions, ignoring W.T.O. rules, lack of reciprocity and forcing Western companies to pay to play inside China.

That is what this moment is about — that’s why it’s a fight worth having. Don’t let the fact that Trump is leading the charge distract from the vital importance of the U.S., Europe and China all agreeing on the same rules for 2025 — before it really is too late.

Have no doubt, though: Both Presidents Trump and Xi are approaching this moment with enormously high-risk strategies.

At a time when we are at a historic juncture in defining the West’s economic relations with China — clearly our No. 1 priority — Trump is also risking a trade war with the very allies we need to move China in the right direction — Japan, South Korea, Europe and Canada — by threatening them with steel and aluminum tariffs if they don’t meet his demands. Trump seems to believe that he can reshape how China approaches the next era of global trade without allies — just American brute force. Good luck with that.

As one E.U. official warned me: “If your concern is U.S. jobs, China is the big challenge and you should not be starting a steel war with Europe. Nobody is going to go with you on China if you’re hitting us on steel.” Added one longtime U.S. observer in Beijing: “If we make this the U.S. versus China alone, we lose.”

Worse, Trump tore up the Trans-Pacific Partnership, which would have brought together the most powerful economies on the Pacific Rim around a set of trade rules perfectly aligned with U.S. interests and focused on all those things, like intellectual property, that we want China to embrace as it moves to 2025.

In short, with a lot of allies in Europe and on the Pacific, we might be able to move China in the right direction. But Trump is alienating them all. How foolish is that?

Trump also has nothing to say about investing in the real source of long-term U.S. strength — infrastructure and education.

But Xi’s bet is also no slam dunk. China is a much more open country today than it was 25 years ago — but it’s also much less open than it was five years ago. Xi’s allies argue that his crackdown on corruption; his repeal of term limits, which position him to rule for what could be decades; and his tightening of the control that the Communist Party wields over every institution was urgent because collective rule did not work. China’s society, government and military were being eaten away by corruption from within, those allies say.

That may have been true. But creating a regime of one-man rule; controlling the internet, free speech and universities more tightly than ever; and resurrecting the teaching of Marxist thought cannot be the best way to stimulate and attract the most creative and innovative minds that China needs to propel a start-up economy and deliver on “Made in China 2025.”

Will China’s best and brightest want to work in such a system? I don’t know. China’s autocracy has managed to produce a tremendous number of patents and start-ups so far, so maybe Xi can pull this off. But it’s a big bet.

As I said, this is not just a front-page business news story. What’s being written is the first page of a whole new chapter in the history of U.S.-China relations. And how it gets written and how it ends will shape the Trump and Xi legacies — and touch every major economy in the world.

There are 6 Replies


-Mnuchin and other Trump administration representatives on trade will be coming to Beijing this week. This could be of historic importance.

-The current tensions on aspects of trade is part of a broader struggle between the U.S. and China to determine the future of economic dominance. The U.S. side sees this as the right time to confront China -- before it's too late; the Chinese side sees this as the right time because it *is* too late, that China is too big to be contained.

-It was in 2015 that China announced its new long-term vision: “Made in China 2025,” a plan to dominate 10 next-generation industries, including robotics, self-driving cars, electric vehicles, artificial intelligence, biotech and aerospace. It plans to do this as it did with low-end industries before: forced technology transfers, IP theft, and international acquisitions of foreign companies.

-We should support Trump's initiative to challenge China and force it to play by a rules-based trade system that is fair to the U.S., Europe, China, and all nations -- but this is going to be much, much harder after leaving the TPP, slapping tariffs on EU steel, and basically going it alone internationally.

-As the article concludes: As I said, this is not just a front-page business news story. What’s being written is the first page of a whole new chapter in the history of U.S.-China relations. And how it gets written and how it ends will shape the Trump and Xi legacies — and touch every major economy in the world.

Posted May 2nd by Agis

Do you think there is a high likelihood thks will cause military escalation?

In light of the peace talks between North and South Korea, one has to wonder whether this will result in gradual withdrawal of US troops from the Korean peninsula; which would be to China's liking, or even the possibility of a military presence in North Korea, which would offer America much more deadly efficiency in power projection against China.

Do you see both countries looking for opportunities to indirectly engage each other militarily a la the Cold War from here on?

Posted May 2nd by Dr. Doom
Dr. Doom

I don't think this will lead directly to military confrontation.

The three main points of possible military confrontation between the US and China have their own dynamics outside of these high-level trade disputes.

Those being:

*Korean peninsula*: Part of the reason why we didn't see a trade war up until now is because the US needed China to help impose sanctions on North Korea. Seems like we're past that point; the sanctions, Trump's rhetoric, Kim's nuclear weapons development, and Moon's engagement strategy have put us on a new trajectory. We'll see how it happens.

But when it comes to the possibility of conflict between the US and China on the Korean peninsula, China definitely doesn't want it, has said it will protect North Korea in the event of US attack, but won't if there's a North Korean attack. I think they'll move into North Korea in the event of war regardless, but not in the way they did in the Korean war, where they threw waves of soldiers at US positions.

*The South China Sea*: China has been building artificial islands and militarizing them, and will probably deploy anti-missile systems and other hardware. The US will continue to perform freedom of navigation exercises to challenge them, but this will work into the Chinese narrative where further militarization is justified.

Last semester, Jeff White, the foreign policy advisor to Obama over South Asian issues gave a talk at my school. My classmate asked him if he thought there could be war in the SCS. He said that the people in the Pentagon take freedom of navigation -- the foundation of American dominance of the post-war order -- as sacred. He said they may be willing to have an "incident" with China in the SCS and let the world decide who's in the right.

*Taiwan*: Taiwan remains the single most important geopolitical challenge for China, and if there's a formal move for independence (which more Taiwanese seem to be moving towards), there may very well be war. There's no reason to think this might happen any time soon, but China may feel that Trump might be willing to strike a deal over Taiwan relations. But considering the strong, bipartisan support Taiwan has in Washington, I don't think the establishment will allow Trump to do it.

So none of these really seem to be directly tied to trade, but worsening relations over trade and fear of American encirclement could lead to China acting more and more aggressive within Asia.

Posted May 3rd by Agis

The last time we had a military confrontation with China they beat us to a stand still.

And that was us, and our allies, fighting a third world country who was still staggering to move after its own civil war. And didnt give two shits about our nuclear armaments.

China will avoid war at all cost. Even before they entered the Korean War they were more than happy to see North Korea fall as long as they could keep a 30 mile buffer zone between them and the west. I am sure this is still the case today. However if we continue to push and prod, and they feel the livelyhood of their nation is at risk, they will retaliate.

Edited May 3rd by S.O.H.

Distraction, Russia should be the primary target.

Posted May 3rd by Psygnosis

The only distraction is your reply.

Posted May 6th by Agis
Reply to: Opinion | The U.S. and China Are Finally Having It Out

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