16:27 GMT +318 October 2018
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    Pivot to Asia

    China Will Not Be Blackmailed

    Pivot to Asia
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    John Harrison
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    At the UN general assembly of world leaders last week, Chinese foreign minister Wang Yi says the US-China relationship is at critical point after escalating punitive tariffs. Wang Yi said that China “Will not be blackmailed…protectionism will only hurt oneself, and unilateral moves will bring damage to all.” How far will this trade war go?

    Bryce Swerhun, a researcher at the City University of Hong Kong joins the program.

    Wang Yi is presenting China as upholding multilateral relations in contrast to Trump's anti-globalist stance. Bryce comments: "…In terms of trade, China's position is that they are utilizing governance and norms that have been established by the WTO and existing agreements, so they are playing a multilateral approach, but if you look at security matters, things that impinge on Chinese sovereignty we see that they are able to put their own national interests first….For both countries, the real approach is still national."

    One of the main accusations levied against China is the fact that its currency is controlled. Bryce says: "Yes, but in China's defense, the country's not recognized as a market economy by the WTO, and this definition exposes China to more stringent conditions than the recognized market economies are subject to. So, there is the argument that China is a currency manipulator and not playing by the rules, but on the other hand, China is able to say — well, we are not so respected or afforded the same kinds of rights and privileges that other WTO member states are. There are arguments on both sides."

    Trade tariffs are nothing new, and most countries have used, or are still using trade tariffs. Trade seems to be becoming politicized, with the US referring back to the past and creating the idea that it needs to be ‘Great Again'. This can be seen as being rather negative not just for the U.S., but for the rest of the world, which may also have to adopt similar polices. "One of the worst parts of the ‘Make America Great Again' or of any other populist rhetoric is that it assumes that somehow things have not got better since the 1950s… it is a strange rhetoric to say that we need to go back to a time before all the progress of the 20th century was made, which was one of longest periods of economic expansion in the history of the world."

    In regard to the question — how long can this trade war go on for? Bryce says: "China is able to play a much longer game here. I think China can afford to play with a cooler head, particularly as nobody seems to be able to work out what America's strategy is. We keep on guessing what it is, because there is a possibility that there isn't really a strategy. It seems to be reactionary and appealing to a political base, but that all goes away when Trump goes away….But China's administration won't be going away. They can afford to wait until the next administration." Host John Harrison argues that the repatriation of jobs will have a positive effect on America's economy. Bryce says: "The one thing that Trump loves to talk about is how the stock market has never been higher, and that the economy is roaring because of these tariffs. Well if you look at it a bit closer, all of this has to do with tax cuts which have increased corporate profits and they are buying back a lot of stock which increases stock prices. It is a great time to be an executive and sell your shares and the company is able to buy back the tax savings that they now have, so that's a financial matter, not really a question of what the economy is doing at the level of production. In terms of jobs coming back, well we have to consider that a lot of these jobs have become automated anyway. Relocating them back in America will not necessarily replace the blue-collar jobs that we had in the 1970s. When he was President, Obama had a meeting with the tech leaders in Silicon valley, and asked what we need to do to bring jobs back to America. Steve Jobs, who was alive at the time, said very directly that these jobs are not coming back. And more to the point, that you don't want what they have become. The types of jobs that have been lost and been created again in other parts of the world, and have become much less appealing jobs; you wouldn't want to have that type of production re-shored to America because it is not going to the engine pf prosperity it's going to be a sign on economic decline if you are out fighting for the lowest dollar…"

    Bryce sees that the emergence of a middle class in China has somewhat insulated China from the effects of the US trade tariffs. "A place like Macao with its massive casinos does not need people like me to keep going, it is all based on mainland tourists….Chinese manufacturing is already under threat, you see a lot of manufacturing being outsourced of places like Vietnam, which are cheaper. In China, workers are increasingly able to demand higher and higher prices. I see that the trade dispute with the United States might actually accelerate china's globalization and encourage China to seek cheaper manufacturing throughout South East Asia. This actually supports the One Belt One Road initiative that China is working towards." Bryce sees that regionalization is occurring and trade issues which used to be global are now being decided on a more local level, but at the same time, trade is becoming securitized." 

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    Tags:
    US-China trade war, Trade, tariffs, Wang Yi, Donald Trump, China, United States
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