China’s dilemma is the same as everyone’s

Michael Schuman, a Beijing based journalist and author, explains, in Bloomberg Opinion, why US President Donald Trump’s approach makes it almost impossible for Xi Jinping to offer anything meaningful to slow or end the trade war.

With the latest round of trade talks between the U.S. and China ending in a donald-trump-xi-jinping-usa-china-900105predictable stalemate,” Mr Schuman says, “one thing has become clear: The Trump administration’s approach to these negotiations has made it all but impossible for Chinese President Xi Jinping to make a deal. Until that changes, there’s no end in sight for the tariff-for-tariff tussle between the two countries, and little chance of achieving Donald Trump’s stated goals.” He goes on to suggest  that “The White House seems to misunderstand a crucial fact about modern China. As Xi has tightened his grip on power, China’s economic and diplomatic initiatives have become closely associated with him personally. In foreign policy, Xi has sold himself as the champion of China’s global interests and the man to stand up to the West and restore the country to its former glory. At home, Xi has promised the “Chinese Dream,” a prosperous future with boundless new opportunities … [but, he writes] … this carefully crafted image comes with two downsides. First, Xi must avoid any potentially humiliating setbacks on the world stage, especially any inflicted by a Western power. Second, he must keep China’s economy growing, generating jobs and raising incomes.” Xi’s problems are not unique to him: Shinzō Abe of Japan, Angela Merkel of Germany and Justin Trudeau of Canada all face similar pressures ~ they need to keep their nations’ (trade based) economies growing while, at the same time, not “giving in” to Donald Trump’s bombastic bullying.

Michael Schuman says that “You might argue that this mix should encourage Xi to reach a trade agreement sooner rather than later. After all, U.S. tariffs on Chinese exports will pinch China’s economy (at least a bit) at a time when it is already slowing and heavily indebted … [but] … The calculus in China’s halls of power, however, is more likely the opposite — doing a deal is simply too dangerous. Economically, Xi portrays himself and the Communist Party as China’s saviors, and he has doubled down on the country’s state-led economic strategy. Most of all, that means his industrial policies aimed at upgrading manufacturing and technology companies, typified by the “Made in China 2025” program. These industrial policies are a primary target of Trump’s demands, since the U.S. believes they give Chinese firms an unfair advantage in global markets.” Xi Jinping, he writes, “has almost no ability to negotiate over China’s industrial policies. Not only are they too important to the government’s agenda, they’re very much connected to Xi’s larger political message. That’s why Chinese officials have attempted to focus talks with the U.S. on less sensitive matters, such as deficit reduction. Buying a few more bushels of American soybeans won’t tarnish Xi’s image. Caving to the U.S. and curtailing his industrial program would … [and] … The talks themselves are a diplomatic minefield for Xi. The bombastic approach taken by the Trump administration paints him into a corner … [something the Trudeau government knows only too well, right now, and] … Any major concessions could look like appeasement to Washington’s bullying — and an unacceptable blow to Xi’s prestige. Xi would probably be even more sensitive to such an affront than usual. His highest-profile international initiative, the infrastructure program known as Belt and Road, has come under heavy fire recently. Just this past week, Malaysia’s prime minister told Xi that he planned to defer China-backed projects that were key elements in the Belt and Road package.

Mr Schuman concludes that “If he really wants to reach a compromise, Trump must alter his approach. Toning down the rhetoric, ending the gloating, and offering up a handful of concessions might offer Xi a face-saving way to market a trade agreement to his domestic audience as a win. But with the White House digging in, at least for now, the standoff is likely to continue. Whatever economic advantage Trump believes he has, this trade war is ultimately a test of political will. That’s a contest Trump is very likely to lose.

I don’t think an altered Trump approach is in the cards. I simply don’t believe that ZeroSumGame_-SexPresident Trump has any personal flexibility. His views, it seems to me, which is shared by many Americans including Robert Lighthizer, is that trade is a zero-sum game, there are precious few “win-win” outcomes and America must win every play of every inning of every match. Just like Xi, President Trump has too much invested in his trade strategy … his “base” believes him: the rest of the world is screwing America, stealing American jobs, cheating on contracts, and, and, and … ad infinitum. Tens of millions of Americans want to win, again, as they believe they did in the 1940s and ’50s.

So, Xi Jinping is on the horns of a dilemma … but so is almost every political leader in the 21st century. Sadly, for President Trump and his true-believer followers, globalism works ~ it has made billions of people, including most Americans, better off, but globalization is also, self evidently, responsible for HUGE shifts in employment patterns and many, many American (and Canadian, European and Japanese) workers have seen good, high paying, low skill jobs migrate to other countries. The fact that America and Canada all of the DhTQWwQVAAEeGoJothers have grown new, better, high skill jobs is lost on an under-educated former factory worker. Fear is the driving force behind the Trump Party; globalization is the enemy; isolationism and protectionism are the flavour of the month … we are, I fear, headed for a repeat of the 1920s when Yeats foresaw that the forces, “full of passionate intensity” that were “loosed upon the world” would lead to anarchy and war.

An altered approach is needed, but not just by Donald J Trump.

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