Two items caught my eye the other day:

  • First, in The Economist, there is a nine-part special report which begins by saying that “Since China emerged from the wreckage of Maoism 40 years ago, the profit motive has become a pillar of stability in its relations with America. Presidential candidates might accuse China of stealing jobs. Spy scandals could simmer. Then corporate bosses and politicians in Beijing and Washington would decide that all sides were making too much money to let relations sour. This focus on mutual self-interest involved queasy compromises. Soon after troops massacred hundreds, possibly thousands, around Tiananmen Square in June 1989, President George H.W. Bush wrote discreetly to Deng Xiaoping to urge joint efforts to prevent “tragic recent events” from harming relations. The financial crash of 2008 revealed a dangerous co-dependency between America the importer of cheap goods and China the thrifty exporter. New terms tried to capture this symbiosis: “Chimerica”, or “the G2” … [but] … Suddenly, however, making money is not enough. In the past couple of years, debate about how to get engagement to work has given way to talk of strategic competition and security threats. Rather than catchy neologisms, scholars are reaching for historical analogies. Some talk of 1914, when clashing British and German ambitions swept aside deep bonds of commerce. China analysts obsess over the “Thucydides trap” [about which I commented recently] that supposedly dooms upstart nations to fighting incumbent powers, as the Greek historian wrote of Sparta and Athens;” and
  • Second, in the South China Morning Post, David Brown, who is a freelance commentator and the chief executive of New View Economics, says that “The world is taking leave of its senses and falling down the rabbit hole of a deepening global trade war, economic shocks and political instability. The post-war world order is breaking down, multilateralism is giving way to national self-interest and the political forums for peaceful debate are failing … [and, he says] … It’s time for someone to step forward and show stronger leadership before the world sinks back to where the 2008 financial crisis left off. Right now, the world is in self-harm mode and deeply vulnerable … [because] … When two great superpowers go head to head, there’s normally serious injury felt on both sides. The world generally suffers greatly, too. But this is a trade war that the US will ultimately lose – and probably lose badly at that.

The Economist says that “China’s rise was always going to cause turbulence. The same country is America’s most daunting strategic rival, its biggest economic challenger and a giant trade partner. That is new. The Japan shock of the 1970s and 1980s triggered demands from politicians for protectionist barriers, as America’s trade deficit in goods with Japan rose 25-fold in a decade. But it was a lopsided political fight: Japan was a dependent military ally. As for the Soviet Union, it was an ideological but not a commercial rival: in 1987 bilateral trade was worth $2bn a year, or less than 0.25% of America’s total trade with the world. In 2018 two-way trade between America and China hit $2bn a day, or 13% of America’s world trade* … [and, repeating a now-familiar refrain, The Economist adds that] … Critics argue that elites should have seen this coming. Western leaders had hoped that joining the global economy would make China more like the West, as a growing middle class demanded free speech and more accountable government. They were wrong. The crash of 2008 and spasms of Western populism emboldened Communist Party leaders, notably President Xi Jinping, to reject those norms and assert the party’s supremacy.

China’s growing tech prowess is putting new strains on globalisation, beyond old arguments about stolen jobs,” the article goes on to say. “The fact that General Motors sells more cars in China than in America used to help both countries manage ideological differences. Today’s supply chains, carrying semiconductors from China to devices in America, actually raise the political stakes … [and] … Million-dollar American weapons rely on microchips sourced from firms around the globe. Critical infrastructure may contain components from a dozen nations, require software updates from a provider on one continent and send streams of real-time data to another. In April a Pentagon advisory board warned defence chiefs to plan for “zero-trust” commercial internet networks. A growing number of business transactions require a lifetime commitment to distant service-providers. In this world, trade relations cannot be quarantined from hard questions about whether countries are partners, rivals or foes,” and that is part of the US vs Huawei debate.

The Economist says, and I agree, that “China has every right to want to grow stronger. Its success in helping hundreds of millions of people to raise themselves from poverty is admirable. It is the relentlessness of its methods that has turned business from a safe space to a field of contention. Western firms worry that before China truly opens up, they will be thrown out—as soon as Chinese firms have learned, bought or stolen enough Western knowhow to become self-reliant,” and, in the lead article in the series, it sums up the current situation as follows:

  • The American president is as much a symptom as a cause of a change in the way that America thinks about its openness to the world. Voters elected a might-makes-right leader who scorns alliances, who is cynical about the rule of law and universal values and who believes that national interests always come first …[but] … Amid espionage fears, visa rules for Chinese students of science and technology have tightened. FBI agents have quizzed scholars visiting from Chinese state-backed think-tanks about government links, and cancelled the visas of some … [thus, under Trump] … Rather than China becoming more Western, America is becoming more Chinese;” but
  • Meanwhile, officials in Beijing see a sore loser of a superpower, bent on keeping them down. They scoff at the idea that rich, spoiled America really feels threatened, seeing a ploy to extract better terms for American firms to make money … [but] … This misses how many people in Washington believe that the China threat is real and matters more than profits or free-market purity. Indeed, officials accuse firms of keeping quiet when Chinese spies steal intellectual property, to preserve face and access to Chinese markets.

More to follow …


* Those figures need to be seen in a bit more detail; US trade with China vs Canada in 2017 was, about:

  • US Exports TO China:           < $130 Billion
  • US Imports FROM China:     > $500 Billion
  • US Exports TO Canada:        > $280 Billion
  • US Imports FROM Canada: < $300 Billion

In other words, the USA and Canada have a very nearly balanced trading relationship worth $1.6 Billion per day, while the US trade with China, worth $1.75 Billion per day in 2017, is severely unbalanced with imports FROM China outpacing exports TO China by 4:1. In other words, again, Canada and the USA have a healthy, mutually beneficial trading relationship, a fact that seems lost on the imbecilic Donald J Trump, while China makes what Americans wants to buy at prices they are willing to pay, but, especially given its huge population, imports very little FROM the USA.


Published by Ted Campbell

Old, retired Canadian soldier, Conservative ~ socially moderate, but a fiscal hawk. A husband, father and grandfather. Published material is posted under the "Fair Dealing" provisions (§29) of the Copyright Act for the purposes of research, private study and education.

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