China-US trade war not yet at climax

Editor’s Note:

The US is unleashing an escalating trade war against China. Meanwhile, it is also hitting some of its closest allies and threatening to withdraw from the WTO. What exactly is US President Donald Trump’s foreign policy? What kind of allies does he want? Where is the China-US trade war headed? Global Times (GT) reporter Li Aixin talked to Mats Karlsson (Karlsson), director of the Swedish Institute of International Affairs and former vice president for external affairs of the World Bank, about these issues. GT: Will the recent US moves bring about major changes in the global economic and trade pattern? Karlsson: Of course it will. It’s a very unfortunate situation. We need the open global trade system. Pulling back from major trade arrangements, in particular from the WTO, if it should happen, it’s unfortunate.

Now we are discussing US-China trade relations, I think we would have been far better off negotiating. China has developed with open trade, but has also benefited very much from the global trade regulations. And China also needs to reflect a bit on how it wants to profit from global relations, including intellectual property rights, future technology protocols and environmental and social standards. But the only way to go ahead is negotiations. The trade war will lead to lower growth and hurt everyone. We simply need to get back to a global rule-based order where everyone profits. GT: Will the current worldwide trade rows impact global geopolitics? Karlsson: I think geopolitics is driven by many other issues. It’s also not correct to say that we only have a threat to global trade. The EU is proposing and entering into major trade agreements across the world. So there is a counterforce that is coming from a number of countries including the EU.

I think that in geopolitics, it’s much more important to make sure that we rely on the multilateral rules-based order and not lose faith in what has brought a very long period of prosperity and peace to many countries, not for all, but for most, absolutely yes. GT: Where do you think the China-US trade war is headed? Karlsson: Things are now moving Institute in many unpredictable ways. It hurts business. It hurts Chinese workers, European workers as well, let alone American.

I don’t think the US administration has a clear strategy. I think what we need to do is to cool down, sit down around the negotiation table and see what it is that needs to be resolved.

I’m sure we are not yet at the climax of the issue, but we have to get back to normality as soon as possible. GT: What kind of allies (or alliances) does Trump want? Karlsson: I think we should focus less on Trump than on what actually builds security. After Russia’s annexation of Crimea, Europe does need to develop common defense and security cooperation, and countries will need to increase spending. Europe needs to do that of its own accord. However, we must not forget the lessons of what since 1989 created a much more peaceful world – negotiations, cooperation and commitment to a world where one country’s security is not secured at the expense of another’s. Europe has learnt its lessons from its past wars. And future security must also build on economic cooperation, and therefore work with institutions like the G20, OECD and Organization for Security and Cooperation in Europe. GT: France and Germany have recently warned that the US is no longer reliable. How far do you think Europe will go in the direction of non-reliance on the US? Karlsson: This needs to be taken into context. The US is going through a complicated political period. The relationship between Europe and the US will remain very strong. But what the Europeans have realized is that we need to do more for ourselves, including in foreign policy and financial regulation. That’s simply what we have to do. The French-German relationship is very important, but the EU faces many other issues including the intention of Britain to leave the European Union – I hope it will not happen – but if it has to happen, it has to happen in an orderly way. In that case, those of us among the 27 members of the EU need to focus on what is important for us economically and in global contributions and absolutely, of course, for our own citizens. GT: Thomas Wright from The Brookings Institution once noted that Trump’s views aren’t as confused as they seem: They are 19th century foreign policy. What’s your take on this? Karlsson: I think the president of the US is an isolationist. I think he doesn’t really have the strategy for world responsibility.

In the 19th century, many of the powers of the time thought everything was safe because we had lived through a period of globalization that had given us more income. But suddenly something happened and people behaved poorly and they stumbled into a war without actually knowing what they wanted. It was World War I. Nothing good came out of it. In fact, we got WWII. So I think we need to be extremely careful and rely on our large institutions – the UN, the EU, the collaborative mechanisms that exist across the world – in order to make sure that we always talk and not stumble into something without reflection. GT: Trump wants to make America great again. Does this “great America” in his eyes run contrary to previous US global cooperation? Karlsson: America was never greater than when it led the post-WWII period. When America led in creating the UN, the World Bank, the IMF… The US was not the only one. There were a large group of countries. But America was the greatest when it was opening trade and open to multilateral negotiations.

The US has done much that it should not have done. But what Trump is doing now is not making America great again. He is using nostalgia within his country for his own purpose. But the US cannot be what it was once and is certainly now becoming weaker. GT: Is the confrontation between China and the US about power or ideology? Karlsson: I certainly think it is not about ideology. There is a degree of power competition. That is part of the way nations have evolved. But I think the focus has been altogether misplaced. What we need to do is focus on what are the true values that would underpin a harmonious development of all countries. And the UN helped us come extremely far in this.

I don’t think countries do fight about power, but the ideological fights of today should be based on the interaction where we find the true values and they are after all so well embodied in the UN, in Agenda 2030, and the new sustainable development goals. That’s a huge step forward. GT: Former US president Abraham Lincoln once said, “With malice toward none, with charity for all.” But Trump seems to have taken a different approach. Does the Trump administration really not care about the power of morality and the responsibility of being the No.1 power in the world? Karlsson: Differentiate Trump’s statements from the strength of US institutions. They have been built based on its Constitution and on the huge sacrifice Abraham Lincoln took the country through in the Civil War, because he believed in human rights. No country is spared having to reinvent itself at times when things seem to go wrong, and the US is no exception. In the words of Trump himself, “we will see,” but I think US institutions, such as the judiciary and free media, are proving their strength. We will also soon see how the mid-term elections in November will change the real political landscape. Meanwhile, the world should focus on real issues and try to solve them. The US will surely come back to contribute constructively.