Mellower US trade tone eases onus on China
It is especially important to enhance the multi-lateral system of open and free trade and investment, jointly resist protectionism...
THE SOFTENING of President Donald Trump’s protectionist economic agenda has eased fears of a global trade war. It also spares China from having to assert itself as defender of the existing global economic order or being forced to take the lead in forging a new one.
An improving growth outlook lifted the spirits of finance chiefs meeting in Washington for the first get-together of the International Monetary Fund since Trump’s election. While his “America First” position on trade prompted delegates to adopt the same position taken by the Group of 20 last month, when it dropped a commitment to resisting protectionism, there was cautious optimism the current economic order may shift, but not crumble.
That suits Beijing, which benefited from a global trading system that fuelled its rise from agrarian poverty to the factory to the world.
Now, as China’s factories seek to upgrade and the economy is driven less by exports and more by consumption, its leaders appear happy to stick with the current rule book that Trump’s rhetoric, if not his actions, has questioned.
China “hasn’t shown much of an interest in setting the agenda,” said Benjamin J. Cohen, a professor of international political economy at University of California, Santa Barbara. “It’s expensive. Once you take on a leadership role, you have to be prepared to offer pecuniary incentives, or in some cases make sacrifices, to preserve the stability of the whole system.”
That’s not to say China isn’t playing a growing role at international summits like the
Zhou Xiaochuan, People’s Bank of China Governor
one in Washington. It is often a leading voice resisting Trump’s campaign pledges to impose tariffs and reshape international accords.
“It is especially important to enhance the multi-lateral system of open and free trade and investment, jointly resist protectionism, and accelerate the liberalisation of global trade and investment,” People’s Bank of China Governor Zhou Xiaochuan said in a statement released during the meetings of the IMF’s 189 member nations.
That’s a reminder policy makers are still nervous Trump could yet unleash the kind of punishing tariffs and trade barriers that he promised during his campaign.
A new steel probe the US unveiled last week on the eve of the IMF confab is an example of the kind of actions that could stoke tensions, especially with China.
In Davos in January, President Xi Jinping called globalisation an inevitable force that countries must come to terms with, and said protectionism “is like locking yourself in a dark room.” When finance ministers from the G-20 group of major economies met in Germany last month, China positioned itself as a defender of free trade.
Even before Trump’s election, China had begun to establish its own versions of the US-based institutions that have preached the benefits to growth and stability of western- style, freemarket capitalism since World War II. The Asian Infrastructure Investment Bank, for example, a development lender based in Beijing, finances projects like roads and bridges in poor countries – a role traditionally played by the World Bank.
In parallel to the institutional channels, there’ll be a physical one.
China’s “One Belt, One Road” project will span Eurasia with roads, railways and ports – slashing the time it takes to move goods or people. And, after Trump’s withdrawal from the Trans-Pacific Partnership, China is supporting an alternative trade deal with Asia-Pacific nations. All those initiatives could one day form the backbone of a China-led world economy.
For now, China isn’t ready to take over the mantle of global economic leadership the way the US has for decades, according to Matthew Goodman, a former White House economic adviser who’s now at the Center for Strategic and International Studies in Washington.
“China is not quite comfortable with that role of stepping up,” he said. “People want to follow the US, but we have got to lead. Nobody wants to follow China.”
America’s Treasury Secretary made clear the US still wants to lead. “Sustained US economic growth is good for global growth,” Steven Mnuchin said on stage Saturday with IMF Managing Director Christine Lagarde, the former French finance minister who has championed the we-arethe-world approach to economic harmony. — WP-Bloomberg