Trade war ‘winners’ seek a truce
Countries watching the US-China trade talks from the sidelines are anxious for the two sides to reach a deal and avert the damage a protracted fight poses to the global economy — even if many see the potential to benefit from the dispute.
From Mexico to Southeast Asia, nations see an opportunity to attract manufacturing exporters trying to avoid US tariffs on Chinese products. Japan’s carmakers would stand to gain if the US and China imposed reciprocal car tariffs, and Brazil and Canada’s soybean farmers would have a chance to provide more feed for China’s massive hog herds.
“If Vietnam is booming due to investment shifting from China, why can’t we?” Indonesian VicePresident Jusuf Kalla told a forum this week.
But the threat of a trade war is disrupting global markets and business plans. Despite the potential short-term rewards from the spat, most Asia-Pacific nations support removing trade barriers in general — and barriers to trade with China in particular.
President Trump and China’s President Xi Jinping declared a temporary tariff truce on December 1, and mid-level officials from both sides met this week, narrowing some differences and setting up higher-level negotiations.
Many countries trading with China share Washington’s complaints about Beijing’s practices, including subsidies to its companies, limiting market access to foreign firms and requiring foreign companies to divulge their technology.
Some countries have pursued free trade arrangements without the economic superpowers. When Mr Trump withdrew the US nearly two years ago from talks to establish a regional trade deal, the trans-Pacific Partnership, the 11 other members — including Japan, Australia, Canada, Mexico and Vietnam — went ahead with their own arrangement, known as TPP-11, which took effect December 30. A trade deal between Japan and the European Union is set to kick in on February 1.
Ultimately, the US and China are indispensable for many countries.
There are “absolutely no winners from a continuing trade war”, said Australia’s Trade Minister Simon Birmingham.
He warned that the rift between Beijing and Washington could seriously jeopardise global economic growth — though he said the TPP-11 deal had created opportunities as a counter to China-US tensions.
In Southeast Asia, a production and shipment hub that relies on trade with both China and the US, nations fear supply-chain disruptions and slower global growth. The rapid expansion of containerport traffic over the past decade has made even the passage of trade through Southeast Asian countries important to the region’s economies.
“The public view is that trade conflict is bad and should be resolved as soon as possible,” said Deborah Elms, executive director of the Singapore-based Asian Trade Centre, a business-funded group that studies trade policy. “In private, the views could be more nuanced. Some officials are fairly confident that a protracted trade conflict will drive firms out of China.”
Rising Chinese labour costs were already pushing low-end manufacturers to places such as Vietnam, Cambodia and Bangladesh. The trade battle, with its threat of prolonged tariffs, is ac- celerating that trend.
Fashion house Steve Madden, which sources a majority of its products from China, says it has shifted about 15 per cent of its handbag production to Cambodia and hopes to double that percentage in 2019. “That gives us frankly about a three-year head start on most of our peers because many folks are just now trying to make that move … in light of these tariffs,” chief executive Edward Rosenfeld said last year.
GoPro in December said it would move most of its US-bound camera production out of China by mid-2019 “to mitigate the potential impact of inclusion on any new tariff lists”. The Californian company didn’t say where it would shift production.
Policymakers in Southeast Asia are pressing to expand trade. Indonesia, Thailand and The Philippines have expressed interest in joining the TPP bloc. Officials are discussing a separate trade pact that would bring together 16 economies.
Elsewhere, the US-China trade fight was expected to boost agricultural sectors in some countries, such as Brazil and Canada, after China imposed tariffs on US farming products. But in many cases, disruptions to agricultural markets have offset the benefits.
“Some people said there were opportunities for Canadian [producers] to backfill in the Chinese market,” said Mark Agnew, senior director of international policy at the Canadian Chamber of Commerce. The problem, he said, was that it led to a surplus of US farm products being sold elsewhere, which depressed global food prices. “That poses a problem for Canadian businesses,” he said.
For some US allies, the trade fight wedges them uncomfortably between their main security partner, the US, and their economic partnerships with China.
“Both China and the US are important markets for Japan,” said Akihiko Yasui, head of research on Europe and the Americas at Mizuho Research Institute in Tokyo. “It wouldn’t be good if Japan were put in a situation where it had to pick a side.”
Businesses in South Korea, a US ally that sends about a quarter of its exports to China, would benefit if the US gets China to adopt practices more welcoming to foreign enterprises. On the other hand, China could retaliate if a company is seen to take sides.
Firms including Samsung have recently reduced their presence in China and moved operations elsewhere to hedge against risk. Trade uncertainties, rising labour costs and a declining market share in China factored in Samsung’s decision to build the world’s largest smartphone factory in India.
Vietnam’s economy expanded 6.8 per cent last year as investment shifted from China
Brazil’s soybean farmers could sell more to China