US-China economic war gets colder
US is trying to stop the export of cutting edge technology to Chinese companies.
As US President Donald Trump and Chinese President Xi Jinping sat down to have dinner at a Buenos Aires hotel on 1 December on the sidelines of the G20 Summit, Huawei’s chief financial officer (CFO), Meng Wanzhou, the daughter of Huawei founder, Ren Zhengfei, was being detained at Vancouver airport for selling American origin products to Iran through Skycom, a “hidden” subsidiary of Huawei, thus violating US sanctions. Though she has been granted bail and will be subjected to physical and electronic surveillance, there is no doubt that Meng is now a “hostage” of the economic cold war going on between the United States and China.
The case is similar to the US probing ZTE, another Chinese telecom giant, for trading US products with Iran. ZTE paid almost $2 billion to settle the deal. As the US puts pressure on its allies to proscribe Chinese companies amidst the escalating trade war, Chinese telecom giants like Huawei, ZTE and more recently Fujian Jinhua Integrated Circuit Co Ltd are facing the heat in the Western world. For example, the BT of the United Kingdom has announced that it will not use Huawei equipment for its 5G network; Huawei equipment from the existing 3G and 4G networks will also be removed. Many other countries including New Zealand and Australia are following suit.
In the wake of the USChina trade war, multilateral forums are increasingly becoming platforms for US-China duel, as was witnessed during the recently concluded APEC Summit in Papua New Guinea, where the leaders failed to reach a consensus on the final communiqué. Tensions soared as US Vice President Mike Pence criticised China for its policies and practices related to technology transfer, intellectual property and innovation, and said that the US “will not change course until China changes its ways”. President Xi Jinping, in turn, refuted these in his keynote address; China, rather, accused the US of protectionism, unilateralism, disruption and creating uncertainties.
It was speculated that the recently concluded G20 would also be used to score points by the US and China, for on 26 November, in an interview to the Wall Street Journal, the US President had threatened that if the trade deal was not reached, the US would go ahead with punitive tariffs on $200 billion of Chinese imports. Notwithstanding the rhetoric, a temporary 90- day truce was agreed upon. The US made it clear that if at the end of this period of time, the parties were unable to reach an agreement, the 10% tariff would be raised to 25%. It was reported that China had agreed to import a substantial amount of agricultural, energy, industrial and other products from the US to reduce the trade imbalance between the two. However, both sides were under pressure to strike a deal, as US stocks and the Chinese currency fell by around 10% each.
Notwithstanding the truce, will it stop the economic and political cold war between the two? I believe, tariff is not the only elephant in the room. Undoubtedly, as admitted by the US, China has emerged as a “strategic competitor” and the single largest disruptor of the international order established by the US. “Made in China 2025”— by way of which China would like to achieve 40% “self-sufficiency” by 2020, and 70% “self-sufficiency” by 2025 in core components and critical materials in a wide range of industries, including aerospace equipment, telecommunications etc.,—has rattled the US to its core. China has already made huge headways in areas such as artificial intelligence, robotics and quantum computing. The US is doing every bit to stop the export of cutting edge technology to Chinese companies. Early this April, it banned American companies from doing business with the Chinese telecom giant ZTE, albeit a bailout deal was reached. More recently, on 29 October 2018, the US Commerce Department announced that American companies would require a special licence to export all commodities, software and technology to the Fujian Jinhua Integrated Circuit. The order was passed in the aftermath of US chip giant Micron accusing the Fujian based company of intellectual property thefts. This is how protectionist measures by the US have been linked to national security. The US believes that any competition from China would be unfair, for the latter takes advantage of the openness and democratic systems of foreign countries, subsidis- es its own enterprises and raises barriers to external, political, cultural and economic influences at home. Both sides have portrayed the deal reached in Buenos Aires very differently. If the US talked tough and mentioned the 90-day truce as a second chance for China, conversely the Chinese official media did not make a mention of the truce period. It rather talked about a trade agreement and cooperation between the two and that both sides will gradually work towards decreasing the trade imbalance. It is clear that both countries are prepared for the long haul as the economic cold war gets murkier with the passage of time. B. R. Deepak is Professor of Chinese Studies at Jawaharlal Nehru University, New Delhi. Thanks to the Act East policy, India-Australia ties that had remained dormant through the Cold War years due to global geopolitical constraints, are on the upswing. Several commonalities such as the Commonwealth, Westminster system, cricket and English language, occasional high-level visits, and Australia’s support to India in latter’s wars including in 1962, could not bring enough warmth to the relations. Bilateral ties strengthened only during Phase II of the Look East policy (2002-2014) and further gathered momentum with “Act East”.
President Ram Nath Kovind recently concluded his state visit to Australia, the first-ever by an Indian President. His visit rallies with preceding high-octane visits by Tony Abbott and Narendra Modi (2014), Malcolm Turnbull (November 2017), and Governor General Cosgrove (March 2018). While Prime Minister Modi did meet the newly sworn-in Australian Prime Minister Scott Morrison on the sidelines of the 13th East Asia Summit, Kovind’s was the first highlevel visit after Morrison assumed office in August.
With swiftly changing international and regional strategic dynamics and India’s improving ties with Australia’s allies—Japan and the United States—it looks natural that India’s ties with its Antipodean neighbour should also make qualitative upturn. Kovind’s visit should be seen in that context.
In Australia, Kovind met Morrison, who pitched for stronger bilateral ties, pledging to scale up India-bound investment from current AUD 10 billion to 100 billion by 2035, especially in agro-business, education and tourism.
The Australian government’s India Economic Strategy to 2035, lists out key sectors in which Australia could put special emphasis as a stakeholder in India’s growth story. When finalised, the bilateral CECA negotiations and multilateral RCEP, involving ASEAN and its six dialogue partners, will boost bilateral trade, which currently stands at US$ 19.7 billion. Australia is a critical source of India’s energy security, and is poised to gain more salience with developments on the civilian nuclear energy front. The first India-bound uranium shipment from “Down Under” reached in 2017 marking the beginning of India-Australia yellowcake trade.
Kovind’s visit highlighted the need for India and Australia to do something they both are impressive at i.e. the knowledge sector. During Kovind’s visit, agreements on scientific cooperation and MoU between educational institutes of the two countries on developing a joint doctoral programme, agricultural research and information technology were signed. These are important as education and people-to-people linkages contribute to bilateral relations. Nearly half-a-million strong Indian community and around 80,000 students studying in Australia bear testimony to that.
On the politico-strategic front, India and Australia have inched closer rapidly. In 2009, the strategic partnership agreement including a Joint Declaration on Security Cooperation was signed, showing a 180-degree turn from how Australia had perceived India’s military capabilities two decades ago. The uncertainties posed by China’s unprecedented economic and military rise, emergence of the Indo-Pacific construct and Quadrilateral security dialogue (Quad) are among major contributing factors for rising bonhomie between the two democracies.
In its recent White Papers, Australia has identified India as one of the countries of “first order importance”. This is manifested in the recently-held 2+2 dialogue at the Foreign and Defence Secretaries’ level, one of the very few such dialogues India holds. Three trilateral dialogues—each involving a third partner—Japan, Indonesia and the US, India-Australia-Japan-US Consultations on Indo-Pacific, and joint military exercises are consequential tools of engagement.
That said, there is a need for some reality check. By all counts, in a matrix of bilateral relationships among the four proponents of the Indo-Pacific, India-Australia ties are at the lowest footing.
Amongst the four Indo-Pacific powers, India and Australia are closest neighbours with a direct responsibility to protect the Indian Ocean sector of the Indo-Pacific. Cross-party debates on how to deal with China are as intense in Delhi as in Canberra. And yet, India-Australia ties seem way weaker than their respective partnerships with Japan and the US. Australia was excluded from the recently-held 2018 Malabar Exercise, and India is not included in the Indo-Pacific Fund, which indicates that there still are gaps to be plugged in the quadrilateral dynamics.
Clearly, while a strong group dynamic works as a fine enabler, it cannot turn India and Australia into best friends all by itself. Both Delhi and Canberra have to introspect together on how to get the best out of these unprecedented enabling conditions of the 21st century global politics. Dr Rahul Mishra is a Senior Lecturer and Coordinator, IMERI, at the University of Malaya, Kuala Lumpur.