No early winner in trade war
Xi Jinping chooses prestigious Boao forum to position China in a conciliatory fashion
Has “The Art of the Deal” trumped “The Art of War”? I don’t think so. It’s far too early to call a victory for the United States in the escalating war between the two elephants of global trade despite major concessions by China yesterday.
The US still has plans tabled to slap tariffs on US$50 billion of primarily technology imports from China (and possibly another US$100 billion). China has countered by threatening tariffs on US$50 billion of American exports, strategically designed to hit Trump’s support base hard and impact coming mid-term US Congressional elections.
There will be no truce until these specific threats are gone.
Nevertheless, Xi Jinping’s signalling of a new phase of China’s “opening-up” illustrates the Chinese leadership has paid close attention to major US gripes — not just those of the US President. But those of the American business sector which has in recent months coalesced around a view that China has over several years carried out a skilful raid on US intellectual property, particularly that of the high-value US high-tech sector.
Xi chose the Boao forum to position China in a conciliatory fashion. Among a raft of measures he announced were cuts to auto tariffs, the further opening of the Chinese financial sector to foreign investment, and strengthening the protection of foreign companies’ intellectual property in China.
It was Xi’s most significant speech to a global audience in two years.
The Chinese leadership has clearly paid attention to the subtext to @realDonaldTrump’s bombastic tweets.
Particularly the one on April 8 where Trump said: “President Xi and I will always be friends, no matter what happens with our dispute on trade. China will take down its Trade Barriers because it’s the right thing to do. Taxes will become Reciprocal & a deal will be made on Intellectual Property. Great future for both countries!”
The back channels running between the two capitals would have ensured that Trump had a reasonable inkling of what Xi would announce.
There’s been plenty more in Trump’s recent twitter feed: He pointed to auto tariffs in China’s favour; unequal treatment of the two nations at the WTO, intellectual property theft and a trade surplus in China’s favour.
It was notable that Xi did not mention Trump or the United States even once in this 30 minute address at the Boao forum. But he did say that “China does not seek a trade surplus”.
The annual Boao Forum for Asia — popularly known as “Asia’s Davos” — began in 2002. It is hosted on Hainan Island in a striking purposebuilt complex. The president’s first appearance at Boao since 2015 ensured a top level turnout of senior Chinese business and political leaders and also acted as an enticement for many US multinationals to send senior representatives.
Former Prime Minister John Key spoke at the 2013 forum and later had a personal meeting with Xi at his “summer house”. Aside from former Prime Minister Jenny Shipley, who is a member of the forum’s board, there has been little senior corporate attendance from New Zealand in recent years (although there is a small NZ delegation present this year it does not include the leaders of major corporates).
This contrasts with Australia which tends to muster strong business delegations. The 2018 Australian delegation includes former Treasurer Peter Costello, former foreign minister Bob Carr and a raft of corporate leaders including Woodside’s Peter Coleman, Victor Smorgon’s Peter Edwards and Fortescue’s Andrew Forrest.
Xi preaches mutual respect and a “win-win” approach to mutual cooperation. Trump believes this approach obscures a very real threat to the economic well-being of the US.
At issue is whether the US has left it far too late in the piece to protest against Chinese IP infringements and the Beijing habit of insisting foreign corporates invest in China if they wish to trade.
China is also fast developing its own hi-tech business. That’s where the real battleground lies.
Xi has inferentially made the point “there is no instance of a country having benefited from prolonged warfare”.
Does Trump believe the same?