The intractable U.S. economic demands (2018.04.15)

Two weeks ago I announced that after three years and 121 issues, U.S.–China Week would become the Transpacifica newsletter—shifting to a biweekly publication schedule, covering selected issues in U.S.–China relations and Chinese policy, and emphasizing analysis over news summary. My site Transpacifica.net had always been the home of U.S.–China Week, and I look forward to continuing the conversation under the Transpacifica name. Like in the beginning, I will be experimenting for the next few issues with format and content, and your feedback would be greatly appreciated—including about when during the week you’d most like to receive a message such as this. Without further ado, welcome to Issue 1 of Transpacifica. –Graham Webster

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The intractable U.S. demand at the heart of Trump’s ‘trade war’ bluster

There is a confusion of rhetorics and interests in the escalating U.S. demands on China surrounding trade, investment, and competition. In one vision, captured for instance in President Donald Trump’s tweets, the U.S. government is fighting years of imbalances in the trade in goods that allegedly hurt U.S. workers. A demand to achieve a different trade balance would actually be relatively easy for the Chinese government to accommodate if it so wished, but the broader U.S. demand—the one that has afforded Trump some support for tough trade action, even if not for the tariff threats we’ve seen—is far less tractable.

The U.S. government Section 301 investigation report, issued March 22, outlines grievances shared much more broadly than a circle of Trump advisers and supporters of the trade-deficit, job-recovering narrative. As Lorand Laskai of the Council on Foreign Relations has written, the 301 report devotes a great deal of attention to a specific Chinese government plan and concept: Made in China 2025 (MIC2025). That document is symbolic of a broader, longer-term, and cross-sectoral Chinese government effort to decrease the Chinese economy’s dependence on foreign intellectual property, to move up the value-chain, and to ensure that foreign technology does not pose a security threat to the Chinese people or the Communist Party.

This challenge is by no means merely a Trump administration concern. It’s a bipartisan and international objection to policies that put foreign competitors at a disadvantage in China’s market or systematically wrest intellectual property from foreign hands. Ryan Hass, a former White House China adviser now at Brookings, argues that confronting Chinese practices should be an international undertaking. In Hass’ words, one way to move forward would be to “muster a strong chorus of countries and companies that each stress to Beijing a uniform set of requests about areas where it needs to adjust its practices.” Doing so could deny the Chinese government the privilege it currently enjoys of playing the steadfast global citizen against an erratic U.S. backdrop.

But what could the U.S. and other governments successfully demand of Chinese officials? Developing a set of tough but achievable demands would require an attention to detail and to the art of the possible that is not apparent in the Trump administration approach. As Hass writes, “There are no cost-free options left. We are where we are. The stakes are high. Trump owes the American people an explanation of where he plans to take this dispute, what he intends to achieve, and how he plans to do so.” To this sensible prescription I will add that U.S. and other international demands need to be shaped by a realistic understanding of maneuverability in the Chinese system.

It’s not just the Trump administration demanding relief from a broad array of Chinese policies—one so broad as to guarantee thorough relief will never come. And it’s not just the Trump administration identifying grievances without a realistic path to resolution. Given the presumption among many that the Trump administration will not listen to reason, perhaps it is time for independent researchers to assemble realistic ideas for a calmer time when, no doubt, the present tensions will remain in some form.

Stay tuned…

  • The U.S. “Free and Open Indo-Pacific Strategy” got a major official boost with a State Department briefing by Deputy Assistant Secretary Alex Wong. “By open, we first and foremost mean open sea lines of communication and open airways,” Wong said. The South China Sea is by no means off the table, even if it’s quiet in the headlines for now. Per Wong, “open” also means infrastructure: “We want to assist the region in doing infrastructure in the right way, infrastructure that truly does drive integration and raises the GDPs of the constituent economies, not weigh them down.” If that’s not a pot-shot at the Belt and Road Initiative, I don’t know what is.
  • The Taiwan issue, which saw the first Trump-linked curveball in U.S.–China relations after Trump spoke with Taiwanese President Tsai Ing-wen during the transition, is rising again. After the Taiwan Travel Act reopened the issue of high-level contacts between U.S. and Taiwanese officials, reports are speculating about whether and when a prominent U.S. official might visit Taiwan. Wong, from the previous item, has already visited. The Economist reported on rumors that a cabinet member might go this summer, and the Taiwan Times read the Economist to suggest National Security Adviser John Bolton might be the one. Bolton, of course, has advocated using Taiwan as a lever with China on other issues. What he thinks would become of Taiwan and its people when used as a pawn is not clear.

About Transpacifica

The Transpacifica newsletter is produced by me, Graham Webster, a senior fellow with Yale Law School’s Paul Tsai China Center and fellow with New America, where I am coordinating editor of the DigiChina project, working from a home base in Oakland, California. The opinions expressed here are my own, and I reserve the right to change my mind. For three years after its founding in February 2015, this newsletter was known as U.S.-China Week. It now appears biweekly, delivered by free e-mail subscription.

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