Politics Hijacks Trade – Trump’s “Game Changers” will Prove Counterproductive

By He Yafei

US President Donald Trump recently signed an Executive Memorandum authorizing a review of China’s trade practices.

The first meeting between the US leader and President Xi Jinping took place in April at Mar-a-Lago. Subsequent combined efforts, and in particular China’s proactive response, generated momentum in favor of tackling problems through cooperation and negotiation.

But the unexpected action against China in launching a Section 301 investigation could trigger significant changes to the economic and even the political relationship between the two countries, threatening what had seemed to be a bright sky with dark storm clouds.

Political cooperation benefits both countries, while confrontation will do only harm. There will be no winner in a Sino-US trade war. Here are several points that merit attention:

 Constantly Changing Foreign Policies

The Trump government’s foreign policy – including its policy towards China – is characterized by an uncertainty that has become the hallmark of the present US government.

This uncertainty has harmed US credibility and reliability in international affairs, and many other countries, especially other great powers, feel they have to prepare for the worst when dealing with the US. This fear of unforeseen issues has caused chaos in international relations and brought unnecessary instability to the Sino-US relationship.

Gideon Rachman, the chief foreign affairs commentator of the Financial Times, wrote recently that “Mr. Trump has indulged in nuclear brinkmanship in North Korea, issued vague threats of military action in Venezuela and flirted with white supremacists at home. He is offering the very opposite of the steady, predictable and calm leadership that American allies seek from Washington.”

Donald Trump has a visit to China on this year’s agenda, and both sides are preparing for it proactively. However, the pendulum swings of his policies towards other countries – including China – have created great difficulties in mutual interaction, and threatened the stability and order required when dealing with bilateral affairs.

The comprehensive economic dialogue between China and the US has made visible progress, and some early fruits have been harvested. But the unpredictable attitude of President Trump and the unexpected Section 301 Investigation have given the rest of the world a sense that the Sino-US relationship is taking one step forward and two steps back.

If a trade war between these two great powers is to be ignited, it will certainly damage every aspect of the healthy and steady development of the Sino-US relationship, and what is more, it will bring complexity and uncertainty to wider international economic prospects.

The Self-centered “America First” Principle

The self-centered actions of the US government are indicative of a hostility to globalization. It is taking the lead in a campaign against globalization and unilaterally reversing a general trend, with the intention of changing the rules of a game that has served the international political economy well. These actions have made it harder to extend the reach of globalization, and have hampered cooperation between the US and other great powers in global governance.

Since Donald Trump took office, the measures he has taken in domestic and foreign affairs – health care reform and taxation reform, the withdrawal from TPP and the Paris Agreement on tackling global climate change, the renegotiations with Canada and Mexico over NAFTA, the renegotiation with China on the trade arrangement that has reached the stage of a Section 301 Investigation – all manifest the “America First” principle of the new government, indicative of an egoism that disregards the common interests of the international community.

These actions highlight the fact that the trend against globalization and in favor of populism of the current US government, which goes against existing international rules, is becoming the new normal in US political and economic thinking, and becoming part of the mainstream in US society. This will impose considerable strain on globalization, and further exacerbate the conflict between those who are in favor and those who are opposed. However, we will have to wait and see how things turn out, as this depends on interactions among the great powers as well as the response of the overall international community.

Bundling of Trade and Politics 

The US has bundled trade with geopolitical issues to create bargaining chips, hoping to force China into making concessions in order that it can further its own short-term interests. However, things will not necessarily turn out to its benefit. Through its actions, the US will cause serious harm to its relationship with China.

Listing China as one of the principal countries subject to review for potential theft of intellectual property is essentially an act of political bias. It fails to take into consideration the efforts China has made to protect intellectual property in recent decades, such as setting up a specialized intellectual property court.

Whether by stoking up regional tension through its stand-off with North Korea, by claiming that it will resort to the “military option” on the Korean peninsula issue, by threatening a trade war through its trade investigation, or by exploiting this as a poker chip to force China into surrendering interests in violation of fair and free trade, the US government is simply illustrating its political naiveté.

Bear in mind that China’s exports to the US are steadily declining as a proportion of its GDP – less than 5% according to statistics from American academics. In other words, waves of globalization have carried Chinese products to every corner of the world, a fundamentally different situation from the Sino-US trade relationship of 10 or 20 years ago.

China has always sought to solve trade disputes by consultation and negotiation on the basis of equality and mutual benefit. China is willing to work towards this goal and hopes that the US government will do likewise. There will be no winner in a trade war; cooperation is the only option. This was formerly the consensus reached by the national leaders of both sides, and it is the one that should be valued and retained now.

（He Yafei, former vice-minister of the Chinese Foreign Ministry, former vice-director of the Overseas Chinese Affairs Office of the State Council, senior researcher of Chongyang Institute for Financial Studies, Renmin University of China）