According to Wang Yong, professor of economics at Peking University, the decision was taken to target US agricultural sector, because of its influence in Congress. “China wants the American domestic political system to do the work,” he said. In other words, Beijing is not just taking on the US at its own game, but using its rival’s strength as its weakness.26
The imposition of sweeping tariffs of more than $200bn that came into effect in September 2018 is bound to have an impact on “our business, our customers, our suppliers and the US economy as a whole,” wrote Walmart, the largest retailer in the country, in a letter to the US Trade Representative, warning that it would force prices up.27 The introduction of tariffs on Chinese goods is rooted in the idea that trade deficits are detrimental. The Trump administration is seeking to rebalance the fact that the US imports $375bn more goods from China than it exports, and to force Chinese markets to open to US corporations and businesses. But as Gary Cohn, one of the president’s most senior officials, tried to explain repeatedly at the White House, trade deficits are irrelevant and could even be seen in a positive light—as they effectively enable American consumers to buy the goods they want at the cheapest price.
The problem, according to some, is that while almost all economists agreed with this view, Peter Navarro did not. Cohn, a former Goldman Sachs banker, tried to use evidence and reason to show that tariffs make products more expensive, rather than less, and can prove counter-productive. “If you just shut the fuck up,” he reportedly said to the President and Navarro, “you might learn something.”28 They were not interested. Instead, a policy has taken root that sees that the best way to manage China is to put pressure on its economy—regardless of the impact on American consumers, taxpayers and voters.
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Trump’s negotiating technique of hoping to use apparent unpredictability to his advantage meant that, having initiated a trade war, he then tweeted messages declaring that he was “very thankful” to Chinese President Xi, with whom he was sure to “make great progress,” as negotiators from both sides met to try to move matters forward.29
Discussions were “positive, pragmatic and constructive,” said Chinese Vice Premier Liu He as a joint statement was released, which included an agreement that China would “significantly increase purchases of United States goods and services” that would “help growth and employment in the United States.” This would be done in order “to meet the growing consumption needs of the Chinese people and the need for high-quality economic development” in China.30 It was a solution designed to allow both sides to save face—and to enable each to claim they had found a good solution.
According to some, the likely impact of any tariffs is more presentational than substantive. “The actual impact on growth is not very substantial, when you measure in terms of GDP,” said Christine Lagarde of the IMF, concerning the tariffs. The main worry is about “the erosion of confidence” and perceptions of instability.31 One of the issues is the perceived instability within the Trump administration and the impression that policies are the result of what the Washington Post has called the president “operating on a tornado of impulses.” The sense of chaos is found throughout the White House. According to one anonymous insider, “It’s just like everybody wakes up every morning and does whatever is right in front of them, rather than working to a plan or in a coherent manner.”32
“We’re in crazytown,” were the reported words of John Kelly, the White House Chief of Staff for President Trump, summing up working conditions, before adding “I don’t even know why any of us are here.” Others noted that the way to prevent bad decisions was to take papers off the president’s desk before he could see them in order to stop reactions that might be erratic, counter-productive and even dangerous. The fact that Trump turns on his own appointees, such as Attorney General Jeff Sessions, whom he described as “mentally retarded,” or Wilbur Ross, Secretary of Commerce, to whom he said, “I don’t trust you….You’re past your prime,” perfectly illustrates the challenges facing policy-makers at the heart of government in the US.33
This could also be seen during the trade negotiations with China, when senior members of the US delegation were unable to get along and caused a public scene that raised eyebrows as well as basic concerns about the professionalism of those trusted with trying to defend American interests. According to the New York Times, midway through the negotiations, Secretary of the Treasury Steve Mnuchin and Peter Navarro, assistant to the treasury, “stepped outside to engage in a profanity-laced shouting match”—hardly an encouraging sign for those hoping that choppy waters would be calmed.34
Nevertheless, it would appear, at face value at least, that the determination of putting pressure on China seems to be bearing fruit. Trump had been widely quoted as saying that he saw the imposition of trade tariffs as a way of hurting the Chinese and that he wanted them “to suffer more,” with the logic that the longer the additional costs were applied, the more leverage it would give him.35
This might explain statements made by President Xi at the China International Import Expo in Shanghai in November 2018, where he said that he would work to relax investment barriers, open up the telecoms, medical care and education sectors to outside investment, and support all “necessary” reforms to the World Trade Organization. However, as commentators were quick to point out, similar commitments had been given on several previous occasions—and the promised reforms remained elusive.36
Perhaps more promising was a dinner that took place at the G20 summit in Buenos Aires later in the same month, attended by President Trump and his Chinese counterpart. It was, said the US leader, “an amazing and productive meeting with unlimited possibilities.” Discussions had led to an agreement whereby the US agreed not to raise tariffs from 10 per cent to 25 per cent, at least for the time being, while in return, China committed to purchase “a not yet agreed upon, but very substantial, amount of agricultural, energy, industrial and other product from the United States.”37
“The important consensus reached at the meeting not only effectively stopped further escalation of trade tensions, but also opened up new prospects for win-win cooperation between the two countries,” said China’s foreign minister. “Results achieved at the meeting,” he said, “will not only benefit the two countries and the two peoples, but also be conducive to the global economy’s stable growth.”38
This was welcomed in many quarters as a sign that the tensions between the two economic superpowers were abating and that a long-term agreement might be reached in near future.39 “Relations with China have taken a BIG leap forward” tweeted Trump on his return to the US, suggesting that all is well in the world, once again.40
It goes without saying, of course, that there is political capital to be had from making announcements that seem to be ground-breaking—for both sides. The meeting in Buenos Aires was heralded in China as a positive sign for “world peace and stability” and as a prelude to “a mutually-beneficial agreement” that “opened up new prospects for win-win cooperation between the two countries.” This was not just good for the US and for China, said the press statement in Xinhua; it was good for the whole world.41
It can be tempting, though, to be persuaded that vague if optimistic promises about the future amount to more than tactical opportunities for both sides to claim victories for their domestic audiences while giving up little by way of firm commitments in return. And there are good reasons to be cautious about grand announcements that herald good news, for there is a lot more to the rivalry between the US and China, however, than trade alone.
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One indication that it is not just the rise of China’s economy or its expansion into the South China Sea that has rattled US policy-makers comes from the fact that long-term visas for Chinese citizens working in the aviation, robotics and advanced manufacturing industries were voided by Washington in the sum
mer of 2018, as part of an attempt to limit access to sensitive sectors that are closely linked to military technologies. This followed fiery discussions in the Oval Office as to whether to refuse visas to all students studying in the United States—that were only dropped after concerns about the economic cost this would have on colleges across the country.42 The fears of a visa ban, or on China encouraging or forcing students to study elsewhere have been enough to encourage some schools to take out insurance that would pay out in the event of a sharp and sudden decline in Chinese student numbers.43 Trump’s opinion on the matter is clear enough. “Almost every student that comes over to this country” from China, he is reported to have said, “is a spy.”44
China’s rise is about more than trade imbalances, about updating the terms under which China joined the WTO or about opening access for US businesses in its rival. In fact, the question of China is a very existential threat to the United States. “China inherently presents a fundamental challenge to American strategy,” said Henry Kissinger, before pondering how well this challenge would be dealt with. Not well, he suspected. “We’re not good at it, because we don’t understand their history and culture.”45
How American policy-makers think about China and about change in the world is articulated even more emphatically in a document, the National Security Strategy of the United States of America, that was released in December 2017. China is “attempting to erode American security and prosperity” and wants to “shape a world antithetical to US values and interests.” This must be stopped at all costs, says the document, and not just for the US’s sake. “America’s values and influence, under-written by American power, make the world more free, secure, and prosperous,” it breezily proclaims.46
A parallel document, the Summary of the 2018 National Defense Strategy of the United of America, does not mince its words either when it comes to China. Beijing is pursuing a military modernisation programme that “seeks Indo-Pacific regional hegemony in the near-term.” That pales compared to China’s apparent wider aim: nothing less than “the displacement of the United States to achieve global pre-eminence in the future.”47
At a Senate hearing, Dan Coats, director of national intelligence, talked about the Chinese and their supposed aim of global domination. “They’re doing it in a very smart way. They’re doing it in a very effective way. They are looking beyond their own region.” Christopher Wray, director of the FBI, put this in context. The “China threat,” he said, is “not just a whole-of-government threat, but a whole-of-society threat.”48 Neither commented on whether the US has a policy seeking to do things “in a very smart way,” and if not, why not? And neither set out proposals as to how best to engage with China or manage the relationship with Beijing constructively.
As some East Asia specialists have been at pains to point out, shrill caricatures of China are unhelpful, not least because they avoid trying to analyse and understand China or its motivations. For one thing, it is obvious that far from being a subversive power seeking to undermine the international liberal order—as the Soviet Union was—China is in fact conspicuous in the way that it works within institutions such as the UN, G20 and others, even if it often reluctantly and sometimes even ambiguously does so.49
In fact, and ironically, it is the US that is increasingly perceived as bending rules to its own will or breaking them altogether. In August 2018, President Trump threatened to withdraw from the World Trade Organization (WTO), calling the agreement to create the body “the single worst trade deal ever made.”50 This followed the US withdrawal from the UN Human Rights Council two months earlier. The council was a “cesspool of political bias,” said the US ambassador to the UN, Nikki Haley. The UN body was “hypocritical and self-serving,” she said. “It makes a mockery of human rights.”51 Rather than try to reform from within, the decision taken in Washington was to withdraw from an internationally recognised forum—however flawed it might be—and to do so both loudly and bitterly.
This forms part of a much wider pattern of the US choosing to act unilaterally—something that provides cheap political capital for its rivals. After President Trump pulled out of the Iran nuclear deal (the JCPOA agreement), for example, Russia’s foreign minister, Sergei Lavrov, noted that “it is unfortunate that we note that Washington is once again seeking to revise previously agreed international accords”—including the Iran nuclear deal, the designation of Jerusalem as the capital of Israel “and a whole array of other agreements.”52 Theatrical actions, such as when one of Trump’s closest advisors ripped up and spat on papers he pretended were copies of the JCPOA deal in public, while talking about regime change in Iran, may strike a positive note with some in the US; but they have a significant impact on America’s reputation around the world, particularly when they form part of a pattern.53
“Agreements, alliances and partnerships are seen as being expendable—while little account is paid of either their value in the past, or their use in the future. Since the end of the Cold War,” said Mike Pompeo on a visit to Brussels at the end of 2018, the international order “failed us and failed you.” Organisations like the United Nations, the European Union, the IMF, the World Bank and the World Trade Organization, he said, “must be reformed or eliminated.”54 Positions like these have led to deep divisions in the US. “We must do everything possible to advance an international order that is most conducive to our security, prosperity and values,” wrote Jim Mattis two weeks later, “and we are strengthened in this effort by the solidarity of our alliances.” The willingness of the Trump administration to sacrifice old friendships and ties gave Mattis no other choice than to resign from office.55
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The chorus about America’s unreliability is becoming more and more common around the world. The United States is responsible for instability in Syria, Iraq and Afghanistan, said the Iranian foreign minister, Mohammed Zarif. By contrast, he said, Iran had always sought stability and stood against upheavals that have done nothing but cause destruction and spread extremism.56 “The United States’ attempts to impose its own policies on others is a growing danger,” said Iran’s President Hassan Rouhani. Unilateral actions, he said, “are not only against international rules and regulations, but also damage legitimate international trade.”57
President Putin has taken a similar line, talking about the destabilising effect of the recent decision-making by the US and the fact that this “destroys the existing world order”—a bit rich given Russian intervention in Ukraine and purported attempts to influence voting in the US, UK and elsewhere. If it does not come as a surprise that he should talk in this way and accuse the US of causing instability, rather than accepting responsibility for doing the same, it is certainly remarkable to find President Macron of France agreeing with him. “I share your point of view. I completely share your point of view, all your economic and financial reasoning,” Macron told President Putin at a meeting in St. Petersburg in May 2018.58
Other leading voices also warn of the detrimental effects of US policies. Talking about the trade war instigated with China, Christine Lagarde said, “The multilateral trade system has transformed our world over the past generation. But that system of rules and shared responsibility is now in danger of being torn apart. This would be an inexcusable, collective policy failure.” Tariffs, she added, “not only lead to more expensive products and more limited choices, but they also prevent trade from playing its essential role in boosting productivity and spreading new technologies.”59
Or there is Turkey, a long-time NATO member, which has been threatened by President Trump and Vice President Pence because of the detention of Andrew Brunson, an evangelical Presbyterian Christian from North Carolina accused of being involved in the coup of 2016 that sought to remove President Erdoğan from office. If Brunson was not released immediately, said Trump, “the United States will impose large sanctions on Turkey,” before adding in a further tweet that “this
administration doesn’t practice ‘strategic patience’ with terrorists”—a reference to the government of President Erdoğan.60 “Release Pastor Andrew Brunson NOW,” warned Pence, “or be prepared to face the consequences.”61 The first of these were sanctions issued against Abdulhamit Gül, the Turkish justice minister, and Suleyman Soylu, the interior minister. The Turkish lira slumped to a record low a few days later after the Trump administration was reviewing Turkey’s access to US markets.62
US actions against Turkey, a state that according to President Trump “has been a problem for a long time,” have had an impact on the world beyond, with currencies across the Caucasus sliding as a result, putting pressure on their economies too.63 Concerns about the consequences of the crisis reached India, where the rupee fell to record lows against the dollar—and had an impact on currencies all around the world.64
Cases like this explain why it is that others around the world are more sceptical about the wonders of the rules-based order—and see this either as a screen that masks the reality of how the powerful get and take what they want, or as systematised hypocrisy that castigates the behaviour of others on the one hand—while seeking to enjoy the benefits on the other. As a Chinese spokesperson put it when asked separately about US behaviour: “Who would believe that the rule-maker would make rules to serve others than itself?”65
But perhaps the starkest sign of the change in the way the US is perceived by its allies comes from the comments made by Donald Tusk, president of the European Council. “What worries me most,” he said, “is the fact that the rules-based international order is being challenged not by the usual suspects but by its main architect and guarantor, the US. We will not stop trying to convince President Trump that undermining this order makes no sense at all.”66
The New Silk Roads Page 13
