October 26, 2021

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Free trade with China is over for the United States

Free trade with China is over for the United States

In the summer of 1915, during the first year of World War I, a British official from the Ministry of Mansion settled in Switzerland. Objective: To enter into a transaction from neutral territory, the Germans, in other words, would provide the enemy with a military telescope that the British did not have. London, sending rubber from the tropics, the Germans – those with some colonies – were in disbelief.

It is certain that the treaty was discussed – whether it was granted or not – historians differ on it. But Germany was ready to provide an audience that could effectively target itself with artillery, and wanted to make German car tire production possible for British military equipment, underlining enemies if necessary. Are willing to trade enough. Mutual struggle and mutual dependence occurred simultaneously here. Trade lost its moral elements – bringing peace between nations – and became completely barter. So: rubber in exchange for glass optics. Give a little, take a little.

World War I marks the beginning of a period in which globalization deteriorated drastically. After 1945, under US leadership, the recovery of world trade began. But now, for two decades in the twenty-first century, it has been echoing since 1915. The new rivals in the world economy, the United States and China, are now in a similar situation. Tensions are rising, including in the military. At the same time, however, there was still so much dependence on each other to sever economic ties.

After eight months of thinking, the White House concluded this week: Trade policy towards China is largely Trumpian.

What happens: Mutual imports and exports are often transactional. The high role of trade as a vehicle for mutual understanding and peace and greater prosperity for all is gone.

Struggle and pro

This week, tensions between mutual struggle and pro-US relations became clear. The Biden administration presented an in-depth review of its trade policy on China, which was reversed by former President Trump. Eight months discussed at the White House: Trade policy towards China has largely been Trumpian. The broad tariffs on Chinese goods imported by Trump will remain the same for now. At the same time, Trump’s efforts to export more U.S. goods to China continue.

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Nearly two-thirds of China’s exports to the United States continue to suffer — almost zero before Trump. From onions to vacuum cleaners, from steel to nickel, Chinese goods entering the United States are subject to an average import tax of 19 percent under Python (before Trump it was 3 percent). Chinese counter-import tariffs against the United States are also in effect.

At the same time, Biden management continues to strive for maximum export earnings in the Chinese market. In early 2020, the Trump administration signed a trade-political agreement with the Chinese. ‘Phase 1’ Was invited. The Chinese promised to buy more U.S. goods, including soybeans and airplanes. Mutual import taxes reduced by a fraction. Biden wants to make the most of this deal from his predecessors.

Brittle balance

After a review of the White House led by Trade Ambassador Katherine Toy, it is now clear: The Trump era is not a breakthrough, but the beginning of a new, weaker balance between the two powers.

Trade policy in the 21st century in Washington and Beijing is not based on the goal of global free trade, but on a new business: the idea of ​​trade as a way to maximize one’s own economic and political profits. Part of this is to penalize the export of another (with taxation) and to force one’s own export at the same time (with ‘Phase 1’ contracts). The WTO rules for free trade are very limited.


Also listen to this podcast: What will change in international trade policy with President Biden?

The “new nature” of the US-China relationship is based on “hardening competition” and at the same time “deep mutual independence”. Wrote Recently the American think tank Brookings. You can see that tension in the recent statements of members of the Biden administration. Trade Ambassador Tai delivered one to China this week Talk on CSIS, Another think tank, traditionally “sees” state capitalist country tradeZero sumDynamics, where the gain of one represents the loss of another. “Unjust” Chinese competition would have destroyed 40 percent of U.S. jobs in the steel industry, while U.S. solar cell production would have lagged behind, as well as the semiconductor industry.

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Hard break with the Chinese? No, not even that. At CSIS, Toy opposed the idea of ​​”disintegration” of the United States from the Chinese economy. In the world economy, it is not “realistic” for two countries to “stop trading with each other.” Rather, a “reconnection” is needed, as are the “strong positions” of American companies in supply chains.

Fitness Trade Minister Gina Raimondo Recently discarded Also the ‘decoupling’ idea: ‘We want access to their economy, they want access to our economy’. Both Tai and Raymondo urged China to fulfill its promise to buy additional US goods. Figures from the economic firm PIIE show that China is lagging far behind in meeting ‘Phase 1’ deals. This year, China has so far imported $ 89.4 billion worth of US goods, instead of the agreed $ 130 billion. Raimondo recently complained that there were Boeing planes Not sold in China. Chinese airlines prefer, but “the Chinese government is on the way”.

President Xi Jinping’s new line has helped capitalism and free trade to capture the West while now augmenting the country’s wealth.

The economy serves the party

But now the boss Animal spirits Back in their cage: The economy ultimately serves the party. This system is increasingly controlled not only in business, but for example, you see in dealing with the dominant positions of wealthy individuals and large private technology companies. Look at the fortunes of Jack Ma, China’s richest man, who went missing for several months last year and is now in short supply. His Alibaba, with financial institution Ant, is controlled. As well as an equally powerful fee competitor Tencent. Countless other companies, including taxi company Didi and China Uber, should start sharing customer data with government agencies.

In this raw world of competition and government intervention, companies are under increasing pressure to help free trade after the war

In the new state capitalism under Xi, the Chinese government is behind every institution. Thus, both the economic demands up to this point and the power of the party are integrated. Such managed capitalism also includes guided trade, which is largely not companies, but the government that decides what exports and imports, Boeing, among others, now faces.

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In this raw world of economic-political competition and increased government intervention, companies are under pressure to help free trade after World War II. Heir to the WTO, GATT (which was partially established on a US initiative)General agreement on fees and trade Since 1947), vandalized by Trump. He blocked the appointment of ‘judges’ to the WTO, which severely hampered the key process of resolving trade disputes in the Geneva system. Trump, meanwhile, has imposed tariffs on China (and Europe) outside the WTO on “national security” grounds. According to Trump, the WTO gave China, which joined the organization in 2001, an opportunity to compete unfairly with the United States.

Initially, the West wanted China to integrate into a liberal economic world order through the WTO. That hope is now completely shattered in Washington. Now the question is: what is Joe Biden doing with the WTO? The U.S. delegation in Geneva recently confirmed that he would abide by Trump’s siege. The WTO said this week that it would play a “very, very important role” in the US-China trade relationship. In fact, the post-war rules-based international trade body is now rapidly paving the way for a power-based system.

Europe already has a long list of geopolitical topics where it needs to determine a new, independent position in the field of forces between China and the United States. As of this week, international trade could include security, technology, climate issues and energy politics.