(1) On Thursday, U.S. time, the Trump administration raised tariffs on China goods. Whether the tariffs amount to USD50.0bn or that they were being levied on USD50bn worth of Chinese imports is not yet clear.
An investment bank wrote the following, this morning, in its daily missive:
Our economists note that news reports differ on whether the tariffs would apply to $50bn of Chinese imports, or whether they aim to raise $50bn in revenue. If it is the latter then they would apply to $200bn, or about 40%, of Chinese good imports. The only thing the USTR (US Trade Representative) mentions is that the unfair Chinese trading practices are estimated to cost the US economy at least $50bn / year. The extent of the tariffs is one uncertainty, another is the extent of the response by the Chinese.
The same research note made the remarks below:
Although the US decision elicited consternation abroad and calls from allies not to escalate to a trade war, Trump’s decision received cross-party support in the US from Senate Democrat Leader Chuck Schumer, who said Trump is “exactly right” and “I’m very pleased that this administration is taking strong action to get a better deal on China.” White House trade adviser Peter Navarro meanwhile told reporters the measures are a “seismic shift from an era dating back to Nixon and Kissinger, where we had as a government viewed China in terms of economic engagement… That process has failed”. This suggests that the decision has the weight of the US policy / geopolitical strategy establishment behind it, especially after Trump purged his advisors of pro-free trade voices and replaced them uniformly with China hawks, and is not simply a political tactic ahead of midterms or a Trump-specific impulse.
In a way, it made me think of how much Trump, the outsider, has managed to thumb his nose at conventional wisdom that binds both the major political parties in the United States. He is governing, for better or worse, as a true outsider. In India, in some respects, that is still missing despite the election of Mr. Modi in 2014 who, in a way, overcame the established leadership in his own Party to become its national leader but yet, he has not stamped his authority on policy.
(2) Only this morning, I managed to read the ‘Executive Summary’ of the report of the US Trade Representative on China’s WTO compliance. Of course, the media had featured this comment prominently. But, it is worth putting it out all over again:
Given these facts, it seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime. [Link]
Again, this is in line with what many sensible observers have written in the last two to three years.
(3) Notwithstanding the cop-out/finessing in the last paragraph of their article, Kurt Campbell and Ely Ratner, pretty much, vindicate Trump and they are also extremely consistent with the message of John Pomfret in his wonderful book, ‘The Beautiful Country and the Middle Kingdom’. The article could be behind a paywall.
Very brief extracts:
Nearly half a century since Nixon’s first steps toward rapprochement, the record is increasingly clear that Washington once again put too much faith in its power to shape China’s trajectory. All sides of the policy debate erred: free traders and financiers who foresaw inevitable and increasing openness in China, integrationists who argued that Beijing’s ambitions would be tamed by greater interaction with the international community, and hawks who believed that China’s power would be abated by perpetual American primacy. ……..
…….. Washington now faces its most dynamic and formidable competitor in modern history. Getting this challenge right will require doing away with the hopeful thinking that has long characterized the United States’ approach to China.
(4) A good friend had sent a speech delivered by Kevin Rudd, former Australian Prime Minister to the students at the U.S. military academy at West Point, earlier in March. It is worth the investment of time going through that speech. My reactions are as follows:
(1) Clearly, it is a Master class that the Indian political establishment needs to hear.
(2) Do Indian political leaders know the kind of intellectual concepts or are they capable of the intellectual thinking that Kevin Rudd attributes to Xi Jinping?
(3) Why has NITI-Aayog idea of inviting international experts to address Indian parliamentarians stopped? Was there anyone after DPM Tharman and Bill Gates? (Yes, there was Michael Porter on competitiveness of nations and states in May 2017)
(4) I was struck by his penchant for numerically layered arguments: Three characteristics, three aspects of the economic transformation post-2013 (or lack thereof) esp. with respect to private sector and then seven concentric circles.
(5) His explanation of how China chose to pursue the path that it is currently pursuing after deliberating upon alternative models is fascinating but equally it is silent on the contradictions and vulnerabilities of the model chosen eventually – single party dominance and encroachment.
(6) He has completely underplayed any discussion of China’s vulnerabilities or weaknesses or limitations. I would not say that it is due to a certain veneration or that he is in awe of China but, may be, because he believes that it is good to over-estimate an adversary rather than do the opposite.
(7) His discussion on the method that Xi has chosen to accommodate (or, suppress or ignore) the demand for political freedom after economic freedom is too thin or weak or almost non-existent. He says that Xi’s answer to that is ‘ideology’. Does not elaborate as much as he could have or should have.
(8) In the same breath, I can also add that his discussion of China’s economic limitations is too weak. May be, that is not his forte. He assumes that China will overtake American GDP and also mentions a time frame. But, risks to such a facile view are not mentioned, let alone discussed.
(9) What is clear to India is that there are no easy ways with China. In fact, I might even say that, in a sense, Xi’s ‘Presidency without limit’ makes many things clear. There is no equality or parity with China. They do not want India to have its own sphere of influence. They scoff at it. They may, at one stage, come to that understanding with the U.S. and that too, on their terms, later. But, they could rather have India as a supplicant and not as a strategic adversary or a partner.
India, proud of its civilisational past, now should know what its path is. It has to be prepared to confront and be prepared for confrontations through many flanks – economic, diplomatic and military and not be squeamish about its alliances with other democracies in the region and the USA – ‘the dance of the democracies’.
(5) Separately, I went through the testimony given by John Garnaut, former journalist and advisor to Prime Minister Malcolm Turnbull to the U.S House Armed Services Committee on March 21, 2018 although the document puts the date wrongly as March 21, 2008 (I wonder). That speech which comes with his article in ‘Foreign Affairs’ attached is, in some ways, a good counterpoint to the somewhat relatively benign way in which Kevin Rudd has painted the developments in China.