Irwin argues that the most accurate comparison
from an American perspective is the War of 1812, which came out of a
trade war (a British embargo of France) and was fought at least partly
as a trade war (a British blockade of America) but which famously led to
pressure for decoupling from the British economy. And like the current
calls related to China, that was based on a bigger existential question
for the U.S.
In response, Washington began imposing higher
tariffs on British goods that grew into a feature of political debate
through the 19th century.
In Thomas Friedman’s analysis in the Times he
agrees with President Trump’s instinct that America needs to rebalance
its trade relationship with Beijing—before China gets too big to
compromise—but worries that both countries need to recognize the stakes
involved.
When China was admitted to the World Trade
Organization in 2001, “the rules gave it lots of concessions as a
developing economy,” he says. Now, we are working to define how the U.S.
and China can compete for the same 21st-century industries at a time
when our markets are totally intertwined.
For it to end well, the administration will need
to quietly forge the best rebalancing deal we can get and probably
can’t fix everything at once. And, we must move on, without stumbling
unthinkingly into a “forever tariff war,” Friedman says.
At the same time, China’s president, Xi Jinping,
will have to recognize that “China can no longer enjoy the trading
privileges it has had over the last 40 years — and that it can’t afford
America and others shifting their manufacturing to “ABC,”
Anywhere-But-China, supply chains.
He notes that China has become as the world’s largest manufacturer by far.
More recently have come “some changes too big to
ignore,” Friedman thinks. China now has a modernization plan that would
use heavy subsidies to make China’s private and state-owned companies
world leaders in supercomputing, A.I., new materials, 3-D printing,
facial-recognition software, robotics, electric cars, autonomous
vehicles, 5G wireless and advanced microchips — industries that compete
directly with “America’s best.”
As a result, its subsidies, protectionism,
cheating on trade rules, forced technology transfers and stealing of
intellectual property have become much greater threats. So, the
administration is seen as right about the competitive threat—but
probably wrong “that trade is like war.” Friedman worries that neither
side understands the difference.
He thinks we need to let China win fair and
square where its companies are better — but that it also must be ready
to lose fair and square, too. On this basis, Friedman argues that trade
can be mutually beneficial — but the shares can be distorted when one
side is working hard and cheating at the same time.
He also says the west could look the other way
when trade was just about toys and solar panels, “but when it’s about
F-35s and 5G telecommunications, that’s not smart.”
There’s more, he says. We now live in the age of
“dual use,” where “everything that makes us powerful and prosperous
also makes us vulnerable.” He cites a naval strategist who uses the
example of 5G equipment like that made by China’s Huawei can transfer
data and voices at hyperspeed and can also serve as an espionage
platform if China’s intelligence services exercise their right under
Chinese law to demand access.
But China has curbed competition against Huawei
in China to enable it to grow bigger, more quickly and cheaply. Huawei
then uses that clout and pricing power to undercut western telecoms and
also uses its rising global market dominance to set the next generation
of global 5G telecom standards around its own technologies.
Moreover, in a dual-use world, you have to worry
that if you have a Huawei chatbot in your home, an equivalent of
Amazon’s Echo, you could also be talking to Chinese military
intelligence, Friedman says. And, he agrees that when Huawei is
competing on the next generation of 5G telecom with Qualcomm, AT&T
and Verizon and becomes the new backbone of digital commerce,
communication, health care, transportation and education—values matter,
differences in values matters, a modicum of trust matters and the rule
of law matters. And, that gap is widening.
Either the U.S. and China find a way to build
greater trust or they won’t, in which case, globalization will start to
fracture, and we’ll both be poorer for it.
It has long been clear that the stakes are high
in these talks and that an agreement likely will be difficult. Thus, the
current “deeper dives” by well-regarded analysts suggest they may be
both more important and more difficult than previously understood and
that they clearly should be watched closely by producers as they
proceed, Washington Insider believes.