18.04.2018 Author: Vladimir Terehov

The Boao Forum for Asia at the Prospect of the US-China Trade War


On April 8-11, the resort town of Bo’ao, situated on the Chinese island of Hainan, saw the regular economic Boao Forum for Asia (BFA). Let us note the increasing importance of this forum that today is called “the Asian Davos”. This time it was visited by both the former UN Secretary-General Ban Ki-moon (chosen as the chairman of the BFA directors) and the incumbent one, António Guterres.

The 2018 BFA was especially important due to the increasing global confrontation of the two leading global superpowers, that is, China and the US. Their struggle is becoming comprehensive, but lately it has manifested itself first and foremost in the sphere of bilateral economic relations, which is more and more often referred to as a “trade war”.

Let us remind you that the emotional charge at the latest Davos forum was defined by the catch phrase “the looming horror” even by keen and experienced experts. What is going on today between the two global leading superpowers (both on the whole and in the economic sphere in particular) is a good illustration of such moods.

However, the prospects of such a war looked quite feasible even during the 2016 US presidential election campaign. It was back then that the future US President Donald Trump claimed that he would tolerate “no further injustice” in the trade with China, which costs the US about $ 350 billion annually. The figure that Donald Trump exaggerated 1.5 times for some reason or other is impressive by itself.

The first cannonade of the (potentially very serious) trade war has already thundered. In the middle of March this year, Donald Trump signed a decree to impose additional duties on imported steel and aluminum, 25% and 10%, respectively.

This decree excluded Canada and Mexico (as the partners of the US as per the North American Free Trade Agreement (NAFTA)). Moreover, a small reprieve was granted for the key allies (Japan and the leading EU countries, which threatened counter measures).

This is how China (alongside Russia) found itself the main target of the aforementioned measures, its total loss is estimated to be around $ 50 billion.

In response to that, on April 4, the Chinese Ministry of Finance announced a 25% raise of the duties on 108 US-imported goods list items, including agricultural products, certain spirits, automobiles and civil aviation. In 2017, their sales turnover in China totalled the same figure, $ 50 billion.

“In response to this response,” on April 5, Donald Trump stated his readiness to raise duties on an additional range of the Chinese goods with the total volume of $ 100 billion. Experts mentioned the mutual “response” spiral which can spin until the moment one of the two world leaders “blinks first”.

On April 7, the Chinese daily Global Times published an op-ed article with a symbolic title “China should fight the trade war as it did the Korean War”. What they meant was, China is ready to incur material losses as much as it did during the Korean War of 1950-53. Back then, fighting the same enemy (with the USSR aviation support) China prevented the defeat of its ally, North Korea.

Incidentally, let us remind you that the Korean War image came to mind 2 weeks ago during the “secret” Beijing visit by the North Korean leader. Even back then, on March 25-27, the Beijing message was very clear: we are not starting a new war, we have no need for it. But we shall not retreat.

It seems that faced with the unequivocal Chinese determination, Washington was the first to “blink”. In late March, the US trade representative Robert Lighthizer stated that new duties would be introduced not before June this year. In his opinion, the 2-month reprieve will enable to discuss the bilateral measures for the US-Chinese trade to reach “a good format”.

Some experts saw a positive Chinese reaction to the US signal during the Chinese leader’s speech at the 2018 BFA. This seems to have been the point made by Xi Jinping stating that “China kept to the policy of encouraging foreign investment in the past, we are going to continue improving the investment climate”. We will enhance alignment with international economic and trading rules, increase transparency, strengthen property right protection, uphold the rule of law, encourage competition and oppose monopoly.
The Chinese leader paid a lot of attention to the approaches to the key foreign policy issues. It was reiterated that China would not accept the format of the “zero-sum” and “cold-war mentality”.

Beijing’s willingness to play the key role in the denuclearization of the Korean peninsula was mentioned; it was also suggested that Taiwan businesses should contribute to improving the relations between China and the rebel island. Let us note the increased attention paid by Washington to the problem of ensuring safety on Taiwan, as well as the situation on the Korean peninsula.

All of the aforementioned gave Washington the basis for a positive reaction to the speech by the leader of their main global opponent. US President Donald Trump expressed it in his habitually emotional way.

Finally, the welcoming address at the forum by the UN Secretary-General António Guterres attracted a lot of attention. He noted that he feels “the optimism of an Asia on the move, with the most dynamic regional economy in the world”. And it is indeed Asia (and definitely not Europe) which has the potential to stimulate global economic growth. Everybody will lose if this potential is not used due to the political whim of the weakening incumbent world leader. The trade war with China that he is provoking is already starting to affect the interests of other big countries, such as India.

After all, the Asian political and business establishment believes: let the biggest world superpower do what it likes on its own. However, it would be good to eliminate various “carrier strike teams” from the world politics. Why carry a big stick, if one is leaving the global economy? Build your “house on the hill” on your own and let the others see what will actually happen. What if there is really something attractive, setting a good example? Then put your patent on sale. But, “no hands”, please.

Vladimir Terekhov, expert on the issues of the Asia-Pacific region, exclusively for the online magazine “New Eastern Outlook.” 

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