Sunday, September 15, 2019
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< view full issue: USA-China, cold war 21st century
Eva Perea

​Present yourself as weak when in fact you are strong

Professor at the Department of Business and Economics of the Abat Oliba University CEU

There continues to be much talk these weeks about the trade war that the United States has begun by imposing tariffs on imports from other countries, in particular, on Chinese steel and aluminium. In this way, continuous years of growth in world trade are broken, casting a shadow of uncertainty on the economy, the stock market, international relations and the entire global panorama in general.


El arte de la guerra



It is no coincidence that Trump is imposing these protectionist measures abruptly, but is part of a series of more general sequence of events. Protectionism, "Put America First," build a wall between the United States and Mexico, revile the European Union, defend a hard Brexit without an agreement, everything is related. You can say many things about Trump, but really, he is an example of consistency: a unadorned language, always informal, although the situation is tremendously formal, using social networks, often insulting and without refinement.


The problem is not only the impact of these measures: consumption will plunge probably in China and the US, as prices increase, and also worldwide backlash; stock markets losses due to volatility and uncertainty; an escalation of unprecedented reprisals, how it will end is unknown; probably a fall in jobs, probably most of them in the US itself, just the opposite of what Trump intended. Besides that, there is another qualitative element, more difficult to quantify, even to specify, but equally alarming: the feeling that there is no global order, that we are in the hands of a leader without forms or manners, that any day can dawn with unforeseen measures, crazy agendas, and that there will always be someone who supports him in Europe.


As an anecdote, the Trump administration, in organizing their trip to Europe, which includes two days in Ireland, has rented several limousines (which will probably never be used) worth a million dollars from a local funeral home. Trump and their own world.


The graph given below summarizes the different two worlds, two ways of understanding global trade: free trade, against protectionism.


Figure 1. Free trade against protectionism

Figura 1


Source: Own editorial team.


If there is something with a high degree of agreement among economists, it is in affirming that society gain significantly from free trade: open and without barriers or tariffs, world trade fosters economic growth and raises everyone's standard of living. This is to say, although it may have drawbacks, like any model, it is a more efficient system and also provides the best options to consumers.


In our society, we are familiar with everything that has to do with the United States, and even with Trump, whom we know or think we know almost intimately, including his tweets, his relationships, children and in-laws - all are familiar to us. On the other hand, China represents a country and a culture which is more distant from us and therefore much less familiar. To introduce the subject, it is significant that China in Mandarin means "The kingdom of the centre". From ancient times, the Chou people believed that their empire occupied half of the earth, surrounded by barbarians, and they have always had the concept of China as the glorious people in the centre of the world. Although they know that they have remained dormant for many centuries, they feel that their empire is returning to the place they deserve in history.


China currently represents the largest productive industrial nation in the world and the leading exporter of goods. It is also the world's fastest growing consumer market and the second-largest importer of goods. Moreover, China already has a middle class that exceeds 500 million people, and has managed to lift 300 million out of poverty in record time, never before recorded in history in history, and of course, is not going to throw these advances overboard, for protectionist measures.


Figure 2. United States-China trade relations

Figura 2


In thousands on millions of US $.
Source: USTR (United States Trade Representative)


Figure 3. Evolution of GDP (in current US $)

Figura 3


Source: World Bank


China could overtake US GDP by 2030, although this is still uncertain and difficult to predict. However, what is certain is that the US does not like at all that China and India are snapping at their heels. This much is clear. Some in China believe that the trade war is part of an attempt by the United States to slow down its growth, as it gets increasingly worried about China's growing influence in the world.


FROM CHINA'S VIEWPOINT


Much has been spoken from the western point of view, but with a people like the Chinese, with quite a strong national feeling, how did they feel about these US measures?


So far at least, in a much more restrained way: The Chinese Ministry of Commerce confirmed the last US tariff increase on its website. "The United States and China are expected to work together to solve the existing problems through the cooperation and consultation" it said in a statement. Analysts say that Beijing is being forced to present some good faith in the run up to the meeting between the two leaders in the G20 in Japan in June.


However, as Sun Tzu's Art of War says: "Let your plans be dark and impenetrable like night, and when you move, strike like lightning". It also prescribes: "Present yourself as being weak when you are strong and being strong when you are weak".


Perhaps, if these talks in June do not go well, China is leaving room to exert pressure in the future. The Chinese people are courteous, but without fear of confrontation: if they can talk, they will speak, but if they have to fight, they will fight.


The President of the People's Republic of China, Xi Jinping, a Chemical Engineer, married to the singer Peng Liyuany with a daughter, was born in 1953 in Beijing and their father endured imprisonment during the Cultural Revolution. It was characterized by trying to tackle major reforms in China, fight against corruption and its political signature is the "Chinese Dream": Xi Jinping said that young people should "dare to dream, work hard to fulfil dreams and contribute to the revitalization of the nation." According to the party's theoretical magazine, Qiushi, the Chinese dream means Chinese prosperity, collective effort, socialism and national glory.


A song that became popular in China goes: "If you want to marry, marry someone like Xi (Jinping), a man full of heroism with an inflexible spirit; No matter how much the world changes or how many difficulties await him, he will persevere and move forward." Donald Trump had better be prepared.

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