[SCMP Column] Into the Mid-terms

November 03, 2018

You might have noticed over the past two years that I have taken a consistently dim view of Trump’s trade policies, and have taken many swipes at the sillier elements of his tariff war. Some readers as a result have complained that I am a biased China “poodle”, blind to obstacles Beijing puts in the way of international companies trying to trade with or invest in the Mainland.

So let me be clear. The US is significantly more open to trade and investment than China, and is likely to remain so for many years, whatever the costly consequences for US consumers of Trump’s “America First” policies, or the harm Trump’s swashbuckling administration does to the US’s reputation for reliability and trustworthiness in trade.

Why then do I rant so against Trump and his team, and turn a blind eye to the unreasonable obstacles Beijing continues to put in the way of good international companies trying to do honest business on the Mainland? There are at least three good reasons.

First, there is the “direction of movement” issue: China, starting from a condition of impossible impenetrability in the 1970s, has moved steadily in an opening direction for 30 years, and continues to do so. Not as fast as most of us would like, but at least consistently in a positive direction. By contrast, from being the world’s champion for openness and transparency and the leading advocate for the merits of trade liberalisation, the US has gunned jarringly into reverse, regardless of the self-harm and the harm to other economies worldwide.

Second, the simple hypocracy of the US position sticks in my craw. I know I should be calm and more mature, since I have consistently over three decades listened to government officials worldwide preach to me about the perfidy of foreign companies, which would never succeed against their plucky, honest, hard-working local companies were it not for their conniving corruptness. There is not a business chamber worth its members’ fees that does not insist that their brilliant and innovative local companies would be invincible were it not for unfair obstacles and devious tactics deployed by foreign competitors.

Behind Trumps’ sanctimonious victimhood is just such a presumption, and it is hypocritical nonsense. The truth is that all economies – including the US – have their peccadillos, their devious tripwires, and their conniving local companies keen to exploit local loyalties and relationships for all they are worth to fight off foreign competitors.

Having watched and listened to US trade negotiating teams over three decades bludgeon foreign governments into submission in so many areas of trade and investment liberalisation in the interests of mighty US multinationals, it is surreally nauseating to listen to Trump’s trade team suggest their predecessors had been naïve patsies all this time. And it does a dreadful disservice to a generation of smart, dogged and creative negotiators who have conscientiously served US interests so well to open the world’s markets to their goods and services.

The third factor that irks me so is the blizzard of falsehoods on the basis of which Trump’s tariff war – and the wider US war on China – is founded. I know this is part of the “entertaining distraction” tactics that has allowed him to utter a myriad falsehoods without ever being brought to account, but it is deeply depressing to see the systemic deployment of such cynical tactics, and reflects badly on US citizens who should know better than allow themselves to be mesmerised by the showmanship at the heart of any successful con-man’s repertoire.

It is untrue that China has reneged on the commitments it made when it joined the WTO in 2001. It is true that China has given preferences to its local and state-owned enterprises, retains high barriers to inward investment, imposes tough technology transfer rules, and has frequently failed to respect intellectual property rights.

But guess what? Unsavoury practices in such areas still largely fall outside the scope of the WTO’s rulebook (shame on the WTO for failing to maintain the pressure for continuing liberalisation in such areas after 1994), and are practiced by large numbers of other important economies (including the US). It is true we need progress in liberalising in these areas, but these are not sins being committed by China alone, and need to be tackled multilaterally, at the WTO level.

Anyone who has found themselves blocked from selling products or services in the US because of the Buy America Act or national procurement rules will be familiar with the justification: most purchases made under the Act are made by State governments or agencies – which are not subject to the WTO rules because those rules only apply to Federal laws and regulations. How, then, can we complain when countries like China learn from the US example, and protect large parts of the economy from foreign competitors by making contracts subject to provincial regulations rather than national ones?

The coming week provides a moment of truth. At this point, many can blame the recent erratic and harmful path of US trade policy on Trump alone, and the trade team he has drawn around him. But if voters endorse him in next week’s Senate and House of Representative votes, then it will be clear this dangerous xenophobic mood of victimhood is not the fault of Trump alone.

As the Mid-term election results begin to emerge, I will be flying down to Port Moresby and this year’s APEC Leaders’ meeting. Trump himself will not be going, but the election outcome will influence powerfully the shape of the APEC discussions.
A humbled Trump administration (is such a thing conceivable?) would doubtless lift the mood. Xi Jinping would be given his chance to put substance behind China’s unsubstantiated commitments to opening up, and to multilateralism.

A Trump vindicated would cast a dark cloud, and point towards six gruelling years ahead, not just for China, or Asia, but for the entire global economy. It would test the mettle of all those who believe the liberalisation championed since the 1944 Bretton Woods agreements has in net terms been a source of great good for most people worldwide. These are such interesting times.
David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view. Opinions expressed are entirely his own.

[ Back ]