They’ve certainly got its attention with Trump’s unprecedented phone call to Taiwanese President Tsai Ing-wen, and Secretary of State nominee Rex Tillerson’s confrontational comments on the South China Sea in his confirmation hearing on 11 January.
But is the new president’s naïve focus on a lopsided bilateral trade balance with China evidence that he doesn’t understand how the world economy functions in the 21st century? Or does it leverage his perception that many if not most Americans see China as a proxy for a relentlessly globalising economy that has eroded their wellbeing?
I’ve previously argued that Trump could orchestrate a cosmetic renegotiation of the Trans-Pacific Partnership. ‘Fixing’ the TPP would be considerably less vexing than substituting a bunch of more or less coordinated bilateral free trade agreements. Prime Minister Abe of Japan is eager to help.
A more audacious strategy for the Trump team would be to negotiate a grand bargain with China on the political–economic trajectory of Asia. Trump is no respecter of precedent. By undoing some gratuitous slights to Beijing by the Obama administration, it’s possible that Trump could reset the Washington–Beijing relationship in a positive way.
Sixteen nations have been negotiating the Regional Comprehensive Economic Partnership (RCEP) since 2012. It started as a proposal to bring order to a jumble of overlapping bilateral free trade agreements, but it has grown in scope and ambition.
Throughout, US trade policy officials have sniffed that the RCEP scheme is not really a trade agreement because its proposed compliance deadlines are flexible. They add that RCEP neither prevents official favouritism to state-owned enterprises nor meets 21st century norms on labour rights and environmental protection.
Maybe so, but if the TPP is dead, RCEP is the only game left in town.
If the Trump administration were to show friendly interest in RCEP negotiations it could reinforce the efforts of RCEP negotiating partners urging for higher standards of intellectual property protection and effective dispute settlement procedures. It could lend support to efforts to forge common rules of origin that will facilitate integration of supply chains across national borders.
Trump famously abhors multilateral trade pacts. But it might help if RCEP were understood as a building block in a much larger effort — the economic integration of Eurasia.
The Belt and Road initiative and the Asian Infrastructure Investment Bank (AIIB) aim to build Eurasia’s transportation, power transmission and communications infrastructure. What’s not to like about that idea in principle? China’s companies are expert builders of highways, high-speed rail, pipelines, ports, energy terminals and fibre optic lines. US companies have many of the same and complementary skills. And so, patently, do a host of multinational firms headquartered outside of the US and China. Working together to connect the dots across Eurasia could be a win for all concerned.
The Chinese economy is troubled by huge overcapacity in key industrial sectors like steel and cement. It has a huge hoard of foreign currencies. Beijing designed the AIIB and OBOR to create an outlet for both. It sees these initiatives also as the keys to unlock a supply of resources (oil and gas in particular) that its economy must have to keep growing. And, of course, China wants to prove its skill, build its stature and extend its influence.
The economies of Eurasia continue to suffer an infrastructure deficit, and there’s plenty of work to go around.
Why then shouldn’t the Trump administration consider supporting China’s OBOR scheme and joining the AIIB?
Integrating the economies of Eurasia and bringing them into the 21st century need not be a zero-sum game and the United States doesn’t have to be the captain of the team this time. Done right, OBOR could radically improve the welfare of a great many people in the continent’s vast middle. It’s a huge task, far too big for China alone, with or without help from the market’s invisible hand.
If Trump is serious about influencing China, Washington must bring some creative energy to the table in a way that engages Chinese imagination and allays its suspicion of US motives. Beijing could respond by confirming that its Eurasian integration vision is so vast and so audacious that it needs foreign partners and their skills to be part of it.
US negotiators’ goal should be pragmatic and constructive cooperation, shaped by a set of rules that level the playing field for all participants in the OBOR initiative. It will not be easy to get to ‘yes’ in a dialogue with Beijing about matters that will define the rest of the century. But the Trump presidency makes it seem more possible.
David Brown, a retired US diplomat, writes often on contemporary Southeast Asia. This article draws on material from a longer piece that was first published here on Asia Sentinel.
Thanks for an interesting analysis. I have a few questions.
Will Trump have the attention span needed to pursue such a complex set of negotiations?
Will he tolerate not being ‘the captain of the team’ with something like RECAP, OBOR, or AIIB?
Will tensions in the East/South China Sea remain low enough so as not to undermine any such dialogue, let alone serious negotiations, from taking place?
Will N Korea do something so provocative that these trade and other economic issues come to a standstill?
What will the other players do: Abe in Japan, South Korea, Turnbull in Australia, the other SE Asia countries, etc?
Time will tell.
Channeling 19th century analyst Lewis Carroll: “So many out-of-the-way things had happened lately, that Alice had begun to think that very few things indeed were really impossible.”
It should be obvious by now that the way Trump and company plan to help Russia is by focusing instead on China and stirring conflicts in Asia. We should be alarmed by this, and so should China that thinks Russia is its friend.
Congratulations on an eminently reasonable and positive proposal for all parties concerned. If Trump is equally reasonable and positive, this proposal could make a substantive contribution to a prosperous peaceful Asia and the world. However, the signals Trump has been sending out so far do not auger well. Each of us must do whatever she or he can to keep the pressure up for a good outcome.
Perhaps we cannot tell at this moment yet what Presidend Trump would do. I am afraid, though, his unilateral economic policy, as far as I am made to understand now, would not help much to streanthen US economy.
I am afraid political rivalry is missing in Mr. Brown’s analysis. Political rivalry is a reality, as much as economic cooperation, that should not be ignored or can be ignored at risk.
Chinese high-speed trains are 99% stolen from Japan’s bullet trains. It is what the CCP and the Chinese people call economic cooperation and co-prosperity.
“A quarter-century ago,” I wrote in the Asia Sentinel story that’s condensed here by EAF, “American automobile workers took sledgehammers to Toyotas. Then, US trade negotiators harangued Japanese counterparts on the perversity of Japan’s single-minded devotion to exporting its admittedly high-quality products, on one hand, and keeping out foreign goods on the other. . . . (American) trade hawks then were warning . . . that Japan was eating America’s lunch. . . . Ironically, now it’s Tokyo that’s most ready to partner with the US if Washington were to engage Beijing in dialogue on development goals and standards.”
Mr. Brown,
Thank you for your reply.
The Japanese government decided in 1953 to grow up automobile industry in Japan. It was not a theft.
The United States had large trade deficits with Japan in 1970s and 1980s.
“The closed Japanese market” was all newspaper and TV hype. It was as open or as closed as any other industrialized nation’s market. The big reason for the American trade deficits was overconsumption in America, as a few Americans knew at that time.
One drastic way for the new American President to cut down the trade dificits would be to reduce domestic consumption. But this would be a big trouble for the world economy because the world is now suffering from oversupply or underconsupmtion.
Everything is gigantic in China as I said in my comment on June Teufel Dreyer/China’s Tianxia: Do All Under Heaven Need One Arbiter?.
China had agreed with Japan that it could use the technology for the Japanese bullet train only in China and that it should not export high-speed trains thereby made.
But China made a few minor changes and began to export trains thus made, contending it was no infraction. Prof. Wassestrom’s Chinese logic of 2+2=5 need be modified by 2+2≠4 as I said in my comment on Jeffrey Wasserstrom/Trump Through Chinese Eyes.
Since Mr Brown writes occasionally on Southeast Asia, he should perhaps temper his enthusiasm for Chinese infrastructure construction by examining how well these skills have been employed in Indonesia.
A point addressed in my Asia Sentinel article but for space considerations omitted in EAF’s condensation: “China’s ambitious scheme is . . . problematic from a development perspective, unless Beijing raises its game. Its state companies have seemed to be tone deaf on respect for local cultures, labor rights and environmental protection. In too many overseas ventures, they’ve bribed big, bid low and done shoddy work. Conceivably the Chinese will learn as they go, and in time turn into a bulwark of global comity. Everyone else, and particularly the US, has reason to support such an evolution.
Thank you, Mr Brown, for your response. In my original draft comment, I referred to this article by a very experienced New Zealand journalist in Jakarta, but it disappeared for some reason in the final posting: http://www.scmp.com/week-asia/geopolitics/article/2053395/why-does-indonesia-cling-its-plagued-chinese-infrastructure.
Why blame China, when an Oxfam report, just released in Davos, shows that eight billionaires (five from the US) own more wealth than 3.6 billion people or half of humanity on Planet Earth?
The report exposes how big business and the super-rich 1per cent elites are fueling the inequality crisis by dodging taxes, driving down wages and using their power to influence politics. It calls for a fundamental change in the way we manage our economies so that they work for all people, and not just the 1per cent globalist elites.
“It is obscene for so much wealth to be held in the hands of so few when 1 in 10 people survive on less than US$2 a day. Inequality is trapping hundreds of millions in poverty; it is fracturing our societies and undermining democracy.”
“Across the world, people are being left behind. Their wages are stagnating yet corporate bosses take home million dollar bonuses; their health and education services are cut while corporations and the super-rich dodge their taxes; their voices are ignored as governments sing to the tune of big business and a wealthy elite.”
In December of 1991, the world was stunned by the collapse of the Soviet Union. The United States had garnered a peace dividend and it should have closed down Nato and the US garrisons in Germany and the UK.
Instead, the United States chose a different path and morphed into a Military Empire, with over 1,000 supply and military bases all over the world, the like of which the world has never seen before.
But history shows that all Empires like the Roman, Greek, Ottoman, Portuguese, Spanish, Dutch, French and British Empires fell, when the money ran out.
The US has wasted over US$6 trillion in worthless and endless wars in the last 15 years alone and the National Debt has just crossed the Rubicon, a breathtaking US$20 trillion, excluding the unfunded debts, covering long term liabilities on Social Security, Medicare and Medicaid, which were another estimated US$204 trillion in 2014, according to an economics professor at Boston University.
That excluded another US$6.5 trillion missing in the Pentagon and cannot be accounted for by auditors.
If Donald Trump carries out his campaign trail promises to lower taxes to 15per cent and then spend like a drunken sailor to replace the crumbling infrastructures across the United States, when 96 million people are not in the job market and 45 million people are surviving on food stamps, it is likely that in his first term alone the US National Debt could soar over US$25 trillion and even over US$30 trillion after his second term, if there is a second term.
However astute Trump was as a businessman, he should bear in mind the maxim that a country cannot be rich if it consumes more that it produces, let alone waging endless wars and that ALL past Empires fell when the money ran out.
According to the IMF, China is not a currency manipulator and she has the wherewithal to help the United States rebuild the crumbling infrastructures to create jobs but all bets are off if Trump tramples on the one-China policy and denies China access to her own territories in the South China Sea,which were colonized by Japan in 1939 but returned to China after WW2, in accordance with the terms of the Potsdam Declaration, signed by the US, UK and China.