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Dispute puts all economies in peril

By Daniel De Blocq Van Scheltinga | China Daily Global | Updated: 2019-06-03 09:22
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The trade dispute between the United States and China has taken a serious turn for the worse, and stock markets have reacted accordingly. The US has chosen to greatly escalate the dispute, which is broadly but incorrectly labeled a "trade war".

This dispute has nothing to do with trade alone, as proved by the recent US rejections of Chinese offers to buy more American goods, which would have reduced the trade deficit. This dispute is simply the opening salvo in what the US perceives as a much broader, long-term and strategic battle over global technological dominance.

That is why the US administration issued a statement in February emphasizing the importance of artificial intelligence: "Continued American leadership in artificial intelligence is of paramount importance to maintaining the economic and national security of the United States."

That is why in December the White House issued a news release focusing on the importance of science, technology, engineering and mathematics education, known as STEM, in the US: "The president's plan seeks to ensure that all Americans have access to quality STEM education and safeguard America's place as the global leader in STEM innovation and employment."

And finally, that is why the US has issued two new orders effectively forbidding the American private sector and the government from working with Huawei or ZTE, both telecommunications companies, and preventing Huawei from buying US components or software that it uses.

According to the Department of Commerce announcement, "Huawei is engaged in activities that are contrary to US national security." This view is quite different from that of many other nations across the globe. As French President Emmanuel Macron told reporters after the US pronouncements: "Our perspective is not to block Huawei or any company. Launching a trade or tech war vis-a-vis any country is not appropriate. It's not the best way to defend national security."

These actions, following US increase in import tariffs on Chinese goods on May 10, came despite positive results from the December meeting of the two countries' leaders in Argentina. And the US threat of additional tariffs on$300 billion worth of Chinese imports has not made resolution of the trade situation any easier.

The Chinese government acted with great calmness and restraint, even continuing with the planned trip to Washington by its negotiating delegation.

US consumers will of course feel the pain, notwithstanding the US administration's false claim that somehow China will pay for the tariffs, supposedly enriching the US.

Brett Biggs, the chief financial officer of Walmart, the largest retailer in the US, said, "We will do everything we can to keep prices low, but increased tariffs lead to increased prices." American farmers are also beginning to feel the pinch, with the number of farm bankruptcies in the Midwest rising rapidly due to the combination of bad weather and the continued trade tension.

One can only hope that pressure from US consumers and farmers will ensure that sanity will, at the end of the day, prevail. The two most important economic superpowers engaged in an all-out economic war will not only hurt themselves, but will have a depressing effect on the world economy.

As an African proverb rightly points out: "When elephants fight, it is the grass that suffers." There is no doubt if this goes on, it will soon put the smaller economies in peril.

Singaporean Foreign Minister Vivian Balakrishnan said during a recent conference: "Competition with China is inevitable, but it does not have to be a zero-sum game. Constructive competition should take place within the bounds of established international norms and an adherence to international law."

China is clearly prepared to wait until that realization prevails inside the White House.

The author is an adviser on China-related matters to both the private and public sectors. He is a Dutch national and permanent Hong Kong resident. The views do not necessarily reflect those of China Daily.

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