Superpower Showdown — trading blows in a new cold war

Superpower Showdown — trading blows in a new cold war

“The only fucking arbitrator I trust is me,” US trade representative Robert Lighthizer once told US business executives. The shunning of multilateral systems and the belief that America, having not had a fair hearing on its many grievances with China, must now act aggressively to restore economic justice for itself is at the heart of Trump administration trade policy. 

Central to this anger is China’s accession to the Geneva-based World Trade Organization in 2001, which unleashed a flood of cheap imports on to the US. For hawks like Lighthizer, who warned in 1997 that China’s WTO accession would kill every manufacturing job in America, Washington’s current scuffles with Beijing have been a long time coming. Superpower Showdown, by Wall Street Journal reporters Lingling Wei and Bob Davis, grounds the peculiar and erratic fights of the Trump era in the 1990s and early 2000s of Bill Clinton’s administration, when China expanded economically and persuaded America to let it join the global trading order.

Both Washington and Wall Street’s positions have since grown more complicated. Clinton was easily won over by business, which lobbied furiously in the early 1990s to stop the president from being too hard on Beijing over its repression of dissidents — Tiananmen Square was still a recent memory. Later, corporations such as Boeing, AT&T and General Electric poured dollars and time into twisting arms in Congress to back China joining the WTO.

But by the time of the Trump administration, something had changed in corporate America, and Beijing found it could no longer rely on US business to argue its case in Washington. Companies had become increasingly disgruntled by China’s slow progress in opening key sections of its markets, such as technology and financial services. Several companies complained that their patented technology and intellectual property was not only being taken by Chinese competitors, but that the dispute mechanism only made things worse.

The cost of China’s joining the WTO had also become more apparent. While big US corporations could afford to do business and manufacture in China, smaller companies struggled with the influx of cheap Chinese goods to the US. The now 75-year-old Robert Cassidy, the US’s chief negotiator at the time, takes a break from raising orchids to tell readers he is disappointed with what he achieved in his negotiations with China over the WTO: “benefits went to business, not to labour.”

Enter Donald Trump, whose loyalties are in conflict. Is he Wall Street Trump or Blue Collar Trump? The political calculus shifts daily — should he most please business and donors, or the low-paid workers in the agricultural and manufacturing states most likely to elect him? The division is not only at the heart of his dealings with China, but at the heart of his presidency. The book repeatedly points out that while Lighthizer wanted big, structural economic reforms from Beijing, as the election date approached Trump wanted a win, and more agricultural sales to China.

Much of the to-ing and fro-ing over the administration’s China policy is the result of misreadings and miscalculations on both sides, and of constant White House power struggles. On the one hand are the protectionists, led by trade adviser Peter Navarro and the lower-key Lighthizer. On the other hand are the globalists, headed up by Treasury secretary Steven Mnuchin and former top economic aide Gary Cohn.

At the heart of the trade war, the authors argue, is America’s fear that China will eclipse the US technologically and militarily

Neither side has quite won. Navarro, referred to by Trump as “my Peter”, escapes several attempts to sideline him. “It’s like fucking Game of Thrones around here,” he reportedly complained in 2017, after an episode of being cloistered off in an office across an alley from the White House at the behest of former Goldman Sachs chief Cohn.

As the trade war wore on and Trump’s tariffs escalated, it became clearer that the president’s base was being hurt. Duties collected from China are used to help stricken farmers, now subject to retaliatory tariffs from Beijing. In a poll of voters in the electoral battleground states of Michigan, Minnesota, Pennsylvania and Wisconsin during autumn 2019, a majority said tariffs were hurting their families. It becomes clearer, too, to both Lighthizer and Mnuchin that Washington will not easily get the economic reforms it wants from Beijing.

The book argues that the animosity created by this trade war, which has spilled over into national security issues, is here to stay. The authors write that by the time the first portion of a deal was signed in January of this year, Trump was viewed by Beijing as just another bullying US president, causing China to cleave more closely to its state-led economic model. Even as the US accuses the telecoms company Huawei of being a national security risk, the authors quote an executive at China Mobile as saying the trade war has only served to boost Huawei’s popularity in China, at the expense of US companies. If the heart of the trade war, as the authors argue, is America’s fear that China will eclipse the US technologically and militarily, the phase one deal has not done much to bar the way.

Superpower Showdown, by Bob Davis and Lingling Wei, Harper Business, RRP$32.50, 480 pages

Aime Williams is the FT’s trade reporter

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