In the name of trade

Lin Shaowen​ China Plus Published: 2018-04-21 11:25:56
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By Lin Shaowen

The ban imposed by the United States government on sales of hardware and software to Chinese telecom equipment maker ZTE has revealed the true nature of the trade dispute President Trump is waging against China in the name of reducing the trade deficit.

View of a signboard of ZET during an exhibition in Nanjing, Jiangsu Province. [File photo: IC]

View of a signboard of ZET during an exhibition in Nanjing, Jiangsu Province. [File photo: IC]

After two rounds of reciprocal warnings from both sides of possible tariff hikes on each other’s exports worth 200 billion U.S. dollars, we now see an exchange of “live-fire”. But whereas Beijing has targeted American dumping of commodity goods, citing WTO rules, Washington is using its domestic laws to attack the value chain of sectors involved in the “Made in China 2025” strategy, including ZTE.

The difference in the underlying approach of the two sides is clear: One is fighting unfair trade practices for fear of short-term market losses; the other is attacking the leading tech companies of its market competitor out of fear that it is losing its global digital supremacy.

Want to solve the trade imbalance? Narrow the import-export gap by selling more goods to China that meets market demand. American tech products are highly competitive and would easily attract buyers in a market of 1.4 billion people.

Concerned about unfair trade practices? There is a globally-accepted trade dispute mechanism at the WTO, whose predecessor, the General Agreement on Tariffs and Trade, the GATT, was set up by the United States and others decades ago. The United States remains a signatory state to this rules-based mechanism.

Worrying about a loss of intellectual property rights? In recent years, China has shown a steady improvement in both the legal framework for, and enforcement of, intellectual property rights protections. As for the corporate contracts that involve technology-for-market-access deals, that is a normal part of cooperative business investment. If rules have been violated, or there’s evidence of government interference in breach of market rules, then both sides can work to resolve those specific complaints.

None of this is to say that ZTE hasn’t had problems. That’s why it agreed to pay a massive fine, and why they engaged a U.S. law firm to conduct an independent investigation that immediately reported the issues it found to the United States government. But that proactive approach still failed to prevent the U.S. Department of Commerce from reactivating the seven-year ban. It is this disproportionate response that shows this dispute is, at its core, not about ZTE as much as it is about the “Made in China 2025” plan.

There is nothing wrong with a nation upgrading its high tech and value-added manufacturing sector.  Many countries have similar programs, such as Germany’s “Industry 4.0”. The problem lies in how other market players interpret these efforts, and how they respond.

The United States is the world’s high tech industry leader. But in the process of globalization, many American companies chose to shift some of their manufacturing to other countries in order to access cheaper labor and resources, and to protect their environment. Under the Trump administration, America has been determined to shore up employment and support the growth of American companies domestically. But the way to do that is not to throw up tariff walls to keep competition out, or try to stifle competition by imposing sanctions on companies like ZTE.

The solution for the United States is to encourage more of its companies to join the global value chain, and to participate in international trade in line with established global market rules. The current American strategy of containment for China is a strategy destined to create losses on both sides. That’s why IMF Managing Director Christine Lagarde is warning against protectionist measures. And it’s why UN Chief António Guterres is fearful that the Cold War might be coming back.

The world is nervously watching and waiting to see how the current trade dispute unfolds. Few people doubt that a protracted trade war would shatter market confidence and see cuts to growth and employment both at home and abroad.

(Lin Shaowen is a current affairs commentator for CRI. He has worked as CRI’s chief correspondent at the UN headquarters in New York.)

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LU Xiankun Professor LU Xiankun is Managing Director of LEDECO Geneva and Associate Partner of IDEAS Centre Geneva. He is Emeritus Professor of China Institute for WTO Studies of the University of International Business and Economics (UIBE) and Wuhan University (WHU) of China and visiting professor or senior research fellow of some other universities and think tanks in China and Europe. He also sits in management of some international business associations and companies, including as Senior Vice President of Shenzhen UEB Technology LTD., a leading e-commerce company of China. Previously, Mr. LU was senior official of Chinese Ministry of Commerce and senior diplomat posted in Europe, including in Geneva as Counsellor and Head of Division of the Permanent Mission of China to the WTO and in Brussels as Commercial Secretary of the Permanent Mission of China to the EU. Benjamin Cavender Benjamin Cavender is a Shanghai based consultant with more than 11 years of experience helping companies understand consumer behavior and develop go to market strategies for China. He is a frequent speaker on economic and consumer trends in China and is often featured on CNBC, Bloomberg, and Channel News Asia. Sara Hsu Sara Hsu is an associate professor from the State University of New York at New Paltz. She is a regular commentator on Chinese economy. Xu Qinduo Xu Qinduo is CRI's former chief correspondent to Washington DC, the United States. He works as the producer, host and commentator for TODAY, a flagship talk show on current affairs. Mr. Xu contributes regularly to English-language newspapers including Shenzhen Daily and Global Times as well as Chinese-language radio and TV services. Lin Shaowen A radio person, Mr. Lin Shaowen is strongly interested in international relations and Chinese politics. As China is quite often misunderstood in the rest of the world, he feels the need to better present the true picture of the country, the policies and meanings. So he talks a lot and is often seen debating. Then friends find a critical Lin Shaowen criticizing and criticized. George N. Tzogopoulos Dr George N. Tzogopoulos is an expert in media and politics/international relations as well as Chinese affairs. He is Senior Research Fellow at the Centre International de Européenne (CIFE) and Visiting Lecturer at the European Institute affiliated with it and is teaching international relations at the Department of Law of the Democritus University of Thrace. George is the author of two books: US Foreign Policy in the European Media: Framing the Rise and Fall of Neoconservatism (IB TAURIS) and The Greek Crisis in the Media: Stereotyping in the International Press (Ashgate) as well as the founder of chinaandgreece.com, an institutional partner of CRI Greek. David Morris David Morris is the Pacific Islands Trade and Investment Commissioner in China, a former Australian diplomat and senior political adviser. Harvey Dzodin After a distinguished career in the US government and American media Dr. Harvey Dzodin is now a Beijing-based freelance columnist for several media outlets. While living in Beijing, he has published over 200 columns with an emphasis on arts, culture and the Belt & Road initiative. He is also a sought-after speaker and advisor in China and abroad. He currently serves as Nonresident Research Fellow of the think tank Center for China and Globalization and Senior Advisor of Tsinghua University National Image Research Center specializing in city branding. Dr. Dzodin was a political appointee of President Jimmy Carter and served as lawyer to a presidential commission. Upon the nomination of the White House and the US State Department he served at the United Nations Office in Vienna, Austria. He was Director and Vice President of the ABC Television in New York for more than two decades.