Avoiding trade war amid global tension

In Business
April 15, 2024


Last week, US Treasury Secretary Janet Yellen embarked on her second official visit to China in less than a year, from April 4th to 9th. Her objective was to uphold Washington’s global dominance amidst the ongoing trade war between the two superpowers, particularly in light of the upcoming presidential elections later this year.

She sought to persuade Beijing to curb its growth, exports, and expansion plans in electronic vehicles (EVs), solar panels, batteries, and semiconductors. These technologies are essential not only for providing developing and underdeveloped nations with access to affordable and eco-friendly energy solutions but also for collective action against the escalating global climate change crisis.

However, the US views China’s initiatives in this regard as a threat to its international economic influence. It aims to persist in its policy of safeguarding American businesses, not only domestically but also globally, by advocating for free and fair competition as mandated by the rules governed by the World Trade Organisation (WTO).

President Joe Biden has rallied allies such as European nations, including the UK and Japan, as well as the Philippines and India, to exert pressure on China. The aim is to persuade Beijing to scale back its environmentally friendly export plans, instead of recognising Beijing’s positive contribution to global economic activities, accept fair competition, and foster a cooperative working relationship rather than adversarial dynamics.

According to a recent report by the global media outlet Reuters, US Treasury Secretary Yellen highlighted concerns about the global economic repercussions stemming from China’s surplus manufacturing capacity. This issue took centre stage during four days of economic meetings with Chinese officials.

In remarks to a group of about 40 representatives from the American Chamber of Commerce in Guangzhou, Yellen highlighted that China, being too large to rely solely on exports for rapid growth, would benefit from reducing its excess industrial capacity. This overcapacity puts strain on other economies, she added.

During her visit to Beijing, Chinese Premier Li Qiang conveyed to Yellen that the two countries should strive to be partners rather than adversaries, as reported by CGTN.

Li, as reported by the media outlet, expressed hope that the US would adhere to fundamental market economy norms, including fair competition and open cooperation. He unscored the importance of refraining from politicising or securitising economic and trade issues and urged a balanced, market-oriented, and global perspective on production capacity.

Chair of the Global Silk Route Research Alliance (Think Tank), Prof Engr Zamir Ahmed Awan, speaking to The Express Tribune, suggested that Yellen’s visit to China would likely have minimal immediate impact on the long-standing, complex relationship between the two nations. He speculated that changes in US leadership following the upcoming presidential election might gradually ease tensions. President Biden’s efforts to counter China’s rise, Awan noted, are largely geopolitical and often at odds with WTO regulations.

Research and Media Fellow at the China International Press Communication Centre (CIPCC), Muhammad Zamir Assadi interprets Yellen’s visit as partly driven by political motives ahead of the US presidential election.

He criticised the US for unjustifiably attempting to restrict China’s role in global growth instead of acknowledging and embracing it. Assadi stressed the importance of adhering to WTO regulations in global trade and advocated for mutual cooperation to enhance their influence in world markets.

As reported by Reuters, during the conclusion of four days of meetings aimed at urging Beijing to curb excess industrial capacity, US Treasury Secretary Janet Yellen cautioned China against allowing new industries to be overwhelmed by Chinese imports.

During a press conference, Yellen said that President Joe Biden would not permit a recurrence of the “China shock” from the early 2000s, which saw a surge of Chinese imports devastating approximately 2 million American manufacturing jobs.

At the outset of her visit, Yellen extended friendly gestures. According to AFP, the US treasury secretary and Chinese premier struck an optimistic tone on US-China cooperation, although Yellen acknowledged the necessity for candid discussions.

Yellen underscored to Li, upon her arrival in Beijing from Guangzhou, that the US-China relationship can progress only through direct and transparent communication.

In response, Li welcomed Yellen, expressing China’s sincere desire for the two nations to be partners rather than adversaries. He noted the keen interest of Chinese internet users in the details of her trip, indicating their expectation and hope for the continued improvement of China-US relations.

Awan further highlighted the enduring trade relationship between the superpowers, spanning over four decades. Initially, the US enjoyed a surplus in exports to China, holding sway in global trade dynamics.

However, China later ascended as the world’s second-largest economy, augmenting its exports to the US and bolstering global trade through a low-cost, high-quantity production model.

The US struggled to counterbalance Chinese growth, fearing Beijing’s potential dominance in both local and global economies.

President Obama initiated policy measures to address Chinese economic expansion. Subsequently, President Trump escalated tensions with heated rhetoric, yet his efforts to win the trade war, including imposing new tariffs on Chinese imports and banning Chinese tech firms on national security grounds, yielded limited success.

President Biden’s administration has intensified its political efforts by rallying allies against China, aiming to curtail its growth. China, however, remains committed to peaceful progress – the US cannot dictate its actions. Washington must recognise Beijing’s emergence as a superpower, signalling a shift from a unipolar world.

Media Fellow Assadi from CIPCC highlighted China’s contributions to combating global warming through the production of low-cost, environmentally friendly EVs, solar panels, batteries, and semiconductors. The US should acknowledge and support China’s efforts instead of obstructing them, he said.

Assadi predicts that US tactics will have minimal impact on global economic growth, given China’s expanding share, currently at 30%, which continues to boost the global economy. Additionally, China’s introduction of new productive forces, including cloud computing, big data, 5G internet, robotics, IoTs, high-end manufacturing, and AI, positions Beijing for greater influence in global trade.

The US-China trade war commenced in 2018, with the US imposing $550 billion in tariffs on Chinese imports, prompting China to retaliate with $185 billion in tariffs on US imports. This conflict has contributed to inflation and negatively affected livelihoods worldwide, resembling another Cold War scenario.

THE WRITER IS A STAFF correspondent

Published in The Express Tribune, April 15th, 2024.

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