I’m glad that Tom Friedman is finally coming around on China. Better late than never, I suppose. His latest New York Times column has a number of reasonable passages, e.g.:
Trump’s instinct that America needs to rebalance its trade relationship with Beijing — before China gets too big to compromise — is correct. And it took a human wrecking ball like Trump to get China’s attention. But now that we have it, both countries need to recognize just how pivotal this moment is.
and
China kept insisting it was still “a poor developing country†that needed extra protection long after it had become the world’s largest manufacturer by far. Nevertheless, the relationship worked for enough U.S. companies enough of the time that the world’s biggest incumbent superpower, America, accommodated and effectively facilitated the rise of the world’s next largest superpower, China. And together they made globalization more pervasive and the world more prosperous.
And then some changes too big to ignore set in. First, China under Xi announced a “Made in China 2025†modernization plan, promising subsidies to make China’s private and state-owned companies the world leaders in supercomputing, A.I., new materials, 3-D printing, facial-recognition software, robotics, electric cars, autonomous vehicles, 5G wireless and advanced microchips.
I’m glad he mentioned “Made in China 2025”. That was the shot across the bow. Not only did it reveal that China’s predisposition to autarky had never gone away it was an example of a well-known business tactic in which you force a competitor into an unprofitable niche by cutting off his growth plan.
He continues:
As a result, all China’s subsidies, protectionism, cheating on trade rules, forced technology transfers and stealing of intellectual property since the 1970s became a much greater threat. If the U.S. and Europe allowed China to continue operating by the same formula that it had used to grow from poverty to compete for all the industries of the future, we’d be crazy. Trump is right about that.
Where he is wrong is that trade is not like war. Unlike war, it can be a win-win proposition. Alibaba, UnionPay, Baidu and Tencent and Google, Amazon, Facebook and Visa can all win at the same time — and they have been. I’m not sure Trump understands that.
But I’m not sure Xi does, either. We have to let China win fair and square where its companies are better, but it has to be ready to lose fair and square, too. Who can say how much more prosperous Google and Amazon would be today if they had been able to operate as freely in China as Alibaba and Tencent can operate in America?
and
I repeat: Trade can be win-win, but the winning shares can be distorted when one side is working hard and cheating at the same time. We could look the other way when trade was just about toys and solar panels, but when it’s about F-35s and 5G telecommunications, that’s not smart.
and especially:
In the old days, when we were just buying China’s tennis shoes and solar panels and it our soybeans and Boeings, who cared if the Chinese were Communists, Maoists, socialists — or cheats? But when Huawei is competing on the next generation of 5G telecom with Qualcomm, AT&T and Verizon — and 5G will become the new backbone of digital commerce, communication, health care, transportation and education — values matter, differences in values matters, a modicum of trust matters and the rule of law matters. This is especially true when 5G technologies and standards, once embedded in a country, become very hard to displace.
The tragic part of that is that there’s barely a scintilla of that has not been true for 30 years and it’s what perceptive and knowledgeable people have been saying all along while Tom Friedman and his ilk keep making predictions that have never come to fruition.
Welcome back to the fight. This time I know our side will win.
There was that piece from CNBC where Friedman and Bannon were talking about China and basically agreed… that was cognitive dissonance defined. (My more cynical self thinks Friedman finally noticed where the money and the votes are going).
Let’s see where the “conflict†goes. It may escalate to all out “trade warâ€, or it calms down.
The biggest unknowable factor is while Xi is saying he is ready for a “long March†over this – I don’t know if the Chinese people are. I have said it before; the Chinese people will sacrifice for their nation’s defense – but sacrifice to run a bilateral surplus to the US or to steal technology or really the root of it all – to keep the CCP in power?
Let’s put it this way. Huawei could easily dispel all accusations by open sourcing its software and hardware to the public – open source licenses exist so that while the IP is public and inspectable by anyone; only Huawei could profit from the IP. But it does not – the reader can infer explanations.
Why should anyone sacrifice anything so Huawei can keep doing so?
At this point I think the odds for the outcome are roughly
65% the U. S. settles for something far less than it should, probably just a slight expansion of Chinese imports from the U. S.—enough for Trump to proclaim victory and little more
30% it escalates far beyond anything that could reasonably be called a “trade war”
5% the U. S. gets real concessions from China on its hot button issues (Chinese imports, intellectual property, the Chinese banks)
Mataconis, meet Mr Friedman. Mr Friedman, meet Mr Mataconis……..
The outcome depends on the timeframe.
A fourth possibility is things more or less are where they are now.
Not escalated beyond trade, but not resolved (ie tariffs are left).
There are a lot of factors – but the 2020 election gives incentive on both sides to keep a lid on escalation but not resolve things.
It is interesting the factors pulling at Trump. A deal gives him something to sell; and prob relief for the farmers of his base.
Sticking to his demands gives him a differentiation vis a vis Biden; and he can campaign that he kept his promise (slapping tariffs on Chinese goods unless a deal was made)
But Xi knows, that like Obama’a deal with Iran, it’s only sure till the next election. Whatever deal trumps gets, if it’s not legislated into law by congress, and it won’t be, it’s temporary.
I think Gray’s point is a serious one. Just like Trump and the GOP undid the Iran deal just so they could take away one of Obama’s accomplishments, the Dems might make it a point to undo Trump’s accomplishment, assuming he does anything, just for revenge.
Steve