Trade representatives from the U.S. and China faced off in Washington on Thursday, two months after the leaders of the two countries agreed to resume trade talks during the G20 summit. So far, President Trump has been bullish when asked about the trade war with China; in March, he claimed that “trade wars are good and easy to win.” For anybody who is familiar with the fundamental differences between the central tenets in the cultures of China and the U.S., it’ll be anything but.
In the U.S., where individualism is valued above all else, the country is run from the bottom-up, perfectly exemplified by the startup culture zeitgeist of the Silicon Valley. In China, where collectivism is valued above all else, the country is governed primarily through a top-down approach, with the government regularly doling out generous government subsidies and support.
These opposing styles of governance have their upsides and downsides. With an emphasis on the individual, individual interests are put ahead of the collective, leaving room for more open conflict. As a result, it can be hard to pivot and conduct concerted pushes through government initiatives.
With a top-down approach, the importance of the leaders’ competence is pronounced. If all goes well, this approach can be highly fruitful, leading to an all-in allocation of resources towards a common goal. The caveat is that this policy amplifies failed leadership, manifesting events parallel to Mao’s catastrophic Great Leap Forward.
Another roadblock for the U.S. to hurdle is the stubbornness of the Chinese Politburo. Because the Chinese government extols stability and places the utmost importance on its image of legitimacy, any deal made with the U.S. won’t put them on a serious back-foot.
Currently, the United States has several misgivings towards China’s trade policies. China is not doing enough to curtail intellectual property theft and is, in many cases, facilitating it. China employs a policy called Forced Technology Transfer (FTT), which forces companies to share technology for access to the Chinese market. Additionally, unfair trade practices, China’s top-down approach and generous support for domestic enterprises undermine free-market principles.
Countries functioning in a top-down approach or boasting shady human rights records don’t usually lock horns with the United States, provided they’re on the “good side.” For example, no real action was taken against Saudi Arabia because of American oil interests, even in light of the Jamal Khashoggi murder. China is a starkly different case; it is a country that has the potential to threaten the status quo and become the future dominant global superpower.
Those who believe that the United States is winning the trade war posit that, as a result of tariffs imposed on Chinese imports, China is hurt by companies seeking to diversify supply chains with cheap labor markets in countries like Vietnam and Bangladesh, and that because China exports to the U.S. five times more than they import, the tariffs will have a more pronounced effect on China.
However, these points are only valid if China’s “Made in China 2025” (MIC 2025) plan fails. China’s MIC 2025 seeks to move China away from being the world’s source of cheap labor and towards producing higher quality goods and services, with concrete goals of raising Chinese-domestic core content in hyper-sensitive fields such as information technology, robotics and space from 40% in 2020 to 70% by 2025. If China can achieve their MIC 2025 plan, it will seriously threaten the United States’ technological advantage, and, as a corollary, further deteriorate the U.S.’ firm but loosening grip on their title as the leader of the world economy.
With China slated to overtake the U.S. in terms of GDP by 2030, there’s not much time for the U.S. to get its affairs in order to preserve global American influence. In the 21st century, the world will continue to become disproportionately defined by economic “soft” power as opposed to “hard” military might. Maybe it’s time for the U.S. to think about investing a greater share of federal funds into science (1%) and education (3%) as opposed to spending more on defense (16%) than the next ten countries combined.
Furthermore, much of China’s economic strength comes from its sheer population. If the U.S. wants the principles of the West to prevail, it needs to start focusing on building coalitions with countries, like China with the Belt and Road Initiative, not alienating countries and peoples with destructive wars and restricting immigration.
At the root of the problem, we can see that the trade disagreement stems from deep-seated cultural values. That being said, in the interest of the U.S. and maintenance of Western ideals, Trump is right: China’s rise needs to be curtailed. Only time can tell whether or not a trade war is the best route.
