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America’s Trade War with China

The United States could probably extract major concessions from China in a carefully managed confrontation on trading issues, because the Chinese don’t want a trade war with their best export customer. But the US can’t win the trade war that Donald Trump is planning to wage, and it kicks off on Friday.

That’s when the first chunk of Trump’s new tariffs on Chinese exports to the United States – a 25% import tax on $50 billion of Chinese goods – actually goes into effect, and Beijing retaliates with similar tariffs on $50 billion of American exports to China. That’s just a drop in the bucket in terms of the size of either economy, but it’s also just the opening salvo in the war.

Trump has already said that Chinese retaliation would be ‘unfair’, and that if China goes ahead he will slap a 10% levy on an additional $200bn of Chinese goods. (He subsequently reduced that amount to $100 billion, but who knows?) And China has already said that it would respond with measures of a “corresponding number and quality” if the US goes ahead with that.

This is where the real tit-for-tat escalation starts, and it’s hard to see how it can be stopped. Trump is trapped by his own pugnacious rhetoric, and China’s President Xi Jinping is trapped in two ways.

One is that Trump has already imposed big new tariffs on exports to the United States by the European Union and by America’s closest neighbours, Canada and Mexico. They have all responded by imposing similar tariffs on American exports of equal value.

Xi can hardly do less, even if China’s real interests might be better served by not responding in kind to the new US tariffs. He would not wish to be seen as weaker than Justin Trudeau.

On 21 June in Beijing, according to the Wall Street Journal, President Xi Jinping met a group of chief executives of American and European multinationals and assured them that China would definitely strike back at US trade tariffs. “In the West, you have the notion that if somebody hits you on the left cheek, you turn the other cheek,” Xi reportedly said. “In our culture, we push back.”

The other factor weighing on Xi’s decisions is that Beijing is starting to see American trade policy as part of a deliberate attempt to stop China’s emergence as a great industrial and technological power and a real peer rival to the United States. After all, there are undoubtedly people in Washington who would like to do exactly that.

Trump himself does not think in geo-strategic terms, but the Chinese may well see his actions on trade as inspired by those who do. If they come to that conclusion, their willingness to go all the way in a trade war may be greater than the financial experts think it is.

China’s exports to the United States amount to about 40% of its total exports, whereas only 5 percent of US exports go to China, so an all-out trade war between the two countries would obviously hurt China more. President Xi, however, is far more able to ignore the resultant job losses and higher prices than Trump is – especially because the Americans who were hurting worst would be his own political ‘base’.

Or, alternatively, China’s heavily indebted economy may turn out to be even more fragile than it looks – in which case a trade war could drive the country into a deep recession (with unpredictable political consequences at home), and drag the whole world economy down with it. That wouldn’t be much fun either.

There’s a reason that trade wars went out of fashion after the Second World War, and it wasn’t just because international trade tends to enhance prosperity overall. Back when trade wars were the normal way of doing business internationally, in the 16th-19th centuries, the European powers spent almost half their time at war.

The first great era of free trade, ca. 1870-1914, was also the ‘Long Peace’, when no European great power fought any other for almost half a century. That peace was destroyed by the First World War (so free trade does not prevent all wars), but the trade wars of the 1930s certainly deepened the Great Depression and facilitated the rise of fascism and a second world war.

And then came the Second Long Peace, from 1945 to the present, when once again free trade (or at least free-ish trade) reigns and the great powers never fight one another directly.

I’m not saying that Trump’s assault on free trade is going to lead us back down the path to great-power war again. Many other factors go into making such a catastrophe possible. But he may be putting one of the key factors back into place.
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To shorten to 725 words, omit paragraph 7. (“On 21…back”)

Dictators and Elections

Why do they bother?

Last week, Vladimir Putin, the Russian dictator, got himself ‘re-elected’ to his fourth six-year term by a 76 percent majority on a 76 percent turn-out. This week (26-28 March) the Egytian dictator, former general Abdel Fattah el-Sisi, will be ‘re-elected’ with close to 100 percent support, although probably on a very low turn-out. A quarter-billion people are being inconvenienced in order to wield what amounts to giant rubber stamps.

So why do they bother? Both dictators control the mass media in their countries, so they can be reasonably confident that most people will not be exposed to much criticism of their actions. They both can and do have people who oppose them arrested or killed (and Sisi’s enforcers also torture people). Yet they feel the need to go through these fake democratic elections in order to validate their rule.

The charade goes even further in many African countries. At some point in the past, often after popular protests or even a revolution, term limits were imposed on the presidency, but later the man in power (it’s always a man) realises that he actually wants to rule the country for life. Once again, however, abolishing the term limits is done with due ‘democratic’ decorum, generally involving a state-managed referendum.

China is the latest dictatorship to end term limits, making Xi Jinping in effect president-for-life, although it skipped the referendum part. Indeed, even China pretends to be a democracy, more or less, although the Communist Party must always be in the ‘leading role’ and there are no direct national elections. Why do they go through all this rigmarole, when the outcome is invariably a foregone conclusion?

Egypt’s pharohs felt no need to ask the people’s opinions on their performance as rulers. The kings of 18th-century Europe ruled by ‘divine right’, not by the popular will (and they didn’t actually ask God’s opinion on their performance either). But at some point in the past century, democracy has won the argument world-wide.

It has not won all the power struggles, and many dictators survive in practice, but they are all obliged to pretend to have popular support. This is a very big change from the past, when tyrannical power was generally based on a combination of religious authority and brutal armed force. Why, and in particular why now?

The anthropologists may have an answer. It is now pretty widely agreed in their profession that pre-civilised human beings almost all lived in bands where all adult men, at least, were treated as equals, and all had an equal right to share in decision-making. They even had well-established methods for making sure that nobody got too big for his boots.

These primitive ‘democracies’ all collapsed in the early stages of civilisation, when the huge rise in population (from dozens to millions in a thousand years) made it physically impossible for everybody to take part in the discussion about means and ends any more.

At the same time all the traditional social controls that kept ambitious people from seizing power failed too. You can’t shame people into respecting the opinions and personal freedoms of other people if the numbers get so big that you don’t even know them personally. Result: five thousand years of tyranny.

But give these mass societies mass media, and they regain the ability to communicate with one another. It turns out, unsurprisingly, that they want to be treated as equals again. The first successful democratic revolution happened in the American colonies in 1776 because printing presses were everywhere, and over half the population was literate.

Now mass media are everywhere, and even the dictators have to pretend that they are in power by the will of the people. It will be a long time before they actually disappear (if they ever do), but they already rule less than half of the world’s people, and they all have to go through a charade of democracy to legitimise their rule.

When the first results of the Russian election were coming in last week, a reporter asked Vladimir Putin if he would run again in six years’ time. “What you are saying is a bit funny,” Putin replied. “Do you think that I will stay here until I’m 100 years old? No.” But that’s what Robert Mugabe, Zimbabwe’s former ruler, would also have said when he had been in power for only eighteen years.

In the end Mugabe stayed in power for 37 years, and he was 93 and planning to run for another term when he was finally overthrown last year. Putin would be a mere 85 years old when he broke Mugabe’s record, although China’s Xi Jinping would have to live until he was 97 to do the same. I’ll bet neither one makes it.
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To shorten to 650 words, omit paragraphs 3 and 4. (“The charade…conclusion”)

Xi Forever

On Monday the Chinese Communist Party’s Central Committee approved a proposal that the country’s president no longer be limited to two five-year terms of office. On Thursday the National People’s Congress will rubber-stamp the change. And that will be the end of three decades of consensus-seeking collective leadership in the CCP. The god-king model is back.

President Xi Jinping has spent his first five-year term eliminating all his powerful rivals (generally on corruption charges), and now his victory is being enshrined by a change in the constitution.

The change does not mean “that the Chinese president will have a lifelong tenure,” said an editorial in the state-owned Global Times. But the paper also quoted Su Wei, a prominent Communist Party intellectual, who said that China needed a “stable, strong and consistent leadership” from 2020-2035. No need to wonder who that might be, although Xi Jinping would be 82 by 2035.

Shades of Mugabe, I hear you thinking, although Xi commands a country around a thousand times richer than Zimbabwe. He is now effectively president-for-life, or at least until things get so bad that the people around him decide they have to overthrow him, as Mugabe’s cronies eventually did. And although Xi obviously thinks being president-for-life is a good idea, it is not.

Being president-for-life certainly wasn’t a good idea for former Soviet leader Leonid Brezhnev, who was also effectively in power for life. In his case that was eighteen years. It became known as the ‘era of stagnation’, and only seven years after Brezhnev died in 1982 the whole Communist empire in eastern Europe collapsed.

Alerted to the danger of leaving somebody in power too long by the collapse of the Soviet Union, the Chinese Communist Party has kept its leaders on a short leash since the early 1990s. They got two five-year terms, no more, and they had to keep the support of other members of the Central Committee or it might even be just one term.

It has worked pretty well, as dictatorships go. There have been no more maniacs in power like Mao Zedong with his crazy Great Leap Forward and Cultural Revolution, which killed millions and cost the country two decades of economic growth. During the past quarter-century of cautious, consensus-based politics, China’s economy has grown about tenfold.

That pace of growth cannot continue no matter who is in power, but it is very important for the Party’s survival that the economy does continue to grow. There is certainly no evidence that one-man rule will provide that growth better than the existing system, so why (presuming that he is a loyal Communist) has Xi decided to overthrow it?

Mere personal ambition is one obvious possibility, but there is probably more to it than that. Xi’s father was Communist royalty – one of the founders of the Party, and at one time its General Secretary – and he himself was a ‘princeling’ who spent his early years in very comfortable circumstances. Then in 1966, Mao launched the Cultural Revolution.

Xi’s father was expelled from the Party and publicly humiliated. He himself was sent to the countryside at the age of 15 to “learn from the peasants”, and ended up in a work camp digging ditches. For some years he actually lived in a cave (although it had a door). But he survived, and he was eventually to allowed to join the Party, move back to the city, and go to university.

It all left a lasting impression on the young Xi. He knew that working hard, keeping your nose clean, and even rising to high rank cannot protect you in an essentially lawless one-party state if Party politics takes the wrong turn. So he really only had two choices: work to change the Party into a law-abiding entity (which is probably impossible), or take control of the Party and keep it forever.

He has chosen the latter course, and in terms of protecting himself it is probably the right choice. “I think he will become emperor for life and the Mao Zedong of the 21st century,” said Willy Lam, former Hong Kong democratic politician and now politics professor at the Chinese University of Hong Kong. And that is precisely the problem.

Xi no doubt justifies his actions to himself by believing that he is the indispensable man for China’s modernisation, but the cemeteries are full of indispensable men. The longer you are in power, the more poor or at least sub-optimal decisions you make – and when the passage of time makes the mistakes obvious, you are obliged to defend them although a successor could just drop them and move on.

Xi is not likely to “do a Mao” and unleash chaos in China. He is intelligent and he works hard. But the mistakes will accumulate nevertheless, and stagnation awaits.
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To shorten to 725 words, omit paragraph 4. (“Shades…not”).

All Quiet on the Climate Front

“Promoting coal at a climate summit is like promoting tobacco at a cancer summit,” said Michael Bloomberg, the former New York mayor, but President Donald J. Trump did exactly that. He sent a team of American diplomats and energy executives to the annual world climate summit, being held this year in Bonn, Germany, to extol the wonders of “clean” coal.

Bloomberg, now a UN special envoy for climate change, got it right. The audience at the US presentation heckled and mocked the presenters. Where people who were concerned about global warming once worried about whether the US government would dare to defy the fossil fuel lobby at home, the denialists now control the government – and it turns out not to matter all that much.

There are several reasons for that. One is that global coal use has gone into steep decline as the cost of renewable energy has dropped. It’s just not competitive any more, and China and India have cancelled plans for hundreds of new coal-fired power plants this year. Even in the United States, the share of electricity coming from coal fell from 51 percent in 2008 to only 31 percent last year – and US coal companies are going bankrupt.

A second reason is that Trump’s decision to pull the United States out of the 2015 Paris Climate Agreement has had zero impact internationally. The fear that other countries would also default on their commitments proved to be unfounded, and the United States is the literally the only country on the planet that does not subscribe to the treaty.

Indeed, Christiana Figueres, the UN’s chief climate negotiator, actually thanked Trump for his attempt to wreck the Paris deal. “It provoked an unparalleled wave of support for the treaty,” she said. “He shored up the world’s resolve on climate action, and for that we can all be grateful.”

Finally, Trump has been outflanked by a new alliance announced in Bonn on Monday that links the fifteen US states committed to strong climate action with the Canadian and Mexican governments in a continent-wide group that concentrates on phasing out coal power and boosting clean power and transport. Much of the US contribution to emissions cuts that Trump reneged on will be covered by these state-level American initiatives.

There are other causes for alarm, of course. There always are. After three years when global carbon dioxide emissions stayed steady, albeit at a very high level, they have started rising again. And there is an unexplained rise in methane emissions in the tropics, not caused by burning fossil fuels, that leads some scientists to suspect that one of the dreaded feedbacks is kicking in.

Feedbacks are the spectre at the feast. You can get everything else right, your emissions are going down nicely, and you are on course to stop the warming just before the average global temperature reaches two degrees C higher – and then suddenly, the whole global system goes into overdrive. The warming that human beings have already caused has triggered some other, natural source of warming that we cannot shut off.

The consensus among scientists is that the risk of triggering feedbacks rises steeply in the vicinity of plus 2 degrees C average global temperature, which is why the world’s governments have all promised never to exceed that target. But there could be some unknown trigger in the system that would set off runaway warming at a significantly lower average global temperature: the whole process, as they say, is “non-linear”.

So we are still living dangerously, and it is still uncertain whether we can ratchet down emissions targets fast enough to stop the temperature rise in time. But there are big changes in the offing that will make it easier to cut emissions: meat substitutes and lab-grown meat, electric vehicles, and rapidly falling prices for renewables like solar and wind.

There is also now a unity of purpose that was previously absent from the climate talks: the long struggle between the rich and the poor countries over who is to blame for the problem and who pays for the damage is largely over. And although President Xi did not come in person, China is definitely taking the lead.

Nobody in Bonn is celebrating the US government’s defection from the fight against climate change, but their panic is long past. The Bonn meeting is concentrating on writing the rules for measuring how countries are complying with the promises they have made on emissions cuts. They also need to figure out how to organise the five-yearly reviews at which the countries are supposed to adopt progressively higher targets for cuts.

When the conference closes on Friday, there will be no exciting new announcements of breakthroughs, but we don’t need that. The real breakthrough came in Paris in 2015, and the objective now is to keep the show on the road. So far, so good.
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To shorten to 725 words, omit paragraphs 5 and 9. (“Indeed…grateful”; and “The consensus…non-linear”)