China dream, Beijing, Wang Yi, Tibetans, Trade deficit, Trade war, STEM, weapon, US Congress, Seema Sirohi, Raisina Debates

US President Trump with President Xi during their bilateral meeting at Mar-a-Lago

Somehow the bio rhythms of India and the United States rarely seem to synchronise. From election cycles to policy formulations, the two are often out of sync. It makes doing things together harder and slower.

The lastest case in point: China. As the Americans finally awake from their long, collective dream about China growing into an honest stakeholder, India seems to be going into one of its cyclical sleep modes, imagining a mutually respectful relationship.

New Delhi has apparently promised Beijing it will not “intervene” in the Maldives in the hopes of building “strategic trust” after a tough year. This after forcing the Dalai Lama and the Tibetans to shift their celebration to Dharamsala to please the Chinese. The government note prohibiting senior officials from attending Tibetan functions that leaked will go down as one of the more clumsy moves.

Perhaps, a great Chanakyan trick will unfold in time but it’s bizarre to telegraph to the Chinese and the world what India will or won’t do in its own neighbourhood just to get a “reset” on unequal terms and of uncertain duration. This is not an argument for provoking China but bending backwards is also not necessary. The two schools of thought in the Indian foreign office – please them versus show them up -- can surely find a better blend.

Having truly gamed India’s neigbourhood, Beijing is increasingly brazen about squeezing New Delhi. At the recent meeting of the two commerce ministers, China promised nothing in real terms except obfuscation and platitudes. India’s trade deficit with China stands at $51 billion  -- almost half of India’s total deficit with all trading partners. Add to this the constant pressure on the border and pushback in international organisations.

 

The recent public announcement on the website of the Chinese Academy of Sciences that it had sold Pakistan a highly sophisticated large-scale optical tracking and measurement system is but one more example of Beijing’s swagger. No more hiding, denying and biding time.

In Washington, however, the rose tinted glasses are slowly coming off. The Americans are done expecting any concessions or fair play from China. Opinion across sectors, branches of government and business associations is gradually coalescing that China is a challenge, and a formidable rival. The Washington establishment is increasingly calling China out, and trying to restrict it from buying critical technology companies and punish it for stealing intellectual property.

How well it translates into policy in a town preoccupied with Russia and its sins and a myriad scandals starring President Donald Trump himself is anyone’s guess. But the three-decade long slumber, which began with Bill Clinton’s nod to China’s entry into the World Trade Organisation, the World Bank-IMF support and the think tank consensus that a market economy would ultimately bring liberal values, is well and truly over.

It’s remarkable how many strategic thinkers, especially those from the Obama Administration, are suddenly finding their inner anti-China voice. Trump’s relentless focus on China’s predatory policies during the 2016 election campaign has concentrated the mind.

 

Here’s a statement from the latest US Trade Representative’s report on China’s WTO compliance submitted to the US Congress in January: “It seems clear that the United States erred in supporting China’s entry into the WTO on terms that have proven to be ineffective in securing China’s embrace of an open, market-oriented trade regime.” The WTO rules simply aren’t sufficient to deal with a state-led economy. And the state’s role is increasing, not decreasing.

It’s hard to imagine such bluntness during Barack Obama’s tenure – the crucial eight years for Chinese consolidation of territorial claims and military and technological power. Obama’s only real attempt to counter China was crafting the Trans Pacific Partnership but even that didn’t get the push it deserved.

Trump fired his first salvo early last month with steep tariffs on steel and aluminium imports. He exempted several countries but not China. He then announced plans to slap tariffs on $60 billion in Chinese imports following an investigation into theft of intellectual property from US companies. The tariffs are aimed at Chinese aerospace, technology and machine industries.

China fired back with tariffs on 128 US products worth $3 billion. The list includes pork, fruit, wine, steel pipes among other products and is designed to signal not really retaliate. More will surely come and test Trump’s resolve. The dominance of Peter Navarro, a long-time China critic, in the White House will bolster presidential determination but the key lies in how much pain can Trump’s base suffer for some gain in the end.

The US trade deficit with China is humongous. It stands at a staggering $375 billion and in Navarro’s thinking it is a national security threat. He wants to end the era of “economic surrender.” And Trump believes he is “doing things for this country that should have been done for many, many years.”

It’s true that China has been winning the trade war against the world while protecting its own markets. So when China’s Premier Li Keqiang says, “No one will emerge a winner from a trade war,” what he really means is that disruption could end China’s winning streak.

 

In the wake of US sanctions, Li promised to “fully open the manufacturing sector” to foreign companies but it was Chinese speak for when “hell freezes over.” Remember Foreign Minister Wang Yi’s comment that if the dragon and elephant danced together -- a reference to India and China -- it could make eleven? Yes, it would for China.

If Trump holds firm and a trade war ensues, it’s not necessary that the US would lose, especially if the Europeans agree to work on a joint strategy. Some economists have suggested the US could impose capital controls which would severely impact China.

The other focus of US strategy is to put roadblocks in the way of China’s attempt to control critical technologies by forcing technology transfer, buying key companies, using cyber-theft and ultimately dominating the world of robotics, artificial intelligence, aeronautics and anything futuristic. Trump recently blocked a hostile bid by a Singapore company to takeover Qualcomm, a $100 billion US chip manufacturer. More such interventions are likely.

It’s an open secret how technology has leaked from US military labs through scientific collaborations. US defence experts note the rapid expansion of Chinese weapon manufacturing and how similar some of their systems are to US designs. Visas for Chinese students coming for science, technology, engineering and mathematics or STEM programmes could get more difficult in the coming years.

The Senate is also considering a bill called The Foreign Investment Risk Review Modernisation Act of 2017. It is written with China in mind. The idea is “to more effectively guard against the risk to the national security of the United States posed by certain types of foreign investment” and to modernise and strengthen the Committee on Foreign Investment. It covers any acquisition by a foreign company in which a foreign government has a 25% interest either directly or indirectly.

While awareness has taken a quantum leap, action and coordination with other countries will have to multiply manifold to make a difference.

The views expressed above belong to the author(s).

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