How To Legitimately Deal With China

On the topic of tariffs, I’ve been asked during client review meetings, and via email from blog subscribers, what other solutions might there be to the legitimate issues surrounding global trade.

Here’s essentially my response (taken from an email conversation yesterday morning):

China has a massive campaign currently underway they call the “Belt and Road Initiative”. Essentially, they are providing infrastructure and pathways from much of the rest of the world right to China’s business sector, and to its massive, growing (in number and incomes) middle class consumers. On the surface it’s potentially a huge win/win for China and the rest of the world. Under the surface, China is slowly supplanting the U.S. as the world’s benefactor and influencer. Trump’s antagonistic (populist [works politically at home]) approach to established institutions (NATO, the WTO, etc.), as well as to our allies/trading partners is exacerbating the latter.

One possible solution to the trade concerns would be to go at China on a coalition basis with the rest of the developed world (Japan, developed Europe, Australia, etc.) — all of whom share the same concerns — and threaten roadblocks in the “Belt and Road” if China doesn’t put an end to IP theft, etc.. Together, with our allies, I believe we could absolutely muster the influence necessary to establish such roadblocks. 

When there’s interest I’ll show the video below (or link to it in an email): 

Ironically, just last evening, CNBC published an article stressing that we should indeed be partnering with our allies on the issues surrounding China. It also touches on the ills of populism and protectionism. 

Here’s a snippet:   emphasis mine…

In managing trade practices surrounding China, Gardner said the U.S. should see the European Union as an economic ally.

“We should be working with the EU together more than we have even in the past in bringing more cases to the (World Trade Organization) … which clearly has problems in dealing with China. Instead we are fighting with the EU, ” he said, referring to U.S. President Donald Trump’s ongoing trade complaints about the bloc.

The ambassador also told CNBC’s Martin Soong that both the U.S. and the EU agree that Beijing should roll back certain practices, such as the forced transfer of technology from foreign firms to their Chinese partners, and restrictions on market access to overseas companies.

“We agree on 90 percent” of the issues about China, Gardner said. “What we should be doing is work with the EU more, not threatening the EU saying we’re going to put tariffs.”

Credit Suisse said in a report issued at its Singapore conference, that the rise of global trade disputes is “one of the most obvious results from the increase of populist governments.”

Citing World Trade Organization figures, the bank said 137 new trade-restrictive measures have been introduced between October 2017 and 2018, affecting $588.3 billion of trade. That’s seven times more than the year-ago period, it said.


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