While the majority of the main capitalist countries are enjoying a modest economic upswing – small by historic standards, but the biggest since the crash of 2008 – there are very dark clouds accumulating on the near horizon. The threat to economic growth is political, in the form of the trade war being threatened by Donald Trump. Although it is mostly China that is in his sights, a trade war between the two biggest economies will inevitably have global repercussions. A massive expansion of trade was an indispensable component feature of the great post-war economic upswing and without that trade, the massive post-war expansion in production would not have taken place. Likewise, the threatened strangulation of world trade will have the effect of stopping the present economic upswing in its tracks.
To the horror of the ‘allies’ of the US, the White House is edging closer week by week to implement new tariffs against its trading partners.
Trump’s apparent determination to provoke a trade war with China can be seen in the complete failure of the US trade delegation to Beijing last week. Failing to come up with any compromises or agreement, it is now clear that the US delegation had no serious intentions in the first place. “If one sat down and made a determined effort”, the editorial of the Financial Times (May 8, 2018) remarked acidly, “it would be hard to come up with a more economically wrong-headed, diplomatically toxic and legally destructive negotiating position than that presented to China last week by a visiting US trade delegation…
“…Indeed, it is such an extreme set of demands that it is hard to avoid the conclusion that President Donald Trump’s administration, itching for a trade war, has produced an impossible agenda with the aim of goading Beijing into open hostilities…this list of demands is nothing but a destructive provocation.”
Remember, this newspaper is the foremost media representative of British capitalism and a world-renowned voice. But if one wanted to understand the background to the anger of the Financial Times editorial writers, it was only necessary to wait another day. Martin Wolf, a regular economic columnist in that newspaper spelled out in detail what the US delegation had apparently been demanding of China – and it was nothing less than a national humiliation. Wolf, writing from the standpoint of a supporter of the capitalist system, nevertheless expresses in a sober and unvarnished way what is at stake. We are quoting him here at some length, because no Marxist could have put the issues better.
When the US trade delegation presented its terms to Chinese officials in Beijing, Wolf wrote,
“China could not accede to its demands. The US administration is either so foolish that it does not understand this or so arrogant that it does not care. This may be a decisive moment for relations between the world’s two greatest powers.
US is judge, jury and executioner
The US side demands the following ‘concrete and verifiable actions’:
China is to reduce the US-China trade imbalance by $100bn in the 12 months beginning June 2018, and by another $100bn in the 12 months beginning June 2019.
China should also immediately eliminate all ‘market-distorting subsidies’ conducive to excess capacity. It will strengthen intellectual property and eliminate technology-related requirements for joint ventures. “Furthermore, China agrees to…cease the targeting of [US] technology and intellectual property through cyber operations, economic espionage, counterfeiting and piracy. China also agrees to abide by US export control laws.”
Moreover, China will withdraw requests for World Trade Organisation consultations relating to tariff actions on intellectual property. “In addition, China will not take any retaliatory action…in response to actions taken or to be taken by the US, including any new US restrictions…China immediately will cease all retaliatory actions currently being pursued.”
China “will not oppose, challenge or…retaliate against US imposition of restrictions on investments from China is sensitive US technology sectors or sectors critical to US national security”. But “US investors in China must be afforded fair, effective and non-discriminatory market access and treatment, including removal of…foreign investment restrictions and foreign ownership/shareholding requirements.”
By July 1 2020, China will reduce tariffs in “non-critical sectors to levels that are no higher than” equivalent US tariffs. It will also open access to services and farm products as the US specifies.
The agreement is to be monitored quarterly. Should the US conclude that China is not in compliance, it may impose tariffs or import restrictions. China “will not oppose, challenge or take any form of action against” any such US impositions. China will also withdraw its WTO complaint that it is not being treated as a market economy.
What is to be made of these demands? The call for a reduction of the bilateral deficits by $200bn (up from $100bn) is ridiculous…
…the idea that the US will be judge, jury and executioner, while China will be deprived of the right to retaliate or seek recourse to the WTO is crazy. No sovereign power could accept such a humiliation…
Both economically and politically, the US is going about this in the wrong way, not only because it is seeking to humiliate China, but because it is simultaneously waging commercial war on its potential allies.”
It seems clear that despite the enormous economic dangers of a full-blown tariff war with China – with direct or collateral damage to Japan, South Korea, Europe and elsewhere – Trump seems to be playing for the domestic political gains his ‘tough’ America-first policies are seeking.Nothing better illustrates the global crisis of capitalism and the fact that we are living in a period of unprecedented economic and political volatility, than Donald Trump’s drive for a trade war. When and if it does happen, the economic consequences will be incalculable and the political results spectacular.
In the turmoil and upheavals that are being developed by the capitalist system itself – not by workers – it will only be the socialist movement that offers a way out for the overwhelming majority of the population. The one percent are represented by people like Trump. The ninety-nine percent have nothing to lose and a world to win by ditching him and his mad system.
May 9, 2018
