A Turning Point for U.S. Economic Leadership in Asia? | Wilson Center

A Turning Point for U.S. Economic Leadership in Asia?

Fears of the latest G20 meeting in Buenos Aires collapsing were unwarranted. Unlike the APEC meeting in Papua New Guinea in November which failed to come up with a joint statement among the member countries, the G20 were able to unite in calling for fair and sustainable development. In fact, the G20 meetings actually exceeded expectations insofar as a truce was seemingly reached between the United States and China. In hindsight, however, the G20 summit of 2018 may actually be cited as the beginning of a greater schism among member countries and a potential unraveling of the group. That, however, may actually better reflect the growing divide between countries over not just trade rules, but also data protection, innovation, and development of technologies.

The Trump administration has never been able to gain much international support for making the reduction of trade deficits, particularly its singular focus on the deficit in goods rather than in the service sector. Yet the White House’s unwavering determination to call Beijing out on its unfair trade practices, and calling China out for its violation of intellectual property rights, forced technology transfers, and protection of its state-owned enterprises have been welcomed by the international community. In fact, the Trump administration’s unwavering position regarding unfair Chinese trade practices have led to a greater willingness to challenge Beijing head-on not just in the United States, but worldwide as well.

In fact, the Trump administration’s unwavering position regarding unfair Chinese trade practices have led to a greater willingness to challenge Beijing head-on not just in the United States, but worldwide as well.

The arrest of Huawei’s senior executive Meng Wangzhou in Canada only days after the seeming trade detente between the United States and China would have been unlikely under previous U.S. administrations. Indeed, a market sell-off after the arrest of the Chinese technology group’s senior official makes clear that anxiety about attacking Beijing for violating international rules, in this case for violating sanctions on Iran. But nearly two years since Donald Trump came into office, it is becoming more apparent that even though there is much concern about how the administration communicates and executes its trade policies, there is a growing global consensus that China’s trade practices not only jeopardize U.S. security, stability worldwide as well. The administration has been able to garner broader international support by identifying China not merely as an economic rival, but as a threat to global security.

Should Washington be able to follow through and continue to insist on China to reciprocate in kind the access it has in doing business outside its own borders to other countries, it would reinvigorate the U.S. position as a global economic leader. There are, however, two major hurdles that would get in the way for the United States to be that leader. First would be the White House’s continued focus on reducing its bilateral deficit with China and insistence on Beijing buying more U.S. agricultural produce in particular. Forcing China to purchase more U.S. made goods undoubtedly appeals to supporters of America First at a time when the White House is eyeing for major wins ahead of the presidential elections in two years’ time. Yet it fails to address the fundamental, long-term challenge that the United States and indeed all major economies including Japan and the European Union face in dealing in dealing with China. Beijing’s industrial policies show no sign of backing down from technology transfers, and the Huawei case has made clear the security risks some Chinese technology companies can pose in the telecommunications infrastructure and beyond. Indeed, Japan, Australia, and New Zealand have already followed the U.S. lead in banning Huawei equipment.

But as the underlying threat of China’s economic strategy becomes more apparent...there will need to be a clearer distinction between attacking the Chinese Communist Party and the people of China.

The second hurdle for the United States to reinvigorate its position as the standard-bearer of economic rules in Asia lies within Washington and its own diplomatic skills. The president’s blunt tweets and incendiary off-the-cuff remarks have strained long-standing U.S. allies. But as the underlying threat of China’s economic strategy becomes more apparent, especially in critical fields such as information technology and data, there will need to be a clearer distinction between attacking the Chinese Communist Party and the people of China. In his speech highlighting the China threat in October, Vice President Mike Pence repeated reference to the Chinese Communist Party in an effort to distinguish his attacks against the CCP from that against the Chinese people. That effort should be lauded and continued. After all, the ultimate objective of the United States and other countries is to create more opportunities for growth worldwide, and avoid a broader conflict that would antagonize the Chinese people against the global order.

China’s economic expansion over the past decade has been nothing short of breathtaking. What the world does not want is to challenge or stop its growth, which would be a futile exercise in itself and at worst, lead to a broader conflict between the world’s two largest economies. The latest dispute regarding Huawei offers an opportunity for Washington to champion global values that would ensure fair trade and allows the White House to spearhead a coalition of like-minded countries to protect the rules-based order. But the administration must not lose sight of the fact that this is as much a political issue as much as it is an economic one, and continued, constructive, and coordinated efforts will be critical to ensure that rules to govern the technology industry will not lead to broader conflict.

Follow Shihoko Goto, senior associate for Northeast Asia, on Twitter @GotoEastAsia.

The views expressed are the author's alone, and do not represent the views of the U.S. Government or the Wilson Center. Copyright 2018, Asia Program. All rights reserved.