Saturday 25 August 2018

US-China trade war will most hit Europe (Pakistan Observer)

Geopolitical Notes From India
M D Nalapat

Donald Trump is under attack by the Atlanticist establishment across both sides of that once mighty ocean because of the realism he is seeking to introduce into US foreign policy. Aware that the commercial future of the US is much more linked to Asia than to Europe, President Trump has not hesitated in saying that Europe is his Number One target. Although the trade dispute between two strong leaders, Xi Jinping and Donald Trump, is seen as being between the US and China, in reality it is likely that European interests will be most affected as a consequence of the present trade war between Beijing and Washington. For there is no doubt that the charming manners and diplomacy practiced by the European powers has led to a situation where China first looks to Europe rather than to the US for hardware and to Europe rather than from India for software.
During any dispute, the European powers have refused to take a stand that favours China, and the same is true for the US-China trade war now playing out. Instead of backing China against protectionism by the world’s biggest economy, several European countries are seeking to gain from the battle by replacing the US as the supplier in China and China in the US. At the same time, China is by far the most important market for the economic workhorse of Europe, Germany. However, this did not stop Chancellor Angela Merkel from preventing the Greek government from accepting a Chinese economic lifeline and forcing Athens to instead be dependent on the rest of Europe for assistance to ride over the payments crisis, naturally on much harder terms than what the Chinese were offering.
The same Angela Merkel who silently blocks Chinese entities goes to Beijing multiple times wearing a smile on her face at the tens of billions of euros of profit that Germany is making from China every year. This would be put at risk were the Chinese to decide that the huge surpluses they run with the US means that it is that country rather than Europe which should be the first port of call for Chinese importers. Only if a particular product is not available in the US at acceptable quality and prices should Chinese businesses turn to European countries to make the same purchase. It is this that is being signalled by Donald Trump to Xi Jinping . Make Europe the default option and not the primary source by replacing the EU with the US as the first destination Chinese importers visit to meet their needs
The trade war could end by mid-October if Beijing takes steps to ensure that the trade deficit of the US in China trade gets lower and the trade surplus of certain EU countries in China trade gets smaller. Ultimately, it is Europe that may pay the heaviest price for the trade war launched by President Trump on the Peoples Republic of China in a manner far deeper than has been attempted by any of his predecessors. Bill Clinton, for example, talked tough but did very little in practice. He left several problems for later Presidents of the US to solve (many of whom also failed). This included the problem of North Korea.
During the period Clinton was in office, it would have been possible to ensure that Pyongyang be stopped from developing a nuclear device and delivery systems that could threaten US territories and even both coasts of the mainland. However, Clinton failed to act, and these days, his acolytes are blaming former President Jimmy Carter for this lack of resolve, suggesting that Carter made Clinton abstain from military action. This is nonsense, for Clinton detested Carter and never took this predecessor of his seriously. Both Clinton and Bush failed to deal with North Korea, as did Obama (who had a much weaker hand than the two), leaving Donald Trump with very few options.
The 45th US President is doing much more than he is being given credit for by those who recognize the danger to European primacy as a consequence of the ending of US diplomatic subsidies to the EU in the name of “common defense” against Russia, a country that is less of an economic power than New York state, the home of the Trump family. President Xi Jinping and President Donald J Trump may have a long conversation in person or on telephone in a few weeks time, and declare an end to a trade war that has been caused by the disproportion between US deficits in trade to China and the huge surpluses of European countries such as Germany with China. However, such a situation can take place only once relations between Beijing and Washington get freed of mutual mistrust sufficiently to ensure that normal trade relations develop between the two superpowers. Should the US-China trade war come to a close in October, it may be certain European exporters who would be the major casualties.

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