The Trump administration’s declaration of a trade war with China has implications for that country’s latest round of ambitious economic reforms as well as for global economic development generally. China refuses to be bullied by Trump’s imposition of $34 billion in tariffs and the threat to impose $500 billion more. China has swiftly retaliated with its own $34 billion in tariffs on US goods.
The purpose of tariffs is not chiefly to overcome the trade imbalance between the two countries and protect American workers. Trump’s real goal, besides energising his base for the 2018 elections and splitting the ranks of the US labour movement, is to thwart China from becoming a direct economic rival and make it abandon its socialist-oriented economic strategy. This flows from Trump’s new national security strategy, which declared China and Russia strategic economic and military rivals.
Until now, China has competed with other developing countries to produce consumer goods for advanced industrialised economies. In the future, it will be competing more directly with the US and other advanced capitalist economies in the advanced manufacturing and technological sectors.
Trump wants China to dismantle its “Made in China 2025” strategy, a 10-year plan to make the country a world leader in key scientific and technical fields and advanced manufacturing, with an aim to sharply increase productivity (which is approximately one-third that of the US economy).
Trump is demanding China abandon public sector investments in basic science, research, and innovation as well as its targets to raise the domestic content of its manufactured components to 40 percent by 2020 and 70 percent by 2025.
Further, Trump’s administration officials want China to eliminate requirement that US firms seeking access to its market must enter into agreements to share technology and its restrictions on US corporate investment. They say China has put US corporations at an economic “disadvantage” by stealing intellectual property rights and technological secrets.
China disputes these charges and insists it is operating within World Trade Organization guidelines. The fact China leads the world in patent applications exposes the racist lie that it doesn’t possess the wherewithal to develop its own intellectual and technological innovation.
The chief architect of this policy is White House National Trade Director Peter Navarro, who “took aim at China’s internal plan to develop cutting-edge industries like robotics, new energy vehicles, advanced rail and shipping, and aerospace, saying the country could not be allowed to dominate technologies that will be an important source of jobs and growth for the United States in decades to come,” The New York Times reported.
Navarro is considered on the fringe by most economists and advocates some of the most extreme measures against China, which he sees as posing an existential threat to the US. China sees the rise of economic nationalism as a threat to its domestic economy and to global economic development. Despite Trump’s pressure, it has declared it will never agree to abandon its developmental path of creating a “modern, democratic, culturally advanced, harmonious, and sustainable socialism” by 2050.
Trump’s “America First” economic nationalism will actually hurt US workers and farmers by closing markets and making goods uncompetitive. It undermines the dominant role of US expansionism and ironically opens the door for China to become the global economic leader.
The 19th Communist Party of China (CPC) Congress in October 2017 projected a new round of openness and bold economic, social, and governance reforms that extend decades into the future. The socialist market economy will continue to dominate in the new era.
But instead of a model based on export of consumer products, the goal of “Made in China 2025” is to remake the country into a global high-tech manufacturing power and radically increase productivity through innovation and cutting-edge digital technology, artificial intelligence, and big data. The target is to gear production toward quality over quantity.
The newly created industries will be geared first to satisfying the rapidly growing domestic market and then later compete in the global economy. In addition to providing the conditions for private and public enterprises to promote innovation, China is in the midst of a massive modernisation of its infrastructure, including creating a world-class system of universities, research institutions, and hospitals with the expectation of attracting world-class scientific talent.
Development and sustainability will go hand-in-hand to create an “ecological civilisation”. China invested $126 billion in renewables in 2017, a 31 percent increase over 2016, making it to the world’s biggest investor in the field. A high-speed rail system extending 35,000 kilometers (nearly 22,000 miles) is half complete. Production of electric vehicles is ramping up.
The ambitious and mind-boggling development plans and the new era of economic reforms means China will continue to take giant steps toward a modern socialist society and increasingly shape global economic and political developments along the way.
Trump and his economic nationalist plans for trade wars and white nationalist immigration policies will also shape global development, though not always as he might intend. His haphazard tariff policies will not only hurt workers in the US and around the world, but also — whether he knows it or not — undermine the dominance of US capitalism in the world economy and global governance. Trump’s policies run counter to the new stage of globalisation taking shape and are doomed to failure.
John Bachtell is national chair of the Communist Party, USA.