The delegations from the three largest economies in the world – the United States, China and Japan – are now gone from the recent Asean and East Asia Summits here, as well as from the Apec summit in Papua New Guinea.
The ramifications of ongoing US-China trade tensions, though, continue to be felt as the world’s eyes turn next to Argentina, where leaders from the world’s largest economies convene tomorrow for the 13th meeting of the Group of 20. Most critically, the G20 Summit in Buenos Aires also will provide the venue for the next meeting of US President Donald Trump and China’s President Xi Jinping.
If the recent meetings in Asia are a guide, the chances for fireworks on the sidelines of the formal agenda might well be high. For the first time ever in its nearly 30 years, the Apec summit ended in disarray, without a final communique.
The Wall Street Journal reported that China effectively torpedoed a communique over a single sentence: “We agreed to fight protectionism including all unfair trade practices.” China’s worries, no doubt, could well have been over concerns that its own trade practices are being recognised increasingly as unfair.
Despite the United States having taken the lead in imposing tariffs on billions of Chinese goods in response to what the Trump administration sees as unfair trade practices, it was China and its delegation that were on the defensive in PNG. According to media reports, tensions overflowed as Chinese officials “barged into” the PNG Foreign Minister’s office after having been denied a meeting about the Apec communique.
A US-China tariff war is sure to continue to produce very real economic consequences, and political fallout, in both nations as well as across Asean. It, however, also presents an opportunity for a trade reset. The ongoing tariffs war provides a chance to re-examine the trade relationship between the world’s two largest economies and perhaps set a new course that would address the elephant-in-the-room issues of China’s trade practices.
As we have argued in the Los Angeles Times and in other media across the US, whatever else one might think of President Trump’s actions, he is confronting China about its unfair trade practices and theft of American intellectual property when too many – including in the Indo-Pacific region – shy away from the truth for fear of Chinese reprisal.
It bears remembering that the Chinese trade practices that irk Trump truly do bedevil Americans and others doing business with China, and they go back decades, to at least to the mid-1980s, when China under Deng Xiaoping was opening to the world.
Once the US formally recognised the People’s Republic in 1978, American businesses were tantalised by the prospect of China’s untapped market of 1 billion consumers. What American companies soon discovered, though, was that this trade partner did not play by the accepted rules.
China’s repeated and unashamed theft of intellectual property has been especially egregious and damaging. A 2017 report by the independent and bipartisan US Commission on the Theft of American Intellectual Property put the annual cost of IP theft by all parties at between $255 billion and 600 billion (Bt8.4 trillion-Bt19.8 trillion) in counterfeit goods, pirated software and stolen trade secrets; these figures do not include the full cost of patent infringement. The commission named China “the world’s principle IP infringer”.
A now-emboldened Beijing is pushing its “Made in China 2025” campaign, an ambitious plan not only to upgrade Chinese industry – most notably in advanced sectors like information technology, robotics and pharmaceuticals, where IP is key – but to compete with and ultimately displace foreign companies domestically and globally. To that end, it has continued to aggressively push foreign companies to hand over technology and IP rights in exchange for market access – a possible violation of World Trade Organisation (WTO) rules.
China’s leaders no doubt see things very differently, and the Chinese expression “huo gai” might well apply. Loosely translated, it means “you had it coming”. If you leave your door unlocked and get burgled, huo gai – it was your own fault because you didn’t lock up. Similarly, if US businesses do not take measures to protect their own IP, it’s huo gai if China waltzes in and makes off with it.
Trump’s approach, while unpalatable to some and unsettling in the short term, could result in a much-needed new chapter in US-China trade as well as in China’s trade with individual members of Asean and other Indo-Pacific nations. If nothing else, Trump has unequivocally called China out for behaviour that should not be tolerated, and paved the way for other nations to do so too.
The Apec summit may well have ended in disarray but it also sets the stage for progress and a more successful G20 summit in Argentina, with all of the world’s leading economies coming together to fight all unfair trade practices. First though, China must look inward, and a face-saving deal be envisioned for and by all.
Curtis S Chin, a former US ambassador to the Asian Development Bank, is managing director of advisory firm RiverPeak Group.
Charlene L Fu is a freelance editor, reporter and translator. She worked in Beijing from 1986 to 2008, much of that time as an Associated Press correspondent. Follow Curtis on Twitter at: @CurtisSChin.