Trade wars and US-China engagements with the capitalist system

Are the trade wars between the US and China merely over the imposition of tariffs on goods and services, or is there more to these conflicts?

A surface understanding would illustrate that the US is concerned over its trade deficit with China, and the latter might be concerned over the imposition of new tariffs by the former to rectify this imbalance.

I am not saying, as some do, that a civilisational war is in the brewing between both countries. But the trade wars seem to be an open manifestation of how both countries engage the capitalist system with different rules and behaviour.

While the US allows for the unfettered role of private enterprises with a limited government role, China is different.

Investments and trade from China make no separation between private investments and the role of the state.

In fact, the state seems to take a preponderant role, whether in trade or investments, both domestic and international.

What is worrisome to the US is the close symbiosis between the state and private capital in China, whether in actual trade or investments.

This is the reason whether, true or not, the US often accuses Chinese companies of stealing technological secrets and spying in the US.

As long as China was marginally integrated within the capitalist order, it did not pose any major threat to the US or its allies.

However, with China’s slow but steady integration within the capitalist order, friction developed with the US which now takes the form of trade wars.

Following the end of the Cold War and with a military option out of the question, the US thought that once China was accepted within the capitalist order, the path would be laid for “taming” China as a responsible international player.

As China increased its trade and investments in the Western world, it dawned upon the US and its allies that the former had a different way of doing business. In other words, China followed different rules and regulations when it came to trade and investments.

Due to the heavy involvement of the Chinese state in investments and trade, US companies felt they had lost out in doing business. In fact, it was argued by the Americans that their companies had an unfair advantage in China due to policies that favoured Chinese companies.

Apart from the unfair advantage over US companies, with the dilution of the war against terror, China was accused of engaging in unfair trade practices to the detriment of US trade. In the last year or so, US trade with China registered a trade deficit of more than US$350 billion.

This unfair trade balance was not acceptable to the new US president, Donald Trump, who recently remarked that the former presidents had been too soft on China.

The sore point of US trade relations with China is not so much trade deficit or even the unfair advantage over US companies in China, but rather the pivotal role of the state in dictating investments and businesses in China as well abroad.

For the US and its allies, it is very simple. China simply cannot engage in trade, business and investment by following a different set of rules and regulations. It must accept the rules laid out by WTO and its members.

Whether Chinese technological company Huawei was actually involved in spying on the US government and its allies is not clear.

While it might have flouted US sanctions on Iran, the 5G company’s close connections to the Chinese state and military establishment were considered as actual or potential threats by the Americans. Even if this threat was more imagined than real, the sabre rattlings by Trump did not help calm the situation.

Recent analyses that the US was jealous of the success of this technological giant, hence its actions against it, are a simplistic diagnosis of the actual situation.

The present US conflict with China, whether in the attempt to impose tariffs on the import of goods from the latter or the measures taken against Huawei, must be seen from the broader perspective of how both countries engage with the capitalist system using different sets of rules and regulations.

P Ramasamy is Penang deputy chief minister II.

The views expressed are those of the author and do not necessarily reflect those of FMT.