Making sense of the US-China Protectionist Policies

On 25th January 2018 the Chinese Foreign Ministry spokeswomen made a very cryptic press release stating – China did not pursue protectionist policies and that it should be clear which country was guilty of such practices. As many have guessed and speculated, it was in response to the Trump administrations imposition of steep tariffs on solar panels and washing machines. However, this is not an isolated example; on 1st March the US government again decided to increase tariffs, this time on steel and aluminium, which was then meet with criticism by the Chinese Foreign ministry stating it as “unreasonable and excessive”.

The rhetoric on tariffs matter not, there’s much happening in the background By US Embassy Canberra [Public domain], via Wikimedia Commons

This very obvious and continuous pattern of pattern of state protectionist policies is increasingly becoming the norm of world economic relations – while more evident in the case of giant economies of US and China it can be found in the economic policy of countries like India, Argentina, Japan and many others and can be substantiated by the results of a recent study which shows that the world’s top 60 economies have adopted more than 7,000 protectionist trade measures on a net basis since the financial crisis and tariffs are now worth more than $400 billion. Rather the increased protectionism is part of a larger rise of right-wing politics in the world, and can be seen as an offshoot.

The consequence of these protectionist policies is brewing a trade war. And although President Trump might find them to be good and easy to win, they will inevitably be catastrophic and not all that easy to win either – as were protectionist polices of 1920-30 that marked the Great Depression. The present economic tussle between US and China is a case of double standards by both countries and a result of a changed US modus operandi in dealing with economic relations under the new administration and persistent Chinese protectionist policy.

On the part of US, the protectionism is considered as a reaction to the competition US is facing from China after a long period of uncontested dominance, and as a mechanism to fuel it’s shrinking economic clout. However, more interesting and important than the short-term US considerations are the dynamics behind the long-term Chinese stake in the present economic face-off.

The 19th National Congress of the Communist Party of China held in October 2017 was the one of the few clear and public declarations of the Chinese hegemonic interests. It was based the now evident Chinese ambition of creating alternative economic institutions, in opposition the existing setup that was developed post World War II, which are inherently biased in favor of the West. An example is the One Belt One Road Initiative, which is setting up alternative trade links, supporting new economic interactions and, taking on the task of supporting global commons – roles that were earlier limited to the US.

Today, the differences between US and China are no longer based on economic policies and principles, and instead are at an ideological and political level. With China potentially providing an alternative to the liberal democratic US institutions – particularly to the Asian and African countries that are still struggling with economic integration. Therefore in this context of changing global power dynamics in the world today is this very crucial to navigate international economic relations with caution.

On the part of US and China there is little attempt to limit the growing trade war, at a level both countries realize that any isolated and closed of economy wont survive, as was evident in the speeches made at Davos by Trump and Xi Jinping – Trump shifted is America First stance to America not alone, and Xi Jinping was seen making a vigorous defense for free trade. Therefore, more serious and thought out measures need to be taken to deescalate the trade war, here other international actors come into play.

This trade wars are not a bilateral issue but an international one, with the potential of creating havoc in economies of all countries as varying degrees. Instead of simply relying on American and Chinese leadership, other countries, who are equally important stakeholders of the trade war, need to work together.  An alternative leadership could be healthy for economic relations and shift the axis of trade relations form the US-China protectionism to a productive economic environment; an example of such leadership was the signing of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 8th March despite withdrawal of US.

Another mechanism to counter the trade war would be strengthening regional economic organisations like the BIMSTEC, ASEAN, and etc. They not only helpful in integrating economies of countries with one another, but also help in creating sustainable economic relations and preventing economic rivalry.

Beyond this, to some degree international organisations like the WTO, IMF and UN can act as a platform for easing economic ties. However, their capacity is limited due to lack of relevant authority.

There exist various speculations on what might me the push the two countries from their economic trade into a ‘hot war’, many even predict a possibility of arms race similar to the Cold War period. The future seems to be a battle between the rational and irrational choices made by international actors and their repercussions.

Varya Srivastava

Varya Srivastava

Intern at InPRA
Varya Srivastava is presently pursing her undergraduate degree in Political Science from University of Delhi. Her work with the United Services Institute, Global Youth India and SheSays has nurtured her interest in security studies, international relations, conflict analysis and feminism. As a part of her undergraduate research she is writing on the application Democratic Peace Theory as foreign policy tool and the conception of positive peace.
Varya Srivastava