Question:
The US President said, "the signing of the Phase 1 trade deal with China may take place 'shortly after' January 15," the date he announced last month as the signing date. Trump added: "I want to finish the Phase 2 agreement with China after the presidential elections as part of efforts to end the ongoing trade war between the world's two largest economies for months, which has led to market disruption and affected global growth..." (Al-Ain News, 2020/01/10). The Chinese Ministry of Commerce formally confirmed that "Vice Premier Liu He will go to Washington to sign the first phase of the trade agreement. This is considered the first official confirmation statement issued by China regarding the signing, which Trump previously said he would go to Beijing after the signing of the agreement to start negotiations on the second phase..." (Trade Captain, 2020/01/10). Does this mean that the trade tension between America and China has ended?
Answer:
To answer these questions and understand the origin of the trade war between America and China, we review the following matters:
First: Background of the issue:
Anyone following American policy toward China sees that America always seeks supremacy in Eurasia (Europe and Asia) and does not allow China to advance ahead of it. This is because Eurasia is a vital region for which the United States has set a strong foreign policy to ensure its hegemony, which continues to serve the interests of American institutions to this day. Since the collapse of the Soviet Union in 1991, the political establishment in America has been divided into two main parts regarding the design of American policy toward China:
First: Revolves around engaging China or cooperating with it to become a stakeholder and responsible member in the international order led by America.
Second: Emphasizes that China's intentions cannot be trusted and that it is ultimately a rival power standing against the Western international order led by America.
In the mid-nineties, the American foreign policy establishment settled on classifying China as a rival power, and policies were adopted to restrict China's rise. During the political administrations of Clinton and Obama, a policy of containment was adopted toward China. During the Republican administrations of Bush Jr. and Trump, a more aggressive policy was taken in containing China. Trump mobilized for an open trade war against China. (Financial Times)
The American containment policy had two main goals: first, to avoid the emergence of China as a regional power, and second, to prevent it from changing any aspect of the Western-based international system. To achieve these goals, the United States adopted a number of measures, including [raising China's human rights violations in Tibet, East Turkestan, and Hong Kong; keeping China busy with the North Korean nuclear crisis and regional disputes in the South China Sea; using India, Japan, and Australia to restrict China's military ambition and growth in the Asia-Pacific region; obstructing China's access to the latest technologies; and pushing back against the Chinese Belt and Road Initiative]. The American political establishment has committed to the containment policy with slight changes in some measures to curb China's power ambitions. However, after the 2008 global financial crisis and the disastrous American wars in Afghanistan and Iraq, the United States realized that the containment policy for China was not sufficient and decided to strengthen it. The goal of Obama's strategy, known as the (Pivot to Asia), was to move military equipment and soldiers from Europe to the Asia-Pacific and confront Chinese military potential. Then Trump began targeting the Chinese economy directly, and his administration described China as a "currency manipulator" and began a trade war with Beijing, which took precedence over efforts to contain China within the international rules-based system. (BBC).
Second: The Trade War between America and China:
As mentioned earlier, America began a trade war with China to limit China's rise. The trade war between the two economic powers accelerated due to the trade imbalance, as America imports $558 billion in goods and services from China, while in return, China imports $179 billion in goods and services from the United States (Office of the United States Trade Representative). However, a rapprochement between them has been noted recently so that each can achieve its interests first!
The United States and China have reached a partial trade agreement in recent months, (which would put an end to the escalating trade war between the world's two largest economies since last year. Trump previously said that the first phase of the trade agreement would cover about 60% of the comprehensive agreement, and it is supposed to include China's commitment to buy more American agricultural products in exchange for the United States reducing its tariffs imposed on Chinese goods... Al-Araby Al-Jadeed, 2020/01/05). Al-Arabiya Net published on 2019/12/15 the following: (After 21 months of the start of the trade war between the world's two largest economies, the United States reached a Phase 1 agreement with China, but it will not be signed before next January. Under the agreement, the United States confirmed that it would halve tariffs from 15% on $120 billion of Chinese imports, but it will keep the 25% tariffs on $250 billion worth of Chinese goods. The United States also postponed the application of new 15% tariffs on $160 billion of Chinese products that were supposed to be applied today, including toys and smartphones... Beijing also agreed to import additional American goods and services worth at least $200 billion over the next two years. Similarly, China will suspend the application of additional tariffs on some American imports that were supposed to start today, as it will suspend the imposition of additional 25% tariffs on cars and 5% on American spare parts. China clarified that it would continue to suspend tariffs on about $126 billion of American products, in addition to its pledge to increase its agricultural purchases from the United States by up to $50 billion annually). Trump was keen to find an escalating market for agricultural exports because he is running in the general elections this year, 2020, and does not want to lose the votes of farmers burdened with debt due to the lack of sufficient export markets... Prior to that, the Al-Bayan News website published: (The Chinese Ministry of Commerce stated - in a statement on Friday evening - that the agreement was based on the principle of equality and mutual respect, and includes nine chapters: introduction, intellectual property rights, technology transfer, food and agricultural products, financial services, exchange rate and transparency, trade expansion, bilateral assessment and dispute resolution, and final provisions... Al-Bayan News, 2019/12/13).
But this does not mean that these agreements regarding the trade war will end the state of economic tension between the two sides. This is because the trade war is not the real motive for controlling China; rather, there is something behind it that is deeper and more dangerous to the American economy and its international priority. China is the leading country in 5G technology, which is the next generation of wireless communications and, more importantly, the gateway to the control of Artificial Intelligence (AI). The Defense Innovation Board, former Alphabet chairman Eric Schmidt, LinkedIn founder Reid Hoffman, and Walter Isaacson, author and former CEO of the Aspen Institute, wrote: "The controller of 5G is expected to get hundreds of billions of dollars in revenue over the next decade, while creating large-scale job opportunities in the wireless technology sector. The country that owns 5G will get many innovations and will be able to set standards for the rest of the world, and it is currently unlikely that this will be the United States"... (ZDNet).
For information, 5G is ultra-fast. Researchers announced that tests on the speed of connection via 5G technology achieved record speeds, reaching a terabyte per second, noting that this speed is 200 times faster than its current counterpart. According to tests conducted by a research team from the 5G Innovation Centre at the University of Surrey in the UK, a file 100 times the size of feature films can be downloaded in about 3 seconds. The new speed also exceeds the average download speed in 4G networks by about 65,000 times. It is expected that the number of devices connected to the internet will range between 50 to 100 billion devices this year, so networks with new and different frequency bands must be available to fill this wide demand for internet connection. As for how 5G works technically, there is a technology known as MIMO (Multiple Input, Multiple Output) that will play a key role in operating 5G networks and their efficiency standards. MIMO technology uses many small antennas to serve data flow individually. Samsung relied on this technology to provide amazing data download speeds, and it is likely that 5G networks will use a larger number of broadcast stations... (Al-Arab, 2017/08/13).
In 2017, Schmidt revealed at the World Economic Forum that "it won't be long before China overtakes the United States in developing advanced Artificial Intelligence (AI)" (World Economic Forum). Artificial Intelligence manifests in:
- Chatbots using AI to understand customer problems faster and provide more efficient answers.
- AI practitioners using it to analyze important information from a large set of text data to improve scheduling.
Experts point to the great interest and investments in the field of AI over the next few years. Deloitte estimates that $57.6 billion will be spent on Artificial Intelligence and machine learning by 2021, which is five times what it was in 2017.
It was not surprising that Trump publicly opposed the Huawei company, which produces 5G, and he stated on several occasions the danger posed by the Chinese company. Trump said at the recent NATO summit: "I think it's a security risk, it's a security danger" (Business Insider). For this reason, the United States pressured many Western countries (Italy, the United Kingdom, Germany, etc.) to exclude Huawei from bidding or activating 5G in their countries, all under the false pretext of security violations. The United States also asked Canada to arrest Meng Wanzhou, the CFO of Huawei, on charges of violating American sanctions imposed on Iran. America is interested in banning the Chinese 5G network, just as Trump also blocked the sale of silicon chips to China.
The Chinese have long worked to become independent in the field of technology under the "Made in China 2025" plan, but the way the Americans dealt with Huawei and other Chinese companies accelerated China's efforts to obtain full independence in key technologies. The Chinese announced plans to create their own operating system by 2022, which closed the door on IBM, Microsoft, Dell, and other American companies. Furthermore, China plans to build its own silicon chips. It doubled the salaries of thousands of Taiwanese chip engineers to move to China over the past few years. American analysts expect that China will achieve independence in the chip industry within five to seven years. By following these measures, Beijing will achieve huge gains from the new AI economy.
America is doing its best to restrict China's ability to take the lead in the 5G and AI systems because this technology is just as important as the steam engine, electricity, and the silicon chip. These technologies are the engines for production and economic growth. Thus, the current trade war is more than just a trade war to address the trade balance between America and China; rather, above that, it is a war of technologies, especially 5G. According to current data, it is likely that the world will have a bipolar technological system: the West led by America, and the rest of the world led by China. If the Chinese technological system dominates Eurasia, the possibility of China threatening American priorities in this field will increase.
Therefore, the trade agreement between America and China—even if concluded and signed in all its stages after a year as Trump said: (that his administration will start negotiating the Phase 2 trade agreement between the United States and China soon, but it may wait to complete any agreement until after the US presidential elections next November... Al-Ain News, 2020/01/10)—even if it is signed in its final stages, it is expected to be no more than a warrior's respite, especially in the field of 5G technology. This is because America does not accept being an equal to China even if China accepts it, for America's arrogance prevents it from accepting so!
17th Jumada al-Ula 1441 AH 12/01/2020 CE