By U AC
WITH the first meeting between China and US trade officials in Geneva over, the two global giants agree to continue to negotiate without setting specific deadlines or targets. The Trump administration, as usual, exaggerates to claim empty victory over successful negotiations, yet the battle is far from over. Trump has given in, lowering the tariffs from the impossibly high 145 per cent. The trade war talk is taking its toll on US consumers, with Walmart, the US’s largest retailer, raising prices every month, citing Trump’s tariffs as a reason.
The prediction
In the end, when the dust settles, the world trading system will go forward with or without the US. The US is already getting isolated even from its closest allies, such as Canada, Mexico and the EU, and it would end up getting isolated from the rest of the world too. The world with continue with the renewed commitment to the formal rules of the World Trade Organization (WTO). The rules may not be perfect, but they are the best we have at present.
The Trump version is slightly different. He wants the US to remain at the centre of power, the system and the US dollar as the main trade currency. The officials have been quite explicit about that, saying other countries would fall in line with the US against China, i.e., join the US side in its trade war against China. Totally unreachable dream, knowing how much homework China has already done in the past five years in the global south, for most of them to be on the Chinese side. Being on the Chinese side means development, being on the Western and US side means ideologies and systems that have no proven record of making any developing countries prosper.
The reasons
If you look at what real economic power the US maintains today, it is a far cry from the rhetoric that the Trump administration touted. The idea that the US market is central to every economy and using the threat of cutting exporting countries out of the US market would make them kowtow to all their whims and whistles is as outdated nowadays. It may have been true 25 years ago, but the consumer power is no longer centralized in the US alone. The numbers simply do not support that theory. The US imports are no longer substantial enough for most countries to alter their whole foreign policy and economic orientation because of that threat, barring Mexico, Germany (~70 per cent of their exports to the US) perhaps.
The US imports only 12 per cent or so of the world’s exports. It’s just not that significant anymore at this point in time, after the enormous growth of China and some countries of the global south.
The counter to all these facts and figures was that when the US blocks China’s exports, China would be forced to flood the EU with its wares, forcing Europe to eventually put up barriers against China, which would be equivalent to joining the trade war with the US. That could be what the Trump people are hoping for, but again, the figures do not support that either.
China currently only exports about $450 billion a year to the US. Its total export to the whole world is $3,600 billion. The exports to the US have come down significantly in the past ten years because of anti-China policies. The long-term master planner, China, has already diversified its trade. What do you think the same Chinese leadership under President Xi has been doing in the past ten years? Just ignoring US threats and not preparing for any eventual possibilities? So the idea that China would flood the world markets with its inexpensive goods if the US market is cut off is merely a fantasy. The US simply does not have the power to do that anymore.
Another factor is that China’s favour is the US being a deficit country with a lot, really a lot of debts. These debt instruments are being held by their major trading partners/adversaries like China, Japan, etc. In the event of a real tit for tat war, once these countries sell their bond holdings, the demand for US debt will be cut significantly, thereby raising interest rates and receiving downward credit ratings, causing it to pay more interest (in billions of $). With current yearly deficits in trillions, it’s a bitter pill that the US simply cannot swallow. A recent anecdote of Japan and China selling US bonds in response to Trump’s threats forces the treasury rates above five per cent, causing markets to free-fall in US stocks. These directly affect 401K (US pension schemes) and make the retirement funds of US workers smaller.
If we use Trump’s words on Zelensky, ‘Trump simply does not have the cards’. Trump does not have a strong hand against China. He is overestimating his hand in his bluff. When Trump was barking from afar, Xi again did his work by visiting some Southeast Asian countries, further augmenting their trade ties with these countries.
The US is now just a shadow of its past. It is a diminishing superpower in the world now. China’s economy has overtaken the US in the past two years, and the reversal of fortunes is not in sight. The US is no longer indispensable in the world economy.
With the non-US dollar trades on the uptrend and with BRICS planning a new global currency (BRICS pay is already in place), the privileged position and sanction-imposing power of the US$ would be over in less than 10 years.
What about us?
The current position of multilateralism in international relations might serve Myanmar good before the year 2000. Maybe it is time to rethink this guiding principle for the coming decades. Cambodia, Laos, Bangladesh, etc., have become richer than Myanmar by sticking to and getting help from their northern friendly neighbour. Instead of appeasing the West, Western puppets and the US, where the help comes with attachments, ideologies and dogmas of faith, our orientation might require readjustment, to cater for the need to at least catch up with our neighbours and get out of the poverty trap.
