This week has been laced with trade threats, drama, and fear for agricultural commodity markets, all based on the possibility of a trade war between the U.S. and China. Most economists agree that though a trade war has yet to start, there is a serious flirtation with one. And no matter what President Trump tells us, trade wars are much easier to lose than win.
This is a potential battle that comes with great risks for the United States, and also for Canada. With Canada’s proximity to the U.S.; the integration of the two economies; and a mutual belief in capitalism, Canadians need to understand that their economic future depends heavily on President Trump winning whatever game is about to be played on the global economic stage.
No matter what you think about President Trump’s brash technique of negotiating, he is waging a battle that many countries in the G7 believe is based on good reason — the lack of respect China has for intellectual property rights. (Not so many agree on the trade deficit reason.) But is the president executing the best strategy to achieve the objectives the White House and other countries desire?
Admittedly, I have concerns about the tactics the president is implementing based on what appears to be a fundamental misunderstanding of Chinese culture and politics.
Understanding the culture of a country includes having an understanding of the dos and don’ts in a region that potentially operates very differently than your own. All countries have a way of doing business and if that culture is ignored, it can be very difficult to win at the negotiating table.
In Chinese business, for example, you will often hear that it’s important to “save face.”
In a New York Times piece entitled “Saving Face in China,” Saul Gitlin of Kang & Lee Advertising describe what this means, and why it is so important in Chinese culture when dealing with Westerners:
“Because of China’s history of exploitation by foreign countries who colonized China or raided China for business purposes, particularly in the business sphere, Chinese do not want to be seen culturally as having been ‘had’ by Western businesspeople,” he said.
“That may sound fairly intuitive, but it is related to the very recent 200-year history in China, up through the middle part of last century, when Western businesspeople clearly had the upper hand commercially and politically in China,” he explained. Today, there is a fierce concern that China must “never go back to that inferior position during that dynastic and imperial period, when China was exploited by imperialist Western powers.”
So “it’s very important for Western businesspeople to show respect.”
President Trump trying to box China into a corner by pressuring them with tariffs is a major test of Saul Kitlin’s and many other people’s experience as Westerners in China.
Compounding the culture around saving face are political developments in China. President Xi Jinping recently became ‘president for life’, creating even more domestic pressure to not back down to the threats of the United States.
China’s long term approach to planning is another consideration. While their president is in it for life, U.S. President Trump could be leading the Republicans into a death march in the fall mid-term elections.
The White House is banking substantially on China cratering to the heavy tariff threats. This seems unlikely in the short term. On Friday, Chinese Foreign Ministry spokesman Lu Kang said, “China will immediately fight back fiercely without hesitation if a new list of additional tariffs is announced.”
The Chinese Ministry of Commerce spokesperson said Friday, “China will fight at any cost and take comprehensive counter measures if the United States continues along its unilateral, protectionist path.”
Harsh words — in both directions.
One of the leverage points for the U.S. in this battle, however, is that China cares immensely about food security. Even though China is threatening tariffs on soybeans and pork, they require these commodities to feed their people, and the United States is a major supplier to China.
So does Canada play a role in helping these two economic powerhouses find a resolution? Friday on CBC’s Power and Politics, the Chinese ambassador to Canada, Ambassador Lu Shaye said that Canada can help out by remaining neutral.
— Power & Politics (@PnPCBC) April 6, 2018
China is an important market for Canadian pork, beef and canola, so we should not want to be pulled out of the neutral position China seems to want us to sit in.
When the U.S. withdrew from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), many viewed the move as giving up not only a major trade deal for agriculture, and improved access to Asia, but also, leverage in its friction with China. Although President Trump has mentioned he might consider returning to the agreement, it would appear to be a low probability within this current administration.
It’s easy to punish #China. It’s a lot harder to hold it truly accountable and change its behavior. That requires a real strategy and positive trade agenda, which is why the US should rejoin the #TPP11.
— John McCain (@SenJohnMcCain) April 6, 2018
If the United States can find a way to leverage the Chinese need for food security, there’s a chance it could gain ground in this fight. So far they have shown little interest in getting other nations to join them in this battle as President Trump looks to want to go at this alone.
But, at this point, Canadians better be cheering from the fence for the stars and stripes. We have far too much to lose if China comes out on top.
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