Commentary on Political Economy

Monday 23 November 2020



US weighs new action over China bullying

US President Donald Trump (L) and China's President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing in 2017.
US President Donald Trump (L) and China's President Xi Jinping leave a business leaders event at the Great Hall of the People in Beijing in 2017.
  • By Bob Davis
  • An hour ago 

Senior Trump administration officials say they are pushing for new hard-line measures against Beijing, even as President Trump winds down his final two months in office.

The most ambitious effort would create an informal alliance of Western nations to jointly retaliate when China uses its trading power to coerce countries, administration officials say. They say the plan was sparked by Chinese economic pressure on Australia after that country called for an investigation into the origins of the COVID-19 pandemic.

“China is trying to beat countries into submission by egregious economic coercion,” said one senior official. “The West needs to create a system of absorbing collectively the economic punishment from China’s coercive diplomacy and offset the cost.”

Under the joint retaliation plan, when China boycotts imports, allied nations would agree to purchase the goods or provide compensation. Alternatively, the group could jointly agree to assess tariffs on China for the lost trade.

The administration is also looking to broaden its ban on imports from China’s Xinjiang region that are made with forced labour, and add companies to a Commerce Department blacklist, including Chinese chip maker Semiconductor Manufacturing International Corp. SMIC already faces tough licensing requirements when buying from US firms.

US President Donald Trump shakes hands with China's President Xi Jinping as leaders take a family photo at the G20 Summit in Osaka in June, 2019.
US President Donald Trump shakes hands with China's President Xi Jinping as leaders take a family photo at the G20 Summit in Osaka in June, 2019.

A SMIC spokeswoman referred to a previous statement released in September by the chip manufacturer, which said the company continues to engage with the Department of Commerce and said it has no relationship with the Chinese military, nor does it manufacture products for military end-use.

The Chinese embassy in Washington didn’t respond to a request for comment. The senior officials acknowledged that the new measures face the hurdle of a waning Trump administration. Should they succeed, they would also need the incoming Biden administration to endorse the effort and carry it forward.

It is also far from certain that other nations, dependent on China trade, would want to join a group aimed at hobbling Beijing — or one that might rely on tariffs, which hurt domestic consumers. The officials said they were contacting Western democracies, but didn’t say which ones.

“This would be a Cold War-like division of the world,” said Eugene Gholz, a University of Notre Dame national security expert. “We expect (China) to behave badly, so we’ll prepare a defence.” Mr Trump has himself been focused on contesting the results of the Nov. 3 election, in which he was defeated by Democrat Joe Biden. A spokesman for President-elect Biden declined comment on the possible new moves against China.

The Trump administration effort was energised by the pressure China put on Australia this year, as Australia sought support for an investigation into any missteps that might have contributed to the spread of the COVID-19 virus, which originated in Wuhan, China.

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China has imposed restrictions on imports of Australian beef, barley and wine, which many lawmakers and economists see as retaliation for Australia’s push for scrutiny of COVID-19’s origins.

PM: Australia will not have to choose between US and China

Australia will not be forced to choose sides between China and the United States amid increasingly rising tensions as the nation has its own interests to pursue, says Prime Minister Scott Morrison.

Even so, the share of Australian exports headed to China hit a record 41.7% in September, helping to cushion the impact of the coronavirus pandemic on an economy that is experiencing its first recession in 29 years.

Australia’s growing dependency is driven by China’s need for Australia’s iron ore to feed its infrastructure-led economic recovery.

The Chinese embassy in Canberra this month raised the temperature when it handed over a list of 14 complaints about Australian government behaviour to Australian media outlets.

The grievances included the call for the Covid-19 investigation, government funding of “anti-China” think-tank research, raids on Chinese journalists, comments about China by Australian members of parliament, legislation to scrutinise Chinese acquisitions, and “incessant wanton interference” in Beijing’s dealings with Hong Kong, Xinjiang and Taiwan. The Australian government rejected China’s characterisation and called on Beijing to discuss its complaints.

A spokesman for Australian Trade Minister Simon Birmingham on Sunday said purchase decisions by US businesses or governments were matters for them, but that Australia welcomed any interest in its goods and services from any partner countries.

In a televised interview with Australia’s Sky News, Mr Birmingham said he was deeply concerned at what he said were moves by China that undermined co-operation between the countries, but said that the country remained open to dialogue with Beijing.

“That is a question for Chinese authorities as to why they may have chosen to seemingly single out Australia in some way,” Mr Birmingham said.

Prime Minister Scott Morrison (R) chats with US President Donald Trump (C) at the G20 Summit in Osaka, Japan.
Prime Minister Scott Morrison (R) chats with US President Donald Trump (C) at the G20 Summit in Osaka, Japan.

Beijing has assigned the blame for the deteriorating relationship to Canberra, a characterisation rejected by the Australian government.

“The Australian side should reflect on this seriously, rather than shirking the blame and deflecting responsibility,” said Chinese Foreign Ministry spokesman Zhao Lijian around the time the list of grievances was published.

The fight caught the attention of the US National Security Council, which tweeted a link to a Sydney Morning Herald story on Nov. 18 and its support of Australian action. “More and more nations worldwide have Australia’s back,” the NSC said.

Since then, the White House has used the 14 grievances to rally allied support. “We’re using the list of complaints as an affirmative list of what other countries should be doing” on China policy, said the senior official.

Some Democratic Party national security experts involved in shaping the Biden China policy also view the fight as a significant change in Beijing’s foreign policy.

In the past, Beijing has used its economic might sporadically to try to punish Western nations, for instance largely cutting off salmon exports from Norway after the late Chinese dissident Liu Xiaobo was awarded the Nobel Peace Prize in 2010.

But the impact has been limited and Beijing often denies it is engaged in a boycott.

The action against Australia is more far-reaching and overt, said Brookings Institution China scholar Rush Doshi. “It’s clear that China wants to send a signal to U.S. allies about what its red lines might be, ” he said.

China is ‘acting like a bully’ because they are ‘not in a position of strength’

Sky News host James Morrow says it is important to note China is only acting like a bully towards Australia because they are not in a position of strength.

Among the questions the Trump national security team needs to resolve is whether allied action would violate World Trade Organisation rules. Taking a complaint to the WTO is a non-starter, they say, because it would take years to resolve.

Stephen Kirchner, trade and investment program director at the University of Sydney’s United States Study Centre, said it was hard to see the US and allies buying up previously China-bound goods.

“I don’t think the US and other allied countries are really set up to have the government direct the private sector to make the purchases; so that leaves you with tariffs, which is a bit counterproductive in that the tariffs would just raise costs in allied countries,” he said.

The Trump officials say they are also looking to stiffen penalties on imports from China’s Xinjiang region.

In September, the administration banned cotton apparel, computer parts and other imports from companies that allegedly relied on forced and imprisoned labourers in Xinjiang.

But a broader ban was blocked after officials at the Treasury and Agriculture departments and the US Trade Representative’s office warned it would damage American apparel makers and other importers.

National security officials are pushing again for a broader ban. A bill that passed the House in September by a 406-3 margin requires importers to provide “clear and convincing evidence” that goods aren’t made with forced labour. A similar bill is being considered in the Senate.

The senior administration official said they are looking for a policy similar to those measures.

Mr Trump campaigned in 2016 on a promise to get tough on China, ultimately launching a trade war aimed at reducing Chinese imports and creating a level playing field for U.S. companies in China.

Despite a so-called phase one trade pact reached early this year, the U.S. continues to impose tariffs on about $370 billion annually in goods from China.

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