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Trump mustn’t leave China in charge of globalisation

China is exerting significant influence through its Belt and Road Initiative at a time when America is looking inward. This could hand an advantage to the Chinese, argues Garry White.

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Garry white employee

by
Garry White

28.01.2019

For Davos Man, things appear to be moving in the wrong direction. As the annual festival of globalisation was winding down last week, news emerged that China had blocked its citizens’ access to Microsoft’s search engine Bing. This is the latest of a number of American services that are no longer available at the behest of the Chinese government. This is not globalisation; the digital authoritarianism of the Great Firewall of China is its polar opposite. However, this deglobalisation process is actually being driven by the West – and the moves could eventually hand China a major advantage.

Deglobalisation is a process of diminishing interdependence and integration between nation states. It is characterised by a decline in trade and investment, which tends to slow economic growth. After decades of pro-globalisation policies around the world, fractures in the process are now starting to appear – and nowhere is this clearer than in the telecoms industry.  

Worries that Huawei, the world’s largest manufacturer of telecom equipment, could spy on behalf of the Chinese government resulted in a number of countries closing their doors to its products. The company is banned from bidding for US government contracts; New Zealand and Australia have blocked local telecoms operators from using its equipment in their fifth-generation networks – and Germany is mulling a similar ban. In the UK, BT Group has removed Huawei components from a system it is developing for the emergency services. Huawei executives insist this is unnecessary, arguing the private company obeys regulations in all countries in which it operates.  

The Huawei issue is central to Donald Trump’s trade war. The outsourcing of jobs to Asian nations with cheaper labour helped stoke the fires of nationalism, particularly in the US, and boosted suspicion between West and East. Indeed, a key tenet of Trump’s “America First” policy is to repatriate jobs and supply chains from abroad – especially China. By casting doubt on the integrity of Huawei’s products, it is possible that US businesses will benefit.

The arrest of Huawei chief financial officer Meng Wanzhou in Vancouver at the start of December at the request of the US authorities was a major escalation. Ostensibly arrested for breaching sanctions on Iran, the move is really about the Trump regime flexing its muscle in the technology-transfer war. Unsurprisingly, the arrest has soured relations between Canada and China significantly. But the aggressive way President Trump’s is pursuing its strategy is starting to worry its allies.

Last week, Canada’s ambassador to China made comments that are likely to upset the Trump administration, so it is likely they would have been approved by the country’s Prime Minister, Justin Trudeau. John McCallum told Canadian and Chinese journalists that Ms Meng had a “good defence” against extradition because of political involvement from Donald Trump and the fact that Canada has not signed up to the Iran sanctions at the centre of the case. This will be resolved one way or another in the next few days. The deadline for a formal request for her extradition under Canadian law is 60 days after the initial arrest – or Thursday, 30 January. If she is extradited, this can be read as an acceleration of Trump’s trade war. If she is not, globalists can take this as a victory.

Although China is far from being a hero of globalisation – it is, after all, the largest closed economy in the world – this deglobalisation process is being driven by the west. This week’s Swiss shindig was all about “Globalization 4.0” – a theme often pursued by Klaus Schwab, the founder of the World Economic Forum. He argues that we are entering the age of the “fourth industrial revolution” characterised by a fusion of technologies. It includes the fields of robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology and fully-autonomous vehicles. These are exactly the areas in which China is investing via its Made in China 2025 policy, which is an attempt to move the country up the value chain by transitioning from labour-intensive industries to “smart manufacturing”.

Also central to the aim of evolving the Chinese economy is its Belt and Road Initiative (BRI). The initiative aims to strengthen infrastructure, trade, and investment links between China and about 65 other countries that account collectively for more than 30pc of global GDP, 62pc of the world’s population, and 75pc of known energy reserves. The BRI consists primarily of the Silk Road Economic Belt, linking China to Central and South Asia and onward to Europe, and the New Maritime Silk Road, linking China to the nations of South East Asia, the Gulf Countries, North Africa, and on to Europe.

As the US starts to look inwards – and get more protectionist – China is becoming more of a globalist. This runs the danger of handing too much influence to the Chinese at the expense of the West. This will be a mistake. The tone surrounding America First is likely a factor in an 18pc fall in foreign investment in the US in 2018, according to the United Nations Conference on Trade and Development.  Zhu Min, former deputy governor of the People’s Bank of China, also said on Wednesday that China could completely cut any investments into Silicon Valley should there be an escalation. So, right now, Davos Man appears to have more in common with the authoritarian Chinese than the so-called leader of the free world. US policy could prove counter-productive.

A version of this article appeared in Friday’s Daily Telegraph.

Nothing on this website should be construed as personal advice based on your circumstances. No news or research item is a personal recommendation to deal.

 

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