The Biden administration has given clear signals that it will maintain a tough stance against China in terms of future trade and tariffs and will target abusive trade practices by Beijing.
China was hoping that Joe Biden in the White House will cool the anti-Beijing heat in the administration, which became the hallmark of US-China relations under President Donald Trump, and the change on Capitol Hill may help renew business as usual, including restoring the trade ties facing many rifts. Surely, Joe Biden is the President-elect, but he and his administration have already added to Beijing’s diplomatic frustration.
The Biden administration has given clear signals that it will maintain a tough stance against China in terms of future trade and tariffs and will target abusive trade practices by Beijing, what many see as a “continuity of Trump’s trade war against Beijing”.
But China’s trade worries are not confined only to the US. In fact, it is facing a hard diplomatic stance from Australia in the Pacific. Relations between Canberra and Beijing, which is the Pacific nation’s largest trading partner, have soured since Prime Minister Scott Morrison called for an independent international investigation into the origins of the coronavirus pandemic earlier this year. Beijing has slammed Australia for blocking a recent agricultural deal, its barring of Chinese tech giant Huawei from its 5G network and legislation outlawing foreign interference in Australia’s domestic politics.
Global business and trade experts and some, who have a direct interest in US-China and India-China, say: “The tough policies against China are here to continue, especially from the US, as President-elect Biden will not ‘lower the guard against China to provide any ammunition to the Republicans’.” And this comes from a common perception binding nations from America to Australia—China is a threat.
Says Mukesh Aghi, CEO and President of US-India Strategic Partnership Forum: “A common consensus between the Democrats and Republicans is that China is a strategic threat. Any compromise by Biden administration will be seen as a sign of weakness and will provide ammunition to the Republicans. Biden has no choice but to pursue a tougher policy. His style will not be to go alone but build a coalition of nations across Asia and Europe to counter China.”
There are reasons for Biden’s “diplomatic compulsions”, says global business expert Scott Ferguson, who is former CEO of World Trade Center Association. “I do not think President Biden will have much of a choice. President Trump was the first US President to challenge China in this manner and many now believe this was long overdue. As a result, he has the support of many Democrats as well as a majority of the American population when it comes to dealing with China. This is one of the few issues where Democrats and Republicans readily agree. During the Obama administration, VP Biden was the point person on the US-China relationship, so one might think he might bring a slightly more moderate tone to the table. However, with the severity of the coronavirus, the weakness of the US economy, the unsettled trade war as well as China’s continued global aggressiveness have left Biden with little, but to pursue the tone of Trump administration,” says Ferguson.
The worsening US-China trade war is sure to affect global business and trade and it is not going to end very soon, seeing the hard diplomatic exchanges between the two countries, including the US banning many Chinese companies from operation and threatening more sanctions.
Aghi says, “The biggest lobbyists for China in the US were US companies with large investments in China. We are seeing dissipation of that support by the US companies. They have become wary of Chinese government insisting on joint ventures with local partners, forced transfer of IP etc. We are seeing a stealth shift of global supply chain from China into other geographies. US companies are getting more vocal in US against Chinese aggressive policies.”
Added Ferguson: “it is not uncommon for the world’s leading economic powers to be at odds with each other. Even without the coronavirus and the economic trade war, these two countries would still be at odds. This has been coming for a while given the economic trajectory of both countries. Other countries trying to navigate and, in some cases, to aggravate the situation will also be major factors. This new reality will take an exceptionally long term to play out and we should not expect any clear definition any time soon.”
And what’s building against Beijing in Australia may soon be extended to other countries in the Pacific and ASEAN region, facing China’s “unauthorized aggression and expansion”.
Ferguson says, China will continue to be assertive to make examples of weaker countries, who take contrary positions, especially pro-US allies such as Canada and Australia. While Canada is geographically removed from the region, it suffers just like Australia when it aggravates China. These countries are in a very tough position as they may lack the economic might to oppose China, but at the same time are also expected by their citizens to stand up for themselves, even if this means digging a deeper hole…This may work for China in the region to some extent in the short to medium term, but will also make other neighbouring countries more aware and nervous of being isolated in the region.”
Aghi feels that in Australia’s context, its export economy has been very much dependent on Chinese market. “But of late, the wolf warrior diplomacy pursued by China against Australia has forced Canberra to retaliate. It has sent signal to other smaller countries in the region to seek alternate markets and allies.”
Aghi says, “Trust is one big factor which is working against China. Its aggressive stance in South China Sea, against India, Australia, Vietnam, Philippines is sending a message that the rise of China is a threat. China’s One Belt, One Road initiative has left white elephant-infrastructure across poor nations with large, unserviceable debt. Its nationalistic approach on most issues does not send a positive message or build confidence among global investors and citizens.”
But can the world prosper without doing business with China?
Ferguson holds the view that it will never come down to “not doing business with China”, as the country is at the centre of a global economy with massive production and consumption capabilities. Countries will always disagree and will continue to trade and invest with each other. Even with a cold war environment, geopolitical tampering and cyber and military aggravation, diplomacy will be activated, and business will continue.
Aghi says, “No nation is indispensable. People, companies and countries adapt to changes with time. Trump administration’s America First, isolationist strategy gave opportunity for the Chinese to be more aggressive on a global stage. I believe Biden administration’s multilateral and coalition approach will temper this aggressive behaviour. India is a prime example that you can push a nation this far and they will draw a line. The Chinese are very much surprised at the resilient determination of Indian armed forces in Ladakh punching back at the Chinese. They are shocked. So it seems like India has a great opportunity waiting as China fights the multi-nation trade war.”
Ferguson says: “India could certainly benefit from the global uncertainty and China-US deteriorating ties, and with many advantages. India will surpass China shortly in population, but it is also a full ten years younger (average age) than both China and the US, a huge advantage both in domestic production capabilities and consumption. India’s global image is making companies invest in start-ups and to establish operations. India is in an incredibly strong position to surge during the immediate and longer terms…On the trade and investment front India is already growing as a major partner with the US attracting significant attention and investment. This will certainly continue and a natural next step will be to lock up that valued lead position in the global supply chain.”
However, Aghi cautions against the pro-India perception building. “India has an opportunity. Question is will it seize it? So far we are seeing Vietnamese, Cambodian, Thailand and even, Bangladesh grabbing shift of supply chain from China… India has to bring predictability, transparency, stakeholder engagement in its policy framework. It is an opportunity of lifetime which India should not miss.”
Agrees Ferguson: “India’s biggest domestic opportunity is to make the needed business and economic changes at home to make sure it is not only in the game, but is, in fact, looking to dominate it.”