Saturday, October 13, 2018

When Patience is Running Thin...
* US Vice President Mike Pence delivered a sharp, pointed speech--targeted at China—earlier this month at the Hudson Institute. From the ongoing US-China trade war to the long-running concern over human rights abuses in China, it was Washington's first official, public display of extreme frustration, even anger, with a vital player--a partner on so many regional and global issues--seemingly destined toward an eventual showdown.
* The speech was confrontational and reflected the long-held mistrust Washington has had toward Beijing not just this year, but for decades. Beginning with allegations that China is influencing US public opinion and attempting to interfere in the upcoming midterm elections, it spelled out an elaborate list of Chinese actions--in and out of the US--that Washington found deeply disturbing. Under President Donald Trump, according to Pence's speech, that was about to change, as new steps are being taken to forge "a new consensus" across America on its relations with China.
* In addition to voicing anger toward Beijing in so many different areas, Pence's speech was undoubtedly designed to exert more pressure on the world's second largest economy. Beyond the tariffs already imposed, Washington is ready and prepared to pursue steps to, among other things, protect the intellectual property rights (IPRs)--the foundation of its economic leadership--and scrutinize Chinese investments in the US.
* On the other hand, an US-China arms race appears inevitable, as both sides have substantially increased their military budgets for modernizing their respective military and space programs. Given China's expansionist behaviors, it also means the US will not quickly retreat from the Asia-Pacific region. Instead, the Trump administration is rallying support and build bonds with nations "that share our values across the region from India to Samoa." As such, the likelihood of friction, and possible conflict, may also increase.
* Though the tone was deliberate and harsh, the speech delivered a conciliatory ending and left the door open for the two sides to return to the negotiation table. Based on the experience in renegotiating trade agreements with Mexico and Canada, Washington probably anticipated that Beijing would have, and should have, returned to negotiation by now. Since Beijing has been unusually resilient and equally retaliatory on tariffs, Washington might have felt more pressure was needed before the rapidly deteriorating bilateral ties drift beyond the point of no return.
* At the core of the ongoing dispute, it is all a matter of "face." Under pressure domestically, the Trump administration had to "do something" to halt the runaway trade deficits with China and the rampant unfair practices ranging from demands of technology transfer to outright IPR theft. But Washington is also wary of the long-term impact on its own economy, especially since the Congressional midterm election is just weeks away. While nobody wants to see the escalating trade dispute becomes a runaway train, neither side would offer any concessions nor reach a compromise before the new makeup of Congress is set.
* The upcoming G20 summit, scheduled for November 30-December1 in Buenos Aires, could provide a good indicator of how long the US-China confrontation would persist. Speculations abound if Trump and Chinese President Xi Jin-pin would meet during the summit. There are efforts underway to make the much-anticipated summit a reality, but nothing is set in stone yet. Hopefully cooler heads in both capitals will prevail and figure out a way to end the ongoing trade dispute between the two superpowers. 

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