Daily Times

The domestic challenge of achieving economic sufficiency is prodding the US to revisit and reset its trade relations internationally. Similarly, emerging international political situations are forcing the US to look for new allies in troubled areas of the world. Sometimes, the US finds convergence in these two challenges embodying one country.

US President Donald Trump has recently finished his 12-day tour to Asia-Pacific’s five nations (Japan, South Korea, China, Vietnam, and Philippines). The most important country was considered China, the President of which royally welcomed Trump on November 8 for his two-day stay. In China, there were two main items on the agenda: trade and North Korea. Regarding the trade agenda, the US gained sufficient ground in China. Before Trump’s visit, it was being touted that China would not budge an inch, despite the fact that the US-China trade deficit had widened to US $ 223 billion. However, China listened to the US and offered a compensatory investment deal of 37 components having total worth of US $ 250 billion to 30 American companies.

In its essential detail, the economic aspect of China’s foreign policy is the Open Door Policy. This is what was presumed when the incumbent Chinese President Xi Jinping said that China would not close its doors and that it would keep its domestic market “more open, more transparent and more orderly” for foreign companies including American companies. The statement was replete with the potential for offsetting the impression of ‘economic nationalism’ practised by China.

The concept of Open Door is reminiscent of the late 19th Century when US Secretary of State John Hay vocalised it through his Open Door Note in September 1899. The US adopted this policy not only to prevent European countries from dividing China amongst themselves  — that is, territorial disintegration — for trade purposes, but also to avail an equal opportunity to trade with China.

There has been no progress in engaging North Korea over its nuclear weapons and intercontinental ballistic missile programme, but the pressure has mounted on China to rethink its North Korean policy

This was the first time the US helped China in the economic sphere.

Although Chinese historian resent the policy declaring it a product of the competing interests of the colonial powers of that time to exploit Chinese resources to their advantage, they overlook the fact that China remained undivided consequently.

Similarly, though the policy never transformed into any international treaty or law, it acted as deterrence for European colonial powers to avoid taking over China. Consequently, the sovereignty of China remained respected, and territory independent. Nevertheless, with its prohibitive tinge, the overwhelming tilt of the policy remained towards European countries and this factor allowed Japan to operate freely, capture Manchuria in 1931 and subsequently create Manchukuo.

Interestingly, after the formation of the People’s Republic of China in 1949, China’s President Deng Xiaoping initiated the Chinese version of the Open Door Policy, in December 1978, as an economic policy which opened up China to foreign investment. This initiative actuated economic transformation of China.

China, which had left the World Trade Organisation (WTO) in the wake of the Communist revolution in 1949, aspired to rejoin the organisation in the 1980s. To do that, it had to negotiate the terms of trade with three major stakeholders: the US, the European Union and Japan.

Former US President Bill Clinton persuaded the Congress to facilitate China’s re-entry into the WTO in May 2000 and China joined the organisation in December 2001, when China agreed to amend and repeal more than 3000 pieces of laws, regulations and rules acting as tariffs. This was the third time the US helped China in the economic sector.

The impact was immense. In 1998, China’s world market share was less than two percent, but by 2010 the market share rose to above 10 percent, as per the WTO figures. (Having merchandise export sales of more than $ 1.5 trillion) which was the highest in the world. It was in 2013 when China surpassed the USA to become the biggest trading nation in goods in the world (with a total $ 4.16 trillion dollars imports and exports in goods).

The consequent trade imbalance was what resented by Trump during his election campaign in 2016 by calling China ‘raping’ the US. In this regard, what Trump has been trying to say is that China has deviated from the commitments of trade liberalisation and openness of its economy that it pledged with the US, the European Union and Japan before rejoining the WTO.

Now, at least to the US, China’s offering a compensatory investment deal worth US $ 250 to American companies is a token of China’s recognition of US’ stance and trade needs. Regarding North Korea over its nuclear weapons and intercontinental ballistic missile program, no immediate ground has been broken but the pressure has been mounted on China to rethink its North Korean policy.

Apparently, China expressed its deficient leverage over North Korea. However, the US did not submit to this argument. Instead, the US has asked China to act indirectly by imposing trade sanctions, cut off oil exports (through an 18-mile pipeline), closing down North Korean bank accounts in China and sending home tens of thousands of North Koreans working in China, to force it to scrap its nuclear program and balk at intercontinental ballistic missile testing. China had no immediate answer to this demand.

It was not a weird step when Trump referred the Asia-Pacific region as the ‘Indo-Pacific’ region. The veiled threat was to tell China of political repercussions in the region with the inclusion of India into the equation.

Generally speaking, the major challenge the US is facing in its relation with China is that how to strike a balance, both politically and economically, especially when the US is busy in Afghanistan, Iraq, and Syria.

The writer can be reached at qaisarrashid@yahoo.com

Published in Daily Times, November 22^nd 2017.