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China hosts BRICS conference amidst escalating trade tensions with US

By Patrick Higgins  |  02/08/2017 14:23
The BRICS nations have concluded two days of high-intensity talks in Shanghai, which covered measures of countering protectionism and increasing protection for intellectual properties (IPR); all this while the US considers retaliation against China, for theft of American intellectual property and unfair trading practices.
The 7th meeting of the BRICS trade ministers was labelled as successful by the participating countries.  All of the representatives from China, South Africa, Russia, India, and Brazil all agreed to continue to pursue further development of the layered trading relationships within the quasi-economic bloc and to strengthen trade/investment networks.  Additionally, the group pledged to continue moving towards protectionist reductions domestically in their respective countries by repealing outdated legislation, as well as internationally, by increasing overall market access.  Furthermore, all ministers agreed to petition for their respective nations to develop more sophisticated IPR legislation, to provide better-suited environments for trade and innovation.
The meeting took place in China, a country which is keen to cement its role as an economic leader in the world.  As China is anxious to be recognised and respected as a preeminent world power and pioneer in innovation, the timing of its latest trade dispute with the US is ironic.  Yesterday, an anonymous senior figure within the Trump administration released a statement saying that President Trump is speculating on whether to authorise U.S. Trade Representative Robert Lighthizer permission to investigate unethical Chinese trade methods against America.  Such action would be sanctioned under Section 301 of the Congressional Trade Act of 1974.  Section 301 allows for the President to conduct unilateral investigations into illegal practices that harm U.S. industry, and to impose sanctions if said practices are inequitable and hurt US commerce.  The US says it has many reasons to believe that Chinese trade schemes are impeding US commercial development.  Not only have the Chinese been accused of relentlessly stealing American technology and copying innovation methods, but they have also been labelled as currency manipulators and active participants in, "steel dumping," to the US domestic market.
-In response to the statement, China was silent, with Chinese commerce officials declining to answer questions regarding tensions with Trump.  Recently, China's government has said that bilateral Chinese-American trade only brings benefits to both countries and that China is willing to work towards improving economic relations.
These turns of events are no surprise.  China, long denied global hegemony due to US influence, has increasingly sought to cement its position as a leader or influencer amongst newly-industrialised countries, such as the other members of BRICS, and old US enemies, such as Russia for example.  These are nations whose politics and economies are less likely to be subject to intense US pressure on a regular basis.  Additionally, China is still nominally a communist state, not quite an actual market economy.  The Chinese government is quite enthusiastic about encouraging developing countries to emulate the Chinese economic model, and are worried about the sustainability of Chinese economic growth.  As such, many Chinese firms are partially government-owned, and many others benefit from subsidised loans.  Additionally, the Chinese government sets a 2% trading band for its currency, the yuan, each day.  Many claim this band is set to keep the yuan undervalued and to make China a more attractive place to do business.  Such government-derived direction is possible since China still claims to be communist, putting the country in a relatively-comfortable grey area.  It is such government support that causes many in the US to accuse the Chinese of unethical overall trading methods.
Though he campaigned on punishing China severely for its trading transgressions against America (let's also not forget his infamous tweet where he stated that global warming is a Chinese myth to eliminate US industry), Trump has been reluctant to start an all-out trade war with China without an alternative prerogative.  Now, however, Trump has discovered one.  North Korea, which claims it has developed ballistic missiles capable of striking the US, has rattled Trump.  Knowing the only ones who can influence North Korea in any significant way are the Chinese, Trump has unsuccessfully pushed for China to punish the North Koreans more for violating many UN sanctions and declarations.  This pressure has amounted to almost nothing, besides a Chinese ban on North Korean coal.  Now, in response to perceived Chinese inaction, Trump seeks to use the North Korean fiasco as an excuse to punish China economically, and coerce the Chinese into cooperation.  Whether Trump will decide to initiate an unfair practices investigation next week is yet to be seen, but we will see the implications of any decision in the coming weeks.


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