Trade after Trump: Business, Biden and the Belt and Road

During Trump’s tenure the World Order has undergone dramatic changes. To adapt, America needs more than a new foreign policy – it needs a revolutionary economic policy.

After Joe Biden was officially declared President-Elect, pundits raced to deduce how a Democratic administration might reform policy. High on the  foreign policy agenda is relations with China. Trump once faced mockery for his fixation with China – (Biden had said “China is going to eat our lunch? C’mon man…”) but his tough stance on the apparent malpractice of Chinese business won him the votes of workers and companies alike. If the incoming administration is to face the challenges posed by a rapidly rising China, a radical economic transformation will be required.

Chinese citizens themselves observed the election with some enthusiasm, but foreign policy wasn’t at the centre of most discussions. A popular graphic on social media site Weibo read “two geriatrics fighting tirelessly just for a job! What excuses do you have?”. Official media encouraged a sense of schadenfreude, focussing on protests and the dysfunctional counting process. A widespread view was that whoever were to win the US elections was of little consequence to the People’s Republic.

It’s true that both parties now treat China with open hostility. Biden has rowed back on his earlier statements dismissing China as “not a competitor”. Trump’s lasting contribution to American foreign policy will probably be that he initiated a phase of strategic struggle with the world’s second superpower that will be difficult to back down from. But superpower relations need not drift towards a new Cold War, conflicts over trade and McCarthyism. In fact, radical economic overhaul at home, would dispel many of the factors driving conflict with China.

Blaming China

Trump’s anti-China tirades carried weight because many blame China for local job losses and urban decay where American manufacturing used to reign supreme. American businesses responsible for the capital flight that left US industrial heartlands desolate also support a tough stance on China, but most seem to want to have their cake and eat it – requesting restrictions on Chinese competition whilst demanding access to Chinese markets and labour.

So far, Biden has promised to review tariffs on Chinese goods, but he has avoided committing to their removal. The Trade War draws bipartisan support from both protectionist Republicans and the anti-globalisation left. Opposition from a Republican Senate and from Democratic progressives makes tying up any new free-trade deals unlikely. Despite a consensus on the benefits of foreign trade, a majority of Americans believe in a trade policy that puts America first, particularly when dealing with China.

To this end, the White House has attempted to suppress China’s growing economic clout by pressuring the politburo to liberalise trade whilst aiding America’s homegrown competition. Policies aimed at maintaining an industrial advantage have already come to fruition in the form of the America LEADS Act and the Endless Frontier Act, and Chinese restrictions on US made software (Google or Facebook, for instance) have now been replicated stateside with bans on WeChat and Tiktok. To further assuage business, Biden has announced a “Made in America” policy to provide government support for American companies and encourage local demand.

Whilst this state support may be welcome news for U.S. companies, there is little likelihood of it shifting China’s position. Xi Jinping has a plan to make China great again – the recently announced “dual-circulation” strategy, a policy intended to increase domestic consumption to complement exports and better insulate the economy from external shocks. The “Made in China 2025” policy aspires to move China up the global value chain and wean dependence on low-cost manufactures. While the United States is attempting to wrest back its industrial base from China, China is seeking to leapfrog the USA technologically.

Mike Pompeo’s transactional foreign policy has given Xi Jinping the space to advance his signature strategy, exporting Chinese capital, technology and expertise across Central Asia and Africa as part of the Belt and Road Initiative. An unintended  consequence of Trump’s trade war is that China now has a seemingly successful policy for economic decoupling whereas America as yet does not.

Trade Wars are Class Wars

Trump’s anti-globalisation strategy was, in actuality, an attempt to return to a less competitive, American dominated model of globalisation. Free trade appears to be only acceptable to American capitalists if protected by monopolistic practices and rigid economic hierarchies in the global supply chain. That they have instead inspired a self-strengthening programme in China is likely to result in deeper disillusion in the US with trans-continental trade. If the Democratic establishment are serious about tackling the root causes of Trumpism and avoiding further conflict abroad, they must formulate their own comprehensive policy to address the discontents of globalisation.

In Trade Wars are Class Wars (2020), Klein and Pettis offer the explanation that competition over trade is, at its root, a product of domestic inequality: without sound investments at home, capital is bound to roam abroad in search of higher returns. The solution is therefore to increase domestic demand, especially by increasing the purchasing power of the working class with increased wages. The issue for the American left is whether that is achievable within the confines of a laissez-faire economic model.

In his seminal study of imperialism, J.A Hobson wrote that “Whatever is produced in England can be consumed in England, provided that the power to demand commodities, is properly distributed”. The conclusion of Hobson, applied to the modern era by Klein and Pettis, is that only radical economic redistribution can prevent disruptive trade policies or fully blown military conflict, both of which disproportionately affect the working class. China appears to recognise that a nation of low paid labourers is an obstacle to developing a high-functioning and self-sufficient economy and aims to adjust its position in the global division of labour. For America to advance, it must first accurately diagnose its own ills.

                Writing in 1902, it was Hobson’s opinion that “it is the sudden demand for foreign markets for manufactures and investments which is avowedly responsible for the adoption of Imperialism as a political policy and practice by the Republican party, to which the great industrial and financial chiefs belong, and which belongs to them.” According to Klein and Pettis, a century later,  the ongoing trade war represents this continuity, an attempt to achieve market access not through force of arms but through overwhelming economic might. In the case of China, this tactic looks ever more unlikely to succeed.

Trump’s rebuke of globalisation won him a measure of support – but his methods for dealing with it have fallen short. Given blue-collar support for action against the uninhibited globalisation that has stripped former industrial heartlands of jobs, it’s easy to overlook the fact that the trade war has done little to rectify these issues. Tariffs have led to retaliatory price hikes for American consumers and increased pressure on American exports. Falling profit margins have forced companies exporting to China to lay off workers.

                Among the reactionary elite, conflict with China is a holy struggle to reassert the dominance of American economic power. As China seeks to disengage its economy from the U.S., the result abroad has been an imperialist struggle as companies ideologically wedded to free exchange seek to reinforce economic hegemony. “America First” represents not an autarkic path to prosperity but a reassertion of the international supremacy of the dollar.

Regime Change Starts at Home

While Republicans identify a corrupt elite as responsible for industrial decay, socialists recognise these issues as products of unfettered capital; multi-national corporations chasing profit margins by packing factories off to areas with cheap labour reserves and low resource costs. As long as these issues persist, Trumpism is likely here to stay. Should the incoming Biden administration seriously wish to prevent a “clash of competing empires”, it needs a transformational economic and social policy that puts U.S. workers, not capital, at the heart of the project.

                He will face opposition from Republicans who are likely to rediscover their commitment to a small state and balanced budgets, but there should also be concerns that Biden’s true economics are conservative in practice and neoliberal in nature. He is a “life-long centrist”  who boasted in the primaries that he had “beaten the socialist”, has targeted the indebted and consistently took the side of banks and creditors. Many of his corporate donors are likely to be free-market ideologues that resent the idea of state intervention in markets. For a progressive economic policy, what is needed is the united pressure of progressive elements of the Democratic Party and American workers and unions.

                Confrontation with China is not simply an ideological position of Democrats and Republicans but a logical necessity of neoliberal capital. Faced with falling profits and costly competition, any policymaker is likely to find themselves pressured into a stance that reasserts American market dominance. To ensure that, instead of further conflict, the US pursues the international cooperation necessary to tackle global issues such as climate change and pandemics, American progressives must continue to call for economic change.

                Biden’s instinctual rehashing of Obama era policies is likely to provoke a factional struggle, with many progressive Senators now opposed to a simple return to the era of unregulated globalisation. To truly put American workers first, Biden must follow Beijing and stimulate domestic demand. A decisive factor in Trump’s 2016 victory was Democratic neglect of American workers, unimpressed with globalisation and unrepresented by Hilary Clinton. Biden is a man who got into politics “just because he could” and his predisposition is likely to be a simple return to the policies of yesteryear. That horse however has long since bolted.

The China of today is a different beast even to five years ago and will not be so easily bullied by US interests. Attempts to imitate the policies of Obama, when America was able to maintain a veneer of respectability whilst carrying out a plethora of drone strikes appear increasingly unfeasible.

But Biden himself was a key player in many of these policy mistakes; from his support to the Iraq war to his sponsorship of countless crime bills that disproportionately disadvantaged African-Americans, his record implies the improbability of any serious reform. His probable pick for Defence Secretary has said that the U.S. should maintain the ability to sink all Chinese ships in the South China Sea within 72 hours to preserve a strategic edge. The position of establishment Democrats seems unlikely to instigate a step away from the brink.

                America today is faced with two choices: to double down on an aggressive, imperialistic stance that risks a new Cold War or to pursue progressive policies that aid American workers and prioritise international cooperation. To achieve the latter, America needs nothing less than a transformational welfare state, redistributive taxes and socialised services. Given Joe Biden’s historical conservatism and a proclivity for neoliberal rather than disruptive, state-led economic policies, it’s a question that can only be resolved not by Biden himself, but through the united efforts of the American working class and the Democratic left.

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