I was always taught that there was one critical technique in any negotiation, or even any relationship. The key is to get into the shoes of the other party, to understand life from their side. That way we can talk their language, understand their hot buttons, and find deals that work for all sides.
The US and China are currently involved in a major negotiation, ostensibly about trade but touching on all aspects of the relationship. We are relentlessly fed positions about US goals and complaints, built from statements about China developed from a US angle. So I thought it might be useful to try to look at the situation from a Chinese angle.
I haven’t done a lot of research about this. I don’t have many Chinese friends to talk openly about it either. So I am reduced to some educated guesswork. Still, it is a start.
To a Chinese eye, the central complaint of the US must seem hilarious. China sells a lot more stuff to the US than the US buys from China. After years of lectures about how closed Communist economies were cruel and destroyed value and threatening and evil and lots of other sins, China made a choice in the 1990’s to embrace the US shibboleth of capitalism. It has worked so well that all the US seems to do now is complain about it.
China anticipated market needs and set about supplying them with great discipline, and involving many Chinese moving home and working very hard to build better lives. That the US has built up a voracious demand and a workforce unprepared or unskilled to supply that demand economically is surely a US problem, not a Chinese one. That the US corporate and financial machine has required such greedy returns, and has as result been anxious to sign contracts to enter the Chinese market that have some stipulations about joint ventures and intellectual property is surely just good business by China rather than some form of exploitation. By the way, at least twice in the last five years it has been Chinese action to boost demand and credit that has kept that same US-led global financial edifice afloat.
Now it is perfectly reasonable to ask Chinese firms to act within the law, and even to renegotiate those laws if they are unbalanced. So when the intellectual property transfer has been achieved covertly or illegally that should stop, and China should be happy to agree to enforce that. China should also be ready to agree to rebalance terms of the world trade organisation – but would be fair to point out that it is the US that has blocked the function of the dispute resolution mechanism of that body. At the same time, some other rebalancing might be fair. Why should an American still always chair the World Bank, and a European the IMF?
There is also the question of the role of the dollar. China must have very mixed feelings about that, especially since it holds so many dollars. For any other nation bar the US, the response to persistently growing debt must include devaluation and austerity, and all the US based investors are quick to prescribe that diet for everyone else. But the US instead grows the budget deficit further, and the dollar stays strong, because it is the reserve currency and influenced more by international than domestic factors. Still, the fundamentals are the fundamentals, and one day they will bite. I wonder whether Mr. Xi ever points this out to Donald?
Even with the complication of the dollar, the trade dispute would be resolvable were it only about trade. China will be happy to enforce global standards, so long as it has more say in setting them. And it will also be ready to temporarily buy more goods from the US to massage the trade balance.
But of course this is not just about trade. There are at least three other lenses, all visible to China.
The first lens is politics, specifically US politics. Trump needs his stock market to be buoyant in 2020 and to have some deals to trumpet, so he will make sure there is a deal. China has internal politics too, but can be more patient. And Xi will very likely outlast Trump.
The second lens is about world influence generally, and China’s rising ambition. China will see that trade is just one visible manifestation of a wider gripe and the balance of power. They will be amused that the US does nothing to fix the fundamentals, either economically or diplomatically, where it continues to abuse allies and foes alike and to commit to unwinnable disputes.
China will see special irony through this lens, with the US quick to condemn two Chinese policies. How can the US condemn a modest Chinese military build up, when it has nuclear weapons in bases surrounding China in Guam, Okinawa and South Korea? How can they moan about Chinese treatment of Uighur Moslems when it still has troops all over Afghanistan? Bleating about international treaties must seem ironic, given how the US ignores many such treaties itself. And it is the US that is militarising economics – the Chinese have just been told they can no longer buy Iranian oil. Imagine how that looks to China, given the situation in Yemen and elsewhere.
Then there is Belt and Road. The starting point to objections about that must be “What else would you like us to do with all the money your consumers are transferring to us?” If the world insists on building up debt to China, China has to invest somewhere, and it would not help, nor be permitted, to buy up even more of USA Inc. Belt and Road might have subtle strategic overtones, but it is helping developing nations and building global infrastructure. If the Gates Foundation were doing it, nobody would complain. China might be happy to share some governance with global bodies for Belt and Road, but the west hardly seems to be rushing to offer that.
The final lens is the ugliest one. It must seem to China that the US is just bullying China on trade because it can. For all the shifting long-term balance of power, for now China has little choice but to seek an accommodation. This is the typical reaction of a threatened bully, and of course the natural behaviour of the current president.
It is obvious from history where such behaviour leads. Compliance from the bullied is accompanied by resentment and plotting for revenge, while the bully craves more satisfaction and fails to address anything fundamental. Hopefully this motivation will not outlast Trump, but, even if it doesn’t, the resentment and desire for revenge will still have been built up. And for sure the potential for revenge will ultimately be enormous.
So it is possible to see where a more globally beneficial accommodation between China and US could be reached, and even some paths around the obstacles preventing it. Strong international bodies, suitably rebalanced for a new age, could play a role. Viewing this from a Chinese perspective helps to see the potential, but also how the attitude of current US leaders will prevent any of this potential from being realised, and indeed how this will ultimately boomerang.
Getting into the shoes of another party remains a great tool. My thoughts about China have been clarified by this exercise. We can all use the tool in matters great and small. It can improve all of our relationships.
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