Thriving in the trade war
The author is a professor at Ewha Womans University Graduate School of International Studies.
The trade war between the United States and China is expected to drag on. Hopes for a dramatic deal were dashed after talks broke off last week, triggering rounds of new tariff measures. Many had thought U.S. President Donald Trump was bluffing when he vowed to fix the U.S. trade deficit with China through heavy tariffs in March last year. Since then, the battleground and fusillades have intensified. The attack on goods has spilled over to investment, human exchanges, science and technology, and even to the military and security fronts.
The trade war has escalated largely because Beijing misjudged Washington. It thought the protectionist threat was simply Trump’s style of getting things done in his favor. Beijing failed to read the broad anti-China sentiments among Americans and their dissatisfaction over the trade terms with China. Beijing’s refusal to compromise — except for reducing China’s shipments — and its unwillingness to comply with U.S. demands for leveling of the trade playing field have only provoked Trump, who hates to lose a deal, and hardened American attitudes.
As the United States is increasingly determined to see through its campaign to rein in China’s ascent — and China is equally firm in defending its indigenous development model and regime — it is not easy for the two countries to achieve a meaningful breakthrough. Any settlement will be more like a cease-fire than the end of the war.
The trade war sets the stage for a contest of domination after the closing of the chapter in which the United States and China endured each other in the spirit of competition and cooperation. The International Monetary Fund (IMF) cited the trade war as “the biggest risk” to the global economy. The conflict would undermine the growth of the world’s two largest economies and dampen investment and business sentiment around the globe. It could also trigger a vicious cycle and a structural slowdown, dealing a blow to the Korean economy that is already in a downturn.
The conflict has also upset the longstanding global value chain, whereby China acts as the factory of the world, the United States acts as the market of the world and Korea, Japan and Germany supply intermediary goods. The Sino-U.S. trade war also shakes the foundation that has made Korea a trading powerhouse. Exports that have long sustained the economy against a domestic slump are now in jeopardy.
A crisis always offers both danger and opportunity. The conflict exposed the fragility of the state-controlled Chinese economy, which Korea has blindly chased as a land of opportunity. The lesson could be painful now, but can help us better prepare our business sector for the next stage. The United States can also no longer be relied upon to uphold global trade order at all costs and will choose its national interests over alliance. Korea must structure a national strategy in a comprehensive economic, diplomatic and security context to survive the transitional changes.
Although a latecomer, Korea quickly caught up to join the leadership in the digital transition. Yet it has lost its balance and lost the path in the journey in the evolution toward the next industrial stage. It cannot move forward due to a myriad of regulations. The new players stay in the peripheral roads because the expressway is dominated by the mainstream players.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, May 20, Page 28