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Tip to Biden: Neglect the commerce, the true warfare with China is over

New administration, same old trade policy? There's a big difference between outgoing U.S. President Donald Trump and President-elect Joe Biden, but when it comes to trade – especially with China – Biden has promised to protect even the outgoing ore protectionist. As a candidate, Biden not only pledged to take "more aggressive trade enforcement measures against China," but suggested rewriting global procurement rules to reflect his $ 400 billion "Buy American" government purchase plan wear. Japan and the European Union might have something to say about this.

If Biden is really the "last best hope for globalists" as the Financial Times put it in April, globalists should be concerned. "Deglobalization" was the word of the year even before the coronavirus pandemic set land against land in the mad battle for masks and ventilators. In fact, both US imports and US exports have declined this year compared to the first nine months of 2019. That's after running flat for a decade.

But anyone who believes globalization is still all about trade – like both Trump and Biden – must have completely missed the 2010s. Today it is technology that holds the world together, not the container ship. To effectively lead the United States in the 21st century, Biden must learn that dominance in technology networks is the key to success. It doesn't hurt to try to bring some manufacturing facilities back on land, as he said during the campaign, but it won't change the geo-economic balance of power in the Indo-Pacific. If Biden really plans to tough it out with China, he'll have to double up on the U.S.-China tech war that crippled Huawei, put heavy pressure on Chinese semiconductor foundries, and brought TikTok to the brink of divestment.

Contrary to the media portrayal of Trump's trade war as a pathetic failure, he has actually managed to cut US imports from China. The seemingly unstoppable long-term trend of increasing reliance on China has reversed. However, the decline in imports from China had essentially no impact on the overall US goods trade deficit, as supply chains were merely diverted from China to other East Asian countries, particularly Taiwan and Vietnam. Whatever that may mean for the making of cities in swing states in the US, it's bad news for China. The massive shift in trans-Pacific supply chains likely prompted Chinese President Xi Jinping to announce his double-circulation strategy, which encourages Chinese companies to buy fewer materials overseas and source them domestically instead.

Both Biden's Buy American and Xi's dual circulation strategies signal a shift towards self-sufficiency. Neither has a great chance of success. China has been trying to boost domestic demand for years, but has been consistently held back by high inequality and a weak social safety net – problems the ruling Communist Party is in no hurry to resolve. And despite the rhetoric of the US presidential candidates in the rust belt states, the United States is too rich to ever become a manufacturing powerhouse again. Advanced manufacturing countries such as Germany and Japan have a national per capita income at the level of the poorest US states. When Bruce Springsteen sang, "These jobs go guys, and they don't come back" in 1984.

Manufacturing orders are even less likely to return when Biden is genuinely as committed to allies as he constantly claims to be. In the first three years of the Trump presidency, the U.S. goods trade deficit with the European Union boomed (although it appears to have calmed down again in the first nine months of 2020). The Europeans do not want to give up these profits. More importantly, the EU has launched an aggressive regulatory program to hinder US tech giants like Amazon, Apple, Facebook, Google and Microsoft. The EU competition commissioner Margrethe Vestager has alarmed that the coronavirus pandemic "has shown how dependent we are on US companies".

Biden will have a hard time "building a united front of allies and partners in the US to confront China" when European countries and even Australia line up to regulate and punish the businesses of some of Biden's most dedicated donors. Even America's closest security partner, the UK, had to be forced to ban Huawei from the country's 5G networks. Biden is right when he says that "China cannot afford to ignore more than half the world economy" represented by the world's liberal democracies when they take a unified front on "everything from the environment to." Work, trade, technology and transparency ". “However, it is little more than wishful thinking that a Western world without Trump's power to China will represent a united front on these issues.

If Biden chooses to end the trade war with China, it will likely have little impact on the shifting of the trans-Pacific supply chains as China's mounting domestic repression, hostility towards foreigners, and general unpredictability will be enough to keep businesses out. If one of the country's most loyal tech titans, Jack Ma, can cancel the $ 300 billion Ant Group (the fintech giant he founded) at the last minute on Xi's personal orders, overseas investors must know they are don't do this. I don't have a chance. Ant Group's listing on the Shanghai and Hong Kong stock exchanges was intended to demonstrate the continued strength of China's financial markets. Instead, it showed the world that even Chinese national masters cannot risk insulting the Communist Party.

Such a feverish environment is ripe for US disruption. Trump's tech war against China is only around six months old, but it is already forcing decisive changes in Asian technology networks. South Korean and Taiwanese firms have adjusted to US policies and started cutting some of their cables to China, and Huawei is on the verge of collapse. China's long-term strategy of building a domestic semiconductor industry is in a mess. Follow-up effects are likely in related industries such as artificial intelligence, cloud computing and self-driving vehicles. China, which has long forced foreign firms to transfer technology into its domestic market as the price of entry, is now facing the prospect that foreign firms will pass on the Chinese market in order to maintain access to the United States – and thus retain their technologies themselves.

It may be a political horror to admit it, but the United States doesn't need to have manufacturing orders returned from China. It is much more important for the country to maintain its technological lead over China. In contrast to its weak legal basis on import tariffs, Trump's China tech war was based on export licensing powers that were clearly given to the executive by Congress legislation. The President can add companies to the list of companies maintained by the Department of Commerce if this serves the national security and foreign policy goals of the United States. That's all Biden needs to keep the pressure on China. It may be nice for U.S. allies to join the effort, but it won't be necessary. For all internationalist rhetoric, Biden might ultimately find that it's easier to go it alone.

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