A high-level US negotiating team will arrive in Beijing later this week to talk about trade and technology wars. These discussions are not really about trade. America has been running trade deficits for forty straight years, long before China even became a major trading nation. As many experts have noted, America’s trade deficits are driven largely by its low savings rates and this has little to do with China. The team’s reported request for China to cut its bilateral deficit with the US by $100bn is illogical conceptually and in its practicality.
This economic war is more about protecting America’s technological edge. The White House’s latest round of trade sanctions draws on Section 301 of the 1974 Trade Act to cite China for Intellectural Property Rights (IPR) violations and unfair investment practices. IPR theft is not the issue. To the extent it exists, it should and is being addressed.
The more serious concern is whether through its Made in China 2025 initiative and other industrial plans, China is unfairly subsidising strategic industries and violating World Trade Organisation (WTO) guidelines, in particular by “forcing” foreign firms to transfer their technology to China as a condition for accessing its domestic market.