Is Trump right on China? A polite critique of Fareed Zakaria’s latest article.
By: Hirak Mukhopadhyay
Tags: Economics, Politics, India, China, Donald Trump

With Palash Gupta (right), Delaware Commission on Indian Heritage and Culture.

Let me start by saying Fareed Zakaria is my hero. As a young Indian-American who wants a future career in politics and international affairs, he along with Shashi Tharoor are the glimmers of hope that we Indians can be stalwarts in the field. The recent onslaught of attacks by the BJP and India’s right-wing against Jawaharlal Nehru make it even harder for already-unappreciated Krishna Menon to get his recognition as a great diplomat, as well as Nehru himself (at least for the diplomatic prowess). To Dr. Zakaria, I thank you for all you do and for the brilliant work over the years, and please keep it up. That way, maybe the Indian uncles and aunties can lay off about how international law and diplomacy are futile matters. Even his recent piece on Washington Post on Trump’s China policy is lucid and brilliant, until the very end. I will now offer a respectful dissent on some of his concluding points on said article.

The first issue here is the title. Yes, China is a trade cheat. But that is such an obvious point among economists and IR theorists that even Trump knows this, and he knows very little on U.S.-China trade and NAFTA, the latter actually being relevant here. No modern-day President should get credit for knowing China cheats, but rather be told if they are right or wrong based on their response to China’s cheating. Unfortunately for Trump, his response is incorrect.

China-Israel relations (Times of Israel).

Zakaria’s list of China’s mischief, such as WTO commitment inconsistency, blocking of technology and websites such as Facebook, Google, and Amazon, cyber attacks against the U.S., and intellectual property misconduct is well-construed. I wish human rights was also mentioned. China, Brazil, and India sabotaging the Doha Round was also despicable. However, China and India maintaining mixed economies, not liberalizing fully, and staying strong regardless is not a “threat” to the open world economy.

“Threat” seems to be too strong of a characterization. India and China are actually quite open, geopolitically and historically. Both most likely had their best trading relationship with the United States under the Obama Administration. Meanwhile, both have trade relations with Iran. China and India also have simultaneous economic and diplomatic ties to Israel, with Israel becoming a member of the Asian Infrastructure Investment Bank (led by China). At a dinner recently for the Delaware Commission on Indian Heritage and Culture, keynote speaker Richard Verma, the former U.S. Ambassador to the India, noted that President Obama was the first sitting U.S. President to attend India’s Republic Day parade. After Crimea and U.S. sanctions in response, Modi and Putin still remain on good terms. Putin and Xi Jinping continue a historical relationship best described as “frenemies”. China and India also continue their strange relationship in the present day, but China is still India’s largest trading partner. It is doubtful that mixed economies and pressing pause on liberalization by both countries will end all of the previous relationships, though pressing pause for too long is a bad idea.

China-Iran relations (BBC).

But trade and financial liberalization done slowly and intelligently, is not to be downplayed. Impatient liberalization led to the East Asian Financial Crisis of the late 90’s, stopping the massive growth rates of previous years. India and China should liberalize, but implementation and having an established banking system cannot be ignored. Perhaps Zakaria is implying they are not liberalizing for more nefarious and corrupt reasons, which has happened in the past. The Chinese government has displayed preferential treatment of state-owned enterprises over private sector firms. Likewise, China has not been the role model of fair competition in both the PRC and the U.S., nor has the pie of benefits always been cut equally between the two (Trump does have merit there, but I will address that later). Either way, delayed liberalization is nevertheless better than rapid and improper liberalization, whose evils India and China may have the strength to absorb, but end up susceptible to risks, given the billions of people in each country. Not to mention that liberalization going south gives strength to both countries’ anti-growth movements.

On the issue of mixed economies, both India and China are in the shadow of the old Soviet Union. China had Mao Zedong; India had Indira Gandhi. Both figures’ influence and penchants for public enterprise and socialism will not subside overnight. Perhaps a small fraction will always be there, as it is an important part of Delhi and Beijing’s history. In other words, call it “economic originalism”. Western and IMF pressure, like what happened in East Asia, should be applied more proportionally this time around. Beijing and New Delhi should have their own timetables to sort this out, as long as they are in transition to a market economy.

But are mixed economies or public-private enterprises such a bad thing? In the past, the United States has had both a strong federal government and private sector, often working together or being able to co-exist. FDR’s New Deal comes to mind, with big business still in a position of power. The Federal Government still bailed out the banks and Detroit in 2008. New York City, home of the country’s largest city government, had private-public cooperation under Mayor Mike Bloomberg, with a staff boasting private sector experience. Governor John Carney recently replaced the Delaware Economic Development Office in favor of public-private partnerships, with more private sector voices in Delaware’s economic development, with the State of Delaware still playing an integral role. The United States has a mixed economy themselves!

Former U.S. Ambassador to India Richard Verma at the Inauguration of the Delaware Commission on Indian Heritage & Culture.

Zakaria’s final point on China is the most concerning. He concedes Trump’s moves are not the brightest and that the Administration’s frustration is understandable, with other Administrations grappling with Beijing as well. But he then says that “getting tough on China is a case where I am willing to give Trump’s unconventional methods a try. Nothing else has worked”. I once had Zakaria’s open-mindedness to Trump’s approach on China myself. It lasted five minutes.

Trump’s actions have led to Chinese tariffs attacking American agriculture, such as soybeans, wheat, corn, cotton, sorghum, nuts, fruits, wine, and pork. It also led to tariffs on American steel and aluminum (ironic). Manufacturing is likely be targeted as well, and the range of industries affected is unclear, given China’s position. Trump beat Clinton in Middle America (where agriculture and manufacturing are key); they wanted change from the status quo. However, the status quo was serving them better economically than what may come next. Hillary Clinton’s boring stability would have been smoother than Donald Trump’s chaotic uncertainty. I always thought conservatism was about upholding tradition and remembering history and the liberals are the ones willing to start new precedent and be spontaneous. Nixon, Carter, H.W. Bush, and Clinton never approached China this way. Nevertheless, Republican U.S. Senator Ben Sasse and the Democrats who have spoken out against Trump’s China moves are taking the conservative (and correct) stance. It must also be said that when pragmatic liberals try new things, they are aware of the changing circumstances and the potential dangers. Trump is not.

China does cheat. Market manipulation and liberalization stagnation are not ideal. But going with Trump because “nothing else has worked” appears to make the United States far worse off than where it was under the Washington-Beijing consensus from the Great Recession through January 19th, 2017. Those days were not all sunshine and rainbows. In the end, those experiences and stalemates do not justify such drastic changes.

(Side note: for anyone interested, here is the link to the new Delaware Commission on Indian Heritage and Culture: https://www.facebook.com/DelawareIndianCommission/)