Stop blaming China when the United States are guilty as charged

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To say that there has been a peaceful relationship between the United States and China would be fake news. However, the fact that the US are alone in this fight against China should alarm.

It is due to a series of complex factors. The most obvious is a desperate attempt by the campaigning President to designate an outside threat as the reason for his own failures. I had personal experience dealing with the anti-China group in the Republican Party.

Why are so many Americans following that racist leadership? The fact is that the United States has had a constant conflict with one or another Asian ethnic groups. It is so easy to incense the American people by designating an enemy from “outside”. The treatment of African Americans, the Italians and recently the Mexicans is a constant racist undertone of American politics. The recent NPR program on Asian Americans leaves no illusion on the underlying American xenophobia. Now that the Commander in Chief is himself designating these enemies, we need to go more deeply into his accusations, and confront them with the facts.

The SARS Cov19–2 virus response

This unpronounceable virus is known at the White House as the Kung-Flu.

There is no controversy about the origin of the coronavirus. It was in Hubei, in the province of Wuhan. It became identified in December 2019. China is wrong to attack Australia’s investigation on the origin of the virus. This lack of transparency weakens China’s position: the action, however, deserves a reminder.

Here is the Chinese sequence.

December 27, 2019 Vision Labs, identifies the genome in Guangzhou

December 31, 2019 The Wuhan authorities make the virus public

January 12, 2020 China officially communicates the virus to the WHO

January 20, 2020 China recognizes that the virus is transmissible

January 21, 2020 In Hubei, 58 million people are confined to their homes

It took 25 days to isolate the people from the virus in China.

Let us look at the US Sequence

December 31, 2019 The CDC become aware of the virus

January 8, 2020 First public statement of the CDC

January 29, 2020 Trump praises China for its diligence in the virus

January 31, 2020 The White House declares a travel ban from China

February 24, 2020 Donald Trump announces that the virus is under control

February 25, 2020 The Mardi-Gras celebrations are authorized

March 16, 2020 Donald Trump advises on distancing and masks

April 15, 2020 Trump suspends the payments to the WHO

It took 76 days to isolate the people from the virus in the United States

The Trump Administration refuses to collaborate with States. Each State will take its own measures. Those are the facts. The decisions are delegated, but when Governors refuse to lift restrictions the President ask to “liberate” those States, including through white supremacist heavily armed militia.

On April 28, the Secretary of State Mike Pompeo accuses China of delaying the reporting of the virus. The timeline proves the contrary. The delay of the Trump Administration will spread the virus in the United States. The result is unquestionable.

United States: 254 deaths per millions inhabitants, China: 3

The trade war and the tax system

Declaring a trade war against China was the biggest mistake the White House could have made. And it failed. The ignorance of the Trump Administration was abysmal: the bulk of the trade deficit between the two countries was not due to the dumping of goods. It was a much more sophisticated situation.

International trade agreements and practices allow companies the sourcing of raw materials and semi-finished or finished goods from countries where they are available at a lower price. It is the basis of free trade. It does not provide a zero-sum game country by country, let alone goods by goods. It is mathematically impossible. It is a combination of gains and losses.

It also allows the production of goods by companies in another country. The US Department of Commerce plays that game constantly and ensures that US companies are treated fairly in their production and sales in individual countries or in regions like Europe. The bulk of the deficit was exactly that: the production in China by US companies pf goods that were cheaper (and sometimes better) produced in China. The Champion of all categories is Apple that used gigantic China-based facilities of a Taiwanese company, Foxconn, to produce iPad and other iPhones. Will those who want to sop buying Chinese goods extend them to Apple products?

While it does create a trade imbalance, it also provides US consumers with cheaper goods. Would Apple, a US company, be as successful as it is without resorting to these productions? Samsung, with lower production costs, would have crushed Apple. Is it the objective?

Why did the Trump administration not act on the absence of taxes paid by those companies who kept their profits abroad to avoid repatriating them and paying corporate tax? The tax avoidance by major US multinationals is much more damaging to the United States than the trade deficit.

The result is staggering. The trade deficit, despite all tariffs, destroyed part of the US agriculture, unable to export food to China, and rescued by Trump with a gift of $ 30 billion, a true electoral bribe. On top of that it failed.

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Source: Statista

The depth of the US hypocrisy explodes when one realizes that this is only about goods. Yet the United States are a services economy by 80% of its GDP. There the US pretends to invade the world with its services without any consideration for the fact that their services are not even taxed locally. The European Union rightly sued the Google, Amazons and other services company to impose taxes. In that field the US does have a surplus around the world.

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Source: CFR.org

War with China is not a solution: it hurts the United States

The boomerang effect is now felt. At a time when recession his hitting the world, Donald Trump continues to fight a war with China. From the beginning it was a mistake. Today it is even worse: it is a sheer political exploitation of the naturally racist instincts of his electorate for electoral gain. I am not even sure that the Democrats do not share the same instincts.

But what is worse, is that it was a complete failure. None of the battles fought against China by the US administration were won, including in Vietnam or North Korea. It made the world a more dangerous place.

I deeply hate some of the characteristics of the Chinese regime in human rights. However, having worked with Chines authorities and companies for the better part of the past 20 years, when I spent three weeks as a senior executive of General Electric, I know that trust is not the right path either. International relationships require constant vigilance. But the Chinese are even teaching us lessons in climate change, 5G technology, Electric Vehicles and Artificial Intelligence.

Relationships with China have to be conducted at arms’ length. What Donald Trump has demonstrated, is that war rhetoric might be electorally useful, but is a lost war.

Written by

CEO at Galileo Global Advisors and Adjunct professor Columbia Law School.

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