Giant Against Giant

Last Sunday, during a state visit to Japan, Donald Trump became the first U.S. president to attend a sumo tournament, an ancient Japanese sport in which two impressive-sized wrestlers struggle to force their opponent out of the ring. To me, sumo represents a magnificent metaphor for the current confrontation between the United States and China, the two largest economies on the planet.

As we know, both countries are faced with a commercial war that threatens the world’s economic growth. A few weeks ago, the intensity of the confrontation grew after the U.S. imposed tariffs on a new group of Chinese products. And it increased again a few days ago when the Trump administration banned its country’s companies from trading with Huawei, the Chinese telecommunications champion (accused, among other things, of being an agent of the Beijing government).

The combat we are witnessing today is not a simple commercial skirmish. It is the final phase of a confrontation that is likely to define the future of relations between the dominant power and its principal challenger, which owes much of its prosperity to having been able to integrate itself into the global economy without respecting the rules that other countries must respect.

In effect, the Chinese government subsidizes and protects from foreign competition companies that then advantageously compete in international markets. The Chinese government also maintains state monopolies in various sectors of its economy, refuses to respect intellectual property (how else can it export so many fake products?) and forces the transfer of foreign technology, coercing foreign companies that want to operate in its country or facilitating (and protecting) technology theft.

This way of acting means that, for example, we do not need conclusive evidence to imagine a close relationship between Huawei and the Chinese government (otherwise it would never have become what it is today) and that thus, if asked, the company could not refuse to use the telecommunications infrastructure it has installed outside its country for espionage purposes (one of the U.S. government concerns).

As Thomas Friedman points out in The New York Times, to turn a blind eye might have made sense for the U.S. when China exported textiles, toys and trinkets (while at the same time opening its huge domestic market to foreign investment), but not now when it is able to compete with the U.S. in products that will shape the way we live our lives in the future: artificial intelligence, robotics, the Internet of Things, microchips, electric vehicles, etc. Despite himself, Trump is right on this.

We do not know if these giants will be able to reach a satisfactory agreement. The main obstacle seems to be China’s lack of will to fulfill its obligations (in 2015, for example, it promised to stop facilitating industrial espionage) and the difficulties the U.S. would have in making China comply. (If its economy were not so strong, it could hardly embark on a campaign costing it profits and jobs.) What we do know is that the well-being of the rest of the world depends on it.