Author: Shawn Donnan

Posted on Financial Times | Tuesday 19th December, 2017


Donald Trump has revealed a national security strategy with a heavy emphasis on what his administration portrays as an existential economic competition with China.
In a launch speech on Monday the US president made clear he had only one outcome in mind. “We are declaring that America is in the game and America is going to win,” he said.
A Chinese foreign ministry spokesperson said on Tuesday: “We urge the United States to stop the strategic intention of deliberately distorting China and abandon the outdated concepts of Cold War thinking and zero-sum game, or else it will only harm itself.”
The new strategy looks like the recipe for a potentially damaging trade war between the world’s two largest economies, rather than a game. Yet also in there are messages meant to assuage concerns of those who fear Mr Trump is out to blow up the international order.
Here come the tariffs . . .
For most of the past year the Trump administration has been promising more tough action on trade than it has been able to deliver as the president’s campaign promises have quickly confronted real world complexities and consequences.
But that may be about to change. One of the key promises the new document makes is to deliver tougher enforcement of trade violations by economic rivals such as China, which amounts to code for applying punitive tariffs.
In the pipeline and facing deadlines in the coming weeks are a half dozen different ways in which the Trump administration could apply new tariffs on goods from China and other rivals.
Trade experts in Washington believe the conclusion of an investigation into China’s intellectual property theft and forced technology transfer policies is near.
Facing deadlines in January are two separate national security investigations into imports of aluminium and steel that are expected to result in a mix of new tariffs and quotas.
Also looming are presidential decisions on special “safeguard” investigations into imports of solar cells from China and washing machines made by South Korea’s LG and Samsung. A separate probe of imports of aluminium sheeting from China is under way and seems destined to lead to tariffs with the US commerce department having taken the rare step of bringing the complaint — making it plaintiff, prosecutor and judge all in one.
Brace yourself for more scrutiny of Chinese investment and the new IP wars
The new document places a large emphasis on the importance of US intellectual property and introduces the idea of a “national security innovation base” comprised of everything from academia to tech companies. “The genius of creative Americans, and the free system that enables them, is critical to American security and prosperity,” it declares.
One way it proposes to protect that innovation base is strengthening the role of the Committee on Foreign Investment in the United States, or Cfius. The Trump administration has endorsed proposed bipartisan legislation that would expand the remit of Cfius, an inter-agency committee that reviews US acquisitions by foreign investors for potential national security threats, to overseas joint ventures involving US companies. Entering such joint ventures has long been part of doing business in China for many US companies that also are often forced to hand over important technologies to their local partners.
Among the other measures floated in the new strategy document are restrictions on foreign students from “designated countries” who study science, engineering or other technology-related fields in the US. The goal: “To reduce economic theft by non-traditional intelligence collectors.”
Trump may be out to reform the multilateral system rather than blow it up
One of the biggest fears among policymakers that Mr Trump has helped unleash since he arrived on the global scene is that he is out to blow up the multilateral system that has helped preserve a relative economic peace for the past 70 years. Yet what emerged on Monday may offer some comfort.
It is unclear how much standing one should give a policy document when it comes from a White House led by a notoriously erratic and instinctual president. But the new national security strategy at least foresees a role for the multilateral system, albeit one reformed to better serve the US.
“That economic system continues to serve our interests,” the authors of the new strategy write. “But it must be reformed to help American workers prosper, protect our innovation, and reflect the principles upon which that system was founded. Trading partners and international institutions can do more to address trade imbalances and adhere to and enforce the rules of the order.”
They also call for the US to pursue its economic battles against countries such as China with the help of allies. “The US will engage industrialised democracies and other like-minded states to defend against the economic aggression, in all its forms, that threatens our common prosperity and security,” administration officials declare.
The first sign of that strategy emerged on the sidelines of a World Trade Organization meeting last week when the US, EU and Japan announced they would work together on issues related to industrial overcapacity and forced technology transfers.
The question is how long any such alliance will last and if it will weather what increasingly looks like a brewing trade war.

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