THE GIST of Editorial for UPSC Exams : 21 November 2018 (When giants clash: on the US-China discord)

When giants clash: on the US-China discord

Mains Paper 1: International Relations
Prelims level: APEC
Mains level: Important International institutions, agencies and fora- their structure, mandate

Context

•  The Asia-Pacific Economic Cooperation (APEC) organisation wrapped up its summit with no joint communiqué issued.
•  The economic rivalry between Washington and Beijing appeared to fracture the 21-nation summit into two segments.
•  The source of the friction stemmed from the Trump administration’s “America First” policy, under which Washington led the charge on “unfair trade practices”.
•  This was an implicit accusation that China wasn’t levelling the playing field in global trade.

From U.S. angle

•  The U.S. has been urging China to increase market access and grant intellectual property protections for American corporations, cut back on industrial subsidies and, at a broader level, bring down the $375-billion trade gap.
•  Vice President Mike Pence, who attended on the President’s behalf, also hinted at strategic pushback when he called upon nations to eschew loans that could leave them in a debt trap with Beijing.
•  The Chinese message at the plenary was a strategic one too: President Xi Jinping did not mince words in touting Beijing’s Belt and Road Initiative.
•  The BRI has worried smaller Asian nations and the U.S., particularly given that China views the Asia-Pacific landscape as a means to secure economic predominance worldwide.

Analysing the conflict

•  To understand what this clash of the global economic titans portends for the world trading system.
•  It is instructive to examine the path of their mutual conflict thus far.
•  The troubles began over the summer when both countries started taxing $50 billion worth of the other’s imports, followed by the U.S. slapping $200 billion of Chinese exports with a 10% tariff, to be ratcheted up to 25% by the year-end.
•  China, unsurprisingly, retaliated with a promise to impose reciprocal taxes to the tune of $60 billion.
•  Already, the tariff war has resulted in the IMF downgrading its global growth outlook for this year and the next to 3.7%, down 0.2 percentage points from an earlier forecast.

Way forward

•  If this continues, eventually global supply chains may be hit, and shrinking trade volumes may cause companies to seek out new trading routes and partners.
•  Institutionally, multilateral rule-making bodies such as the WTO may lose their authority, and an interlocking system of bilateral trade treaties and punitive sanctions networks may substitute the consensus-based approach that was forged so painstakingly after World War II.
•  Asia will be at the heart of this war of attrition because strategic control of its high-value maritime trading routes is the key to China’s dreams of global trade dominance.
•  After the APEC summit the world is still poised on the edge of the trade war vortex.
•  The forthcoming G20 meeting in Argentina offers an opportunity to pull back from the brink.

Online Coaching for UPSC PRE Exam

General Studies Pre. Cum Mains Study Materials

Prelims Questions:

Q.1) Consider the following statements about BIMSTEC:
1. All BIMSTEC members are coastal nations surrounding Bay of Bengal
2. India is a founding member of BIMSTEC

Choose the correct statements from the option given below:
a) 1 only
b) 2 only
c) Both 1 and 2
d) Neither 1 nor 2

Answer: B

Mains Questions:
Q.1) The U.S.-China discord at APEC highlights the dangers of their tariff war. Explain it.