When giants clash: on the US-China
Mains Paper 1: International Relations
Prelims level: APEC
Mains level: Important International institutions, agencies and fora- their
- 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
- 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
- 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
- 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
- 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.
- If this continues, eventually global supply chains may be hit, and
shrinking trade volumes may cause companies to seek out new trading routes
- 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.
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
Q.1) The U.S.-China discord at APEC highlights the dangers of their
tariff war. Explain it.