From Economic Clash to War of Supremacy

The trade war between the US and China is actually looked like a cover, not purely economic matters such as the American Trade Deficit, Intellectual Property Theft, Investment Barriers, and the like. But it is more about  the clash of supremacy, America First versus China First, especially with the massive development of China technology and  its military budget as well as the expansion of China’s foreign policy (via the Belt and Road Initiative). Therefore, China is considered to be preparing to displace American domination. Whereas economically, with United State GDP per capita that is very far adrift of China, even though US economy is stably growing 1-2 percent annually and China is stably at 6 percent per year, China still needs decades to catch up with America. It’s still very far.

The matter of American trade deficit, for example, is actually not related to China’s trade  surplus on the opposite side. Just look at the data and trade charts of the two countries in the last 20 years, the graphs are actually not too “connected.” At a time when America was experiencing a severe deficit, for example in the early 2000s, China did not even have a large surplus from the US. So it is not a matter of a trade deficit between the two countries. As long as the Global Currency is US Dollar and the US applies a budget deficit into its budget system the US will continue to deficit. So when viewed in more depth and in detail, America’s foreign trade deficit is not due to China per se.

Matter of theft of technology and intellectual rights, in fact the same. If viewed from the side of the economic history of the American state itself, it is not an important matter in fact, considering some of the main American businessmen in the era of the British industrial revolution also did the same thing. So the main issue is only a matter of imitation, stealing, reversed engineering, and the like, especially those related to American military technology that will be backfiring to US Millitary supremacy in several years to go.

Even though the problem is actually common in a country undergoing transformation. Why does the US feel threatened? Because the end will lead to the rapid development of Chinese military technology as witnessed today, which will trigger an arms trial or threaten the military supremacy of west superpower. Therefore, the issue of the new cold war (New Cold War) began to be raised. Even though the matter of technology transfer in general, it seems that only intensive cooperation is needed to equalize law enforcement on Intelectual Property Right in both countries. And it can be discussed carefully.

Economist Yukon Huang, a former Country Director of the World Bank, in his book three years ago, Cracking China Conumdurum, has an interesting example of American theft of technology. In the era of the British Industrial Revolution, he wrote, it was Francis Cabot Lowell from America who stole Power Loom technology, an electric spinning device, from England and brought it to America, which eventually helped accelerate the industrial revolution in the US. At that time, the protection of intellectual property rights was very strict in England, it was very difficult to record or take photograph. So inevitably, Francis Cabot finally kept it in his head on memorizing it. And when he returned to America, power loom technology from England began to be used massively without permission.

The problem is, for the case of imitation technology, China does look prominent, truly “good at plagiarism”, done massively in almost all lines. Some economists and observers try to understand it. Symptoms of “from imitating to innovating” usually occur at the beginning of the transformation. But because many have begun to endanger the security and comfortable zone of America, especially militarily, willy nilly US has to find a way to fight on behalf national security. Theft and reversed engineering is no longer a secret. As informed by many America Media, it Occurs on campuses or in large US companies. The problem is, many of these theft activities are affiliated with the People’s Liberation Army (PLA), the Chinese military.

As a result, prejudice also burst. Not just because of theft, but because the culprit is China’ military (PLA), not Japan or South Korea, which incidentally is an ideologically stronghold with America. More over,  These technological developments also infiltrate China’s foreign economic cooperation policy, the Belt and Road Initiative (BRI) and America is getting unhappier looking at the actions taken by the Communist Party of China (CCP) in the highly aggressive South China Sea . Dozens of countries have entered into the BRI list, ranging from toll roads, ports, fast trains, airports, reservoirs, and other connectivity infrastructure.

Interestingly, one and two of them ended less smoothly, then were acquired by China and made it as military bases such as in Djibouti and Gwadar, Pakistan. Becoming increasingly interesting, both are close to India which incidentally is one of the US strategic partners. The same thing happened in the South China Sea. Recent developments have shown CCP’s lies about promises of not militarizing new islands there. The opposite happened. Unfortunately, besides the international sea, the position of the South China Sea is directly vis a vis with the American power line in the Pacific, starting from the Philippines, Guam, Japan, South Korea, and Taiwan. Finally the transfer of technology that underpins the rapid development of CCP military technology seems very challenging for America.

Although, in one of  the principles of the World Trade Organization (WTO), it is also explicitly stated that developed countries are actually obliged to transfer technology to developing countries and poor countries. Because it is considered, one of the distinguishing line between developed countries and not or less advanced is the technology resulting from innovation that will increase economic productivity. So to advance less developed country, inevitably, is one of them via technology transfer. If that happens, then the boundaries will run low over time with developed countries. That is, US supremacy will eventually fade away with the diminishing technological disparity, more over if the transfer also takes place in the realm of military technology. Actually it does not matter, if the country is not China or Russia, the two countries that become ulcers for American supremacy and liberal democracy.

So the intention to leave the WTO or to categorize China and many others countries as developed countries is actually part of the US strategy to stop the actualization of the WTO principle, namely the obligation of technology transfer, in addition to eliminating the General System of Preference (GSP) in trade with America. By that way, America’s opportunity to maintain its supremacy remains large. This means that there is no longer an American obligation to implement technology transfer policies to China or countries whose status has been changed into developed countries by the United States, if US leaves the WTO or change the status of developing countries to developed countries.

The case of theft of US technology by China is in the same logic to the case of investment barriers in China complained of by America. It is actually not too crucial for reason of a trade war decision. The US accuses China of backing up its large companies in various lines. The problem is, China’s economic system is not entirely the same as America’s, state control is very strong. It is natural that China supports its major large companies, both strategic partners from private and state enterprises. Land transfers will be much easier for them or even various financial incentives from state banks are very diverse and varied.

This condition is clearly not the same as America, which is dominated by private-owned giant companies. So it’s not a matter of obstacles, but more substantive than that, namely the difference in the system and values. The same thing will happen, if America pushes Russia’s companies into Wallstreet, the New York Stock Exchange (NYSE), to get fresh capital as same treatment to China, then funds from the US finally flow into Russia  like China gets. The same problem will arise later on because the two systems are not the same.

Then is America wrong? Or is China wrong? In geopolitics and geoeconomics perspectives, that is certainly nothing wrong with it. The main issue is how  strong or  weak they fight and how they will be prioritizing the national interests of each country. Whatever China does to compete with America is China’s right and can always be justified in the Chinese interests perspective. Vice versa, whatever America does to stem China is an American right and will always be justified in the American interests paradigm. The only determinant is the accuracy and effectiveness of the policies of the two countries in competing. Will it alienate other countries as potential threats or vice versa. Therefore, intensification of communication, especially through multilateral or bilateral institutions, is very important. Not only to avoid military war, but also for the progress of the world economy. But that is only an ideality, the fact that in the future may not be the case.

About the Author
An International Political Economy and Strategic Analyst, A Senior Fellow for Indonesia Strategic and Economic Action Institution