Trump-Xi: win-win or lose-lose?

In recent days, I pointed out how Trump’s visit in China has been a win-win for both countries and I expressed my concern for the marginal role that Europe may play in the future. However, during the weekend, the highly respected Bloomberg published an article where the author, unlike me, argued that Trump’s visit to China has been lose-lose outcome. I always find helpful and welcome people who can offer different views from mine. So let’s see, what are the arguments that Bloomberg puts forward against mine.

The key argument is as follows: “Trump and Xi have focused on making statements that have caught the attention of the media, but they have not discussed the substance of the most important issues, such as conditions of reciprocity and greater protection of intellectual property rights “.

In support of this statement, Bloomberg mentions the agreements for 250 billion dollars, most of which, says Bloomberg, do not ever materialize. This is actually true, indeed I also said, that many of these agreements are fictitious and maybe already the result of previous negotiations. Still, even if only a part of 250bn will materialize, it will be a big step forward. This does not seem like a good reason to argue that the meeting was lose-lose for both countries.

Indeed, Bloomberg, moves to points that are more specific and criticizes Trump for two fundamental sins:

  1. For not having cornered Xi on more intellectual property rights, in particular for exports of US technology products;
  2. For not having imposed conditions of reciprocity in accessing to each other’s market.

Bloomberg argues that had Trump did not pleading these causes was, in fact, a harm to American businesses. From China’s point of view, Bloomberg argues that, symmetrically, progress in these three areas would have brought more benefits to China: greater openness of markets would increase the competitiveness of Chinese companies and pushed domestic consumption. More tightening on the protection of intellectual property rights would have benefited the same Chinese entrepreneurs that they would have been more motivated to innovate, to invest, and, at the same time, American companies would have felt more protected in export their technologies to China.  Therefore, the lack of progress on these lines was, according to Bloomberg, also a loss for China.

My response to this criticism is very simple.

Reciprocity: China will never give conditions of reciprocity to Western countries because it believes that a developing country, as indeed it is, cannot open its own market as much as developed countries should do. Instead, China believes that that should be done very gradually. In my article previously written for China Daily, I discuss exactly this point: China measure its own progress for by comparing itself to other countries today, rather by comparing itself to how China was decades ago. China says: “Our GDP per capita is $10.000: when your GDP/Capita was $10.000, did you advocate for free trade and globalization?”

More competition to improve the efficiency of Chinese industries: China is a planned economy. It is not market rules, rather a very detailed and well-thought out plan that creates economic development. China already knows how to make its economy more efficient, it has set in motion a process of reform on the supply side, supply-side reforms, aiming to reduce the overcapacity and transferring workers from heavy industry sectors to those of Manufacturing 2025 – the Tsunami – and services. This is already happening, and with great results, planned from above, without the need to establish competitive regimes, much less with foreign industries. Steel production has already dropped from 1.200 to 1.100 tonnes.

Intellectual property Protection: I shall be very brief here. China will take measures to protect intellectual property only and only when Chinese companies become themselves the subject of industrial espionage, or when they see their products, patents and other, copied from the West.

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