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Fazal Gilani: Biden's Statement Stinks Secnd Phase of the US
Trade War

2022.03.31

The author is a Senior Journalist and a Doctoral Researcher.


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Cover Design: Original GVI

According to Xinhua, President Xi Jinping had a candid, in-depth exchange of views with Biden. But there is another completely opposite narrative being built by the western media. Considering if it is true, Let’s get into the recent video call between the world’s two strongest leaders with a wider sense of the current U.S - China relationship and Biden’s statement reverberations. 

How does the United States define "MATERIAL SUPPORT"?

Media from all over the world reported on the 19th of March, 2022 that U.S President Joe Biden and China’s President Xi Jinping had a video call for two hours. Reuters reported that U.S. President Joe Biden warned Chinese leader Xi Jinping on Friday of “Consequences” if Beijing gave “MATERIAL SUPPORT” to Russia's military operation in Ukraine. The word “Material Support” has already triggered a new debate among all international political science scholars and anxious journalists. The White House has not provided what consequences President Biden was referring to, Even How the United States defines “MATERIAL SUPPORT”?

In a statement released by the White House “He (President of the United States of America Joe Biden) described the implications and consequences if China provides material support to Russia as it conducts brutal attacks against Ukrainian cities and civilians. The President underscored his support for a diplomatic resolution to the crisis”.

Cornell Law School defines “Material support or resources (1) the term “material support or resources” means any property, tangible or intangible, or service, including currency or monetary instruments or financial securities, financial services, lodging, training, expert advice, or assistance, safe houses, false documentation or identification, communications equipment, facilities, weapons, lethal substances, explosives, personnel (1 or more individuals who may be or include oneself), and transportation, except medicine or religious materials; 18 USC § 2339A(b)(1)

The White House has further stated that “The two leaders also agreed on the importance of maintaining open lines of communication, to manage the competition between our two countries. The President reiterated that U.S. policy on Taiwan has not changed, and emphasized that the United States continues to oppose any unilateral changes to the status quo. The two leaders tasked their teams to follow up on today’s conversation in the critical period ahead”.

Psaki told the journalists who ever-present at the regular news briefing that the United States would communicate any “CONSEQUENCES” directly to Beijing.

Xinhua News Agency also reported on the same day of a video call between two mighty leaders in the world that “President Biden has just reiterated that the U.S. does not seek to have a new Cold War with China, to change China's system, or to revitalize alliances against China and that the U.S. does not support "Taiwan independence" or intend to seek a conflict with China, Xi said. "I take these remarks very seriously."

New Level of Risk Perception

Here, we can see a new and very unique turn between the United States of America and China’s relationship. Especially after Russia’s military operation in Ukraine might get it to the worst level of risk perception, which we have never seen before in past decades. However, Biden is not in a position to open a new cold war with China. The U.S – China relationship in the current world system could be considered one most competitive and coexistence. On the other side, China has more strategic and limitless relationships with Russia.

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Photo Source: https://digital.boisestate.edu/index.php/node/5341 Frank Church and his wife Bethine shake hands with the leader of the People's Republic of China, Deng Xiaoping in 1979. Senator Joe Biden (D-Deleware), is present behind Mrs. Church. Photo courtesy of Frank Church Papers, Special Collections and Archives, Boise State University

Biden's Toolbox

During his presidential debate with former President Trump, Biden showed us a very harsh narrative against China as he put blames on Russia, Iran including China on interfering/influencing in the U.S Presidential Elections. Biden also grown American sentiments by saying that Trump has a secret bank account in China, does business in China and paid 50 times tax in China. Biden also said that “When I met with Xi, and when I was still vice president, he said ‘we're setting up air identification zones in the South China Sea, you can't fly through them.’ I said, ‘we're gonna fly through them. We just flew B52/B1 bombers through it. We're not going to pay attention.’ They have to play by the rules, and what's he does? He embraces guys like the thugs like in North Korea, and, and, and the Chinese president and Putin and others, and he pokes his finger in the eye of all our friends, all of our allies. We make up only — we’re 25%. 25% of the world's economy. We need to be having the rest of our friends with us, saying to China, these are the rules.” Reported by USA Today on Oct. 23, 2020

The White House press secretary Jen Psaki indicated China's massive trade flows could be impacted. "Sanctions are certainly one tool in the toolbox," Psaki told media during a regular press conference when she was questioned about China as the world’s largest exporter, is there the possibility of facing trade tariffs/sanctions?


Is There Another Trade War in The Biden's Toolbox to slow down BRI


 As The Belt and Road Initiative has the potential of China’s economic major growth and supremacy in the world. The U.S could be aiming through another trade conflict by making Russian military operations in Ukraine a reason, this time they could be coming through the cause “Condemning Russia’s Military Operation in Ukraine” with a more impactful force of America’s allies. Whereas, if there would be any new economic conflict between the U.S and China caused by this ongoing Russia - Ukraine conflict, can be increased the level of risk and/or the risk perception.


The Economies Clash


 It no more feasible to say that the world system is only being ran by United States of America and its allies. Now there is another equally strong and strengthen system exists and being governed and ran by China with Chinese Political Characteristics. The Trade conflict due to any reason or especially because of RUSSIA-UKRAINE conflict could stimulate new dynamics between U.S and China relationship. It also has an exceptional scope and enormous expected outcomes in colliding of the world’s two largest economies. Eventually, it will impact the world economic activity, specifically on The Belt & Road Initiative (BRI) partnering countries’ trade and Chinese Foreign Direct Investments (CFDIs) around the world on otheir different dimensions too. This economic clash could also affect the multilateral trading system.


During the past two decades, China’s high growth rate and because of the largest trade surplus with the U.S, China became the primary target of the U.S trade war. This trade war had injured global economic integration timeline. Tariffs were the first bullets in trade escalation between U.S and China. If it happened again as world is still trying to get out of the Covid’s economical hits, these could be worsening even more bilateral relationships not only between the U.S – China but affecting the multilateral global economic integration.


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Image Design: Original GVI - Stats Source: investopedia


The United States of America and China’s economic size and defense budgets make them leading powers in the world. China and U.S are also permanent members of the U.N Security Council. If we look into the very recent past these two countries were trading with each other as the biggest trading partners in the world. Rapidly, China has developed and grown in its economy since 2000. At that time China’s economy was a tenth of the U.S GDP. Another turning point of the Chinese economic boom was becoming a member of the World Trade Organization in 2001. China and U.S bilateral relationship is considered as most influential and consequential in the world.

If these two big economies start colliding with each other then it impacts also other countries’ economies, trades, and even FDIs get affected.


In 2013, China’s President Xi Jinping put forward the Belt and Road Initiative and since then more than 80 countries including international organizations have signed agreements and cooperation with China.

The Belt and Road Initiative is a Chinese ambition for providing opportunities for trade and benefits in the world. Beijing believes that BRI is the broadest platform for international cooperation and further economic globalization in the world. While still in today’s world globalization has been led by America. But fast emerging economies have fuelled this globalization as well like China. On the other side, Washington kept itself away from China’s led The Belt and Road Initiative. It has been argued that “China has depended on trade ties, improved cooperation mechanisms and expanded areas of cooperation with BRI countries First, more international actors have acknowledged and participated in building the Belt and Road Initiative. Since its debut in 2013, The BRI has provided a novel and innovative framework for realizing coordinated global governance and building a community of common destiny for all mankind, receiving more endorsement and support from countries and international organizations. More countries have joined the BRI Friends Circle —According to the Green Finance and Development Center (greenfdc)145 countries have signed a cooperation agreement with China till 2022, Most countries have continued to support the BRI in the midst of global political and economic turbulence. Because there might be a possibility of the United States of America’s keeping itself away from BRI that may be containing a goal to China’s booming economy and affect The Belt and Road Initiative flagship plan through second phase of initiative of the trade war escalation with China.


China's Economic Rise or Divide Asia


The U.S first trade war with China maybe designed to stop China’s economic rise or divide Asia, as we have already seen some evidence by pressurizing China on its trade, technological policies, and investments around the world.


What makes the U.S initiate another trade war with China? Liu and Woo in their research study (2018) give convincing arguments that there were three main concerns were involved that drove U.S to start a trade war with China in the 1st phase.


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Infographics Design: Original GVI


Chinese Foreign Direct Investments Under The BRI

Another study by Chen and Lin in 2018 has found that the global FDI flows that went to the BRI economies have varied nearby 35 percent. Under the BRI economies, Pacific and East Asia have received main Chinese FDIs including the drivers of FDIs outflows. Central Asia and Europe is in the second stage. However, the BRI corridor attracts a high level of investments not only from Chinese FDIs, but also from other world’s FDIs. However, low economy BRI countries still could not attract such FDIs. (Chen & Lin, 2018)

 

According to Belt and Road Economics report: "Within regions, as well, FDI flows show significant heterogeneity and concentration. Only a handful of corridor economies absorbed more than US$10 billion in FDI in 2017. They include China; Hong Kong SAR, China; Indonesia; Singapore; and Vietnam in East Asia and Pacific; the Russian Federation and Turkey in Europe and Central Asia; and Israel and the United Arab Emirates in the Middle East and North Africa. Together, these economies accounted for almost 80 percent of the total FDIs to corridor economies in 2017. In contrast, for many corridor economies, FDI is less than 1 percent of GDP. This group includes Bangladesh, Bhutan, Brunei Darussalam, Kenya, Nepal, Pakistan, Timor-Leste, and Uzbekistan. The concentration of direct investment outflows is even starker: just eight economies accounted for 87 percent of the total flows out of corridor economies in 2017. Five of these eight are from East Asia and the Pacific: China; Hong Kong SAR, China; Singapore; Taiwan, China; and Thailand. The others are India, the Russian Federation, and the United Arab Emirates. At the other extreme, five of 13 corridor economies in East Asia and Pacific and the majority in the other regions invested less than US$1 billion abroad in 2017”. (Belt and Road Economics 2019, p.17)

 

 

The key investments in The Belt and Road are heavier network of transport infrastructures. It will eventually aim to effect and improve world trade. But U.S-China trade conflict could also impact these Foreign Direct Investments over strengthening trade between the China and BRI partnering countries. Under the BRI investments for an easement in trade along the Belt and Road Countries bilateral trade flow has exceptional importance. It can reshape and strengthen trade relations between the BRI participating countries. It may also and already has helped China to increase its imports and exports, especially with East Asia and Pacific economies. This intra-BRI trade is being impacted by U.S-China tensions. (Belt and Road Economics 2019) 


2nd Phase to Trump’s China-Phobia Policy?

I see that this current Russian-Ukraine conflict might be going into a full-fledged cold war between Russia & The U.S. Which has the aptitude to be escalated, if situations remain the same then it must be impacting BRI counties' trade and Chinese FDIs as well. Recent, Tariff war, Tit-for-Tat manner from both sides gave the world an impression that this trade war is not going to end up soon. So, will Biden’s statements - second phase of Trump’s aggressive trade policy towards China now?

 




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