US-China trade war – 5: A bully in the China Shop

There are two stages to solving a trade dispute:

• Stage 1: Bringing your opponent to the table.Show that you have a case, that you are determined, that you will not flinch.
• Stage 2: Reaching an agreement. Finding common ground; showing respect and understanding; establishing trust and conveying reliability.

Bullying is used during stage 1.

• It is an oft-used tool, especially by large nations.
• China is familiar with the concept: it has shown a propensity to bully those that interfere with its affairs.
• It is fair to say that Trump has demonstrated that he can out-bully the bully and has what it takes to challenge the formidable China.
• And, since it worked in stage 1, it is seductive to think that bullying will also work to secure stage 2.

But that would be wrong.

The Bully Trap

• Bullying is an attractive tactic for Trump
  • The US has a strong advantage
  • Trump’s base prize his pugnacity
  • Temptation to believe that “might makes right”
• But bullying has its limits
  • When threats are acted upon they lose their effectiveness
  • China is prepared to endure
  • It will push back if it thinks the dispute is not just about trade

The trap is to think you can win, so you double down on the same tactics and thus, unknowingly, you ensure that you lose the end game.

On the surface, it appears that the Trump team does not seem to realize this.  All we hear are strident threats, the adding of Huawei to the mighty US arsenal, the vilifying of China:  bully tactics everywhere.

 

“Know thy enemy, know thyself, a hundred battles, a hundred victories.”  Xun Zi, The Art of War.

 

It may seem unbelievable to some that China will endure America’s trade WMD (weapons of mass destruction) and will not beg for relief.  But in fact, it should be clear by now that if China is pushed into a corner, if it is not given the option to keep its head high, it will not give in, it will not be cowed into a deal.  It has no choice but the endure.

The Chinese government is the communist party. The main concern of the Party is to earn and maintain the trust and respect of the Chinese people.  America and the world are secondary concerns.  There is no way the Party will lose face to gain economic relief.  There is no scenario that will force Xi Jinping to bow and scrape. For no other reason than that it would be political suicide to do so.

So, we see China pulling back, silently acting as the injured party, bracing its people for bad days to come, getting ready for Armageddon.

To defend itself, the Party will point out that China is under attack – think of Pearl Harbor as a rallying force.  If pushed hard enough, it will recall the Opium wars, the shameful unfair treaties; it will in turn vilify America and cause its people to rally around their leader.

China has conveyed this numerous times, including during a news program on May 13^thduring which the following statement went viral:“If you want to talk, our door is wide open. If you want to fight, we’ll fight you to the end.”

The signs are clear: doubling down on bullying will not work, we have passed stage 1 and it is high time to change gears and address stage 2; get results, secure an agreement and move on.

China has much at stake and a strong vested interest to reach an agreement on this trade dispute.  But to achieve success we must not muddy the waters with broad anti-China rhetoric.  There must be focus on the goals, which as stated before in the last blog, are commercial.

To make stage 2 a glowing success, there has to be a change in tone, and in attitude.  There has to be a moral high ground, a nobler purpose, a proclaimed will to make the world a better place, a win-win for all.  And to achieve that, Trump must add the skills of a gentleman negotiator to that of a bully.

The signs are that we are moving in that direction: a meeting between Trump and Xi Jinping will occur during the G20 in Osaka on June 28-29.  This gives hope.

This hope is supported by the behavior of the 2 protagonists:

• Trump wanted to meet
• Xi Jinping agreed to meet

We know that the China team was weary of a meeting, presumably because they were afraid Xi Jinping would lose face in such a meeting and they were uncertain of the outcome: better no meeting than a bad meeting. Presumably, sufficient assurances must have been provided to China by the US team.

Even so, this does not mean that an agreement will be signed anytime soon. The best we can hope for in these high level talks is that stage 2 gets moving in earnest.

In my next blog on Tuesday, I will explore how both parties negotiate, what issues divide them and how they might find an acceptable common ground, and a way to an agreement in the near future.

 

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