‘Trade war a fight for hegemony, won’t end soon’

The trade war between the US and China will continue for a considerable period of time as it will decide the “hegemon” to lead the fourth industrial revolution, said Rob Davies, South Africa’s trade minister.

“It is essentially a battle over who is going to be the hegemon and who is going to lead the fourth industrial revolution,” said Davies, who is attending the informal trade ministerial meeting of developing countries being hosted by India.

Trade talks between the US and China broke down on 9 May, after China refused to agree on three issues, says a Chinese trade official, on condition of anonymity. The three issues are (1) the increase in the quantum of items to be purchased by China for settling the trade deficit, (2) sweeping changes in China’s intellectual property laws, particularly on provisions concerning the transfer of technology, and (3) the US’ refusal to agree for a balanced and fair enforcement mechanism that would address any breaches by either side.

Even if the meeting between US President Donald Trump and China’s Xi Jinping ushers in a temporary “ceasefire”, the underlying issues of the trade war will not go away and will continue to surface in one form or the other, Davies said in an interview. “Issues concerning technologies (of the unfolding fourth industrial revolution) will morph into national security issues,” he said.

“Our view is we don’t want to back one master against the other, we want to see balanced, inclusive and developmental outcomes,” Davies said, praising India for hosting the World Trade Organization ministerial meeting at a critical juncture for formulating a trade agenda that reflects the developmental concerns of the developing countries.

“When proposals on any of these issues (in e-commerce) come out, the developing countries need to look at them with a long-term perspective and they must remain careful,” he cautioned. “Otherwise, the developing countries will pay a huge price and India has addressed some of these issues in the concept paper.”

The US-China trade war started with the narrative of “trade imbalance and the loss of manufacturing capacity (in the US),” Davies said. “Then the discourse has shifted to the emergence of China as the leader of the technology and the fourth industrial revolution in which the US companies “will find themselves as the second-fiddle players.”

“Ultimately and fundamentally, it is a struggle for the leadership and dominance of the fourth industrial revolution,” he added. “This (trade war) is not going to go away, and it is not going to be resolved by one meeting between President Trump and Xi at the G20 leaders meeting in Osaka,” Davies said. “There might be a short-term ceasefire on tariffs but ultimately this issue is going to persist in one form or the other.”

He said developing countries must follow the “developmental path like China and other countries in the history and safeguard their policy tools”. “The policy tools are crucial so that the ladder is not decisively kicked away through the proposed new trade rules )by the rich countries),” he said, suggesting that there are grave attempts to impose “unequal trade treaties.”.

“Ultimately it is about multilateralism - is multilateralism is going to be a basis on which we are going to find collective solutions to collective problems of humanity or is it going to be a game of power relations in which the powerful countries extract concessions from the powerless.”