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Trump gears up to confront China

Beijing's failure to deliver on North Korea and act on trade demands a response

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U.S. President Donald Trump and China's President Xi Jinping chat as they walk along the front patio of the Mar-a-Lago estate after a bilateral meeting in Palm Beach on April 7.   © Reuters

It is surprising that there is any surprise at all over the deterioration in U.S.-China relations under the administration of U.S. President Donald Trump. On the campaign trail and since taking office, he has pledged to tackle trade imbalances and restore American power and geopolitical advantage.

Both these themes involve China, the source of America's biggest bilateral trade deficit and its greatest potential superpower rival. Meanwhile, Chinese President Xi Jinping is pursuing his own national greatness project to challenge U.S. leadership in Asia while aggressively entrenching the Communist Party's monopoly on political power at home.

Hopes for improved U.S.-China relations were raised by a positive early meeting between Trump and Xi at the U.S. president's Mar-a-Lago resort in Florida in April. Trump appeared to persuade China to tighten pressure on its client North Korea following a succession of provocative missile launches by Pyongyang.

The Mar-a-Lago summit produced a bilateral agreement on reciprocal trade access that U.S. Commerce Secretary Wilbur Ross called a "gigantic" step in reducing the U.S. bilateral trade deficit with Beijing. But the agreement's modest sector-specific initiatives in areas like Chinese imports of U.S. beef and energy left unresolved a host of structural issues that impede U.S. access to the Chinese market. These include key areas such as technology, manufacturing and services.

China's national economic strategy is not premised on providing a level playing field for trade and investment. Its model is predicated on pursuing a highly imbalanced form of economic relations wherein Chinese companies benefit from extensive access to the West's open markets even as Beijing maintains severe restrictions on reciprocal access to the Chinese market, which nevertheless is attractive to Western companies because of its large size.

Under successive leaders, China has used the open global trading system and its possession of the world's single largest domestic market to distort free flows of trade, finance and services. China has become a main hub in the global manufacturing value chain. But it increasingly requires foreign companies in China to share sensitive information on production processes and customer data with local partners, which gives them an asymmetric advantage.

Beijing pursues a concerted policy of subsidizing "national champions" to dominate key industries and technologies of the future, such as artificial intelligence, robotics, supercomputing, renewable energy and high precision manufacturing. China's economic model is dependent on developing, buying, or stealing advanced technologies.

Beijing has also provided subsidized state financing to Chinese companies, resulting in an unfair advantage in global markets. It has used government intelligence and cyber resources to acquire proprietary information illegally from Western companies for the direct benefit of private and state-owned Chinese enterprises. One study estimated that the value of intellectual property stolen from U.S. companies by China was greater than the annual total of all U.S. exports to Asia. General Keith Alexander, former head of the U.S. Cyber Command, called China's theft of U.S. intellectual property rights "the most significant transfer of wealth in history."

North Korea factor

China has also disappointed Trump on North Korea. Being a corporate dealmaker and neophyte in international politics, Trump thought that his good personal rapport with Xi would translate into China increasing pressure on North Korea in response to its rapid progress in developing and brazenly testing nuclear weapons and missiles meant to reach the U.S. mainland. Although Chinese leaders have expressed disgust with Kim Jong Un's destabilizing antics, they are unwilling to pursue regime change in Pyongyang. Indeed, China's trade with North Korea increased during the first six months of Trump's presidency.

Roughly 90% of North Korea's trade goes through China. This means that multilateral sanctions are ineffective in forcing North Korea to curb its weapons program as long as Beijing does not participate fully in them. Pyongyang could not survive without Chinese support. The North Korean economy is almost entirely dependent on Chinese oil imports, without which economic activity would come to a standstill. But China keep the taps flowing. It is an ironic approach for a rising superpower to pursue, particularly since China wants to brand itself as a constructive and non-threatening world power through such projects as the Belt and Road Initiative.

China's attitude on North Korea is highly revealing for the strategic insecurities it reveals. If the Korean peninsula was unified, there would no longer be a need for the 28,000 U.S. troops stationed in South Korea. It would remove the justification for the advanced ballistic missile defense system the U.S. has deployed in South Korea, which China believes undercuts its own deterrent capabilities. A united Korea would be a better economic and diplomatic partner for its regional neighbors such as China, with the threat of a major war removed by the fall of the militant Kim regime in Pyongyang.

But, in fact, Chinese leaders fear a unified Korea because it could become a more powerful U.S. ally since Koreans view with growing concern the rise of China and its intentions to expand its sphere of influence, which poses a threat to Korean sovereignty.

It is perhaps in Asia that Trump's vow to "make America great again" could have its greatest strategic impact. His national security adviser, H.R. McMaster, and the chairman of the president's National Economic Council, Gary Cohn, recently argued that the world is a competitive arena and the goal of the Trump administration is to increase America's ability to compete by expanding its hard power resources. In no other region of the world does the balance of power hinge so decisively on U.S. commitment and capabilities.

As a result, China worries that the Trump era heralds not a withdrawal of U.S. power from Asia but instead its resurgence. In retrospect, U.S. President Barack Obama ceded too much strategic space to China in Asia -- standing by as China carved out a sphere of influence across the South China Sea, hollowing out America's military might through misguided budget cuts, failing to compose an effective response to Chinese cyberpiracy and the billions of dollars in losses it imposed on U.S. companies, and sending the Trans-Pacific Partnership trade agreement to the U.S. Congress in the middle of a presidential election year when the chances of its ratification were slight.

Perhaps Xi, in the midst of his own political campaign to secure support for a new term in office, is worried that the U.S. under Trump is going to be less indulgent of China's mercantilism as well as its coddling of North Korea's criminal regime. Following the tragic death in Chinese custody of the dissident Liu Xiaobo, increased U.S. support for human and civil rights within China -- after Obama downgraded America's historic commitment to these values -- would be an additional source of pressure that Trump -- always the dealmaker -- could bring to bear in his efforts to move China on both trade imbalances and Asian security.

Daniel Twining is counselor at the German Marshall Fund of the United States. He served on the U.S. secretary of state's policy planning staff during the George W. Bush administration and as foreign policy adviser to U.S. Senator John McCain.

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