Making the best of the trade war

China is taking strong measures to defend itself against the trade war that the US has launched against it. For example, the Times of 30 May 2019 gives details of how the People’s Republic is increasing its soya crop in order to avoid having to import soybeans from the US.

The paper reports: “Almost two years after the first salvos of President Trump’s trade war with Beijing, the agricultural workers of Jilin province are reaping the rewards of seeds sown thousands of miles away.

“Their crop, soya beans, is being supported with generous government subsidies from Beijing as part of President Xi’s attempt to move China away from its dependence on US imports.

“As a result farmers in Jilin are diversifying. Some 60 miles northeast of the city of Yanji, one rural co-operative planted more than 1,700 acres of soya beans this spring, up from 1,000 acres two years ago.

“‘When American bean farmers are not happy, we are quite happy,’ said the cooperative’s head, Zhao Xianqing, a 53-year-old villager who manages almost 5,000 acres of land …

“Soya beans are the United States’ second-largest cash crop after corn, worth an estimated $39.1bn a year. The vast majority of US soya bean exports have been to China …

“In the village of Yongqing, Mr Zhao allocated 1,400 acres to bean-growing last year. That entitled him to more than £250,000 in subsidies in the past year from the Jilin government and net profits were more than £340,000, he said, which was shared among the cooperative’s more than 1,000 members.” (Chinese farmers reap the benefit of soya bean row by Didi Tang)

China’s tariffs against products like soybeans and beef, and a recent move to cancel a major pork order, have hit swing electoral states such as Iowa, Ohio and Wisconsin, especially hard.

As a result, US farmers are becoming increasingly anxious over their future. “Those worries helped spur Mr Trump last week to suddenly drop steel and aluminium tariffs on Canada and Mexico, which agreed in turn to withdraw stiff levies on American farm goods.

“On Thursday [23 May], the agriculture department said it would provide up to $16bn in aid to farmers hurt by trade retaliation … The financial support came after the administration handed out $12bn in emergency relief for farmers last year …

“The Federal Reserve Bank of New York said … that Mr Trump’s tariffs will cost the average American household $831 annually.” (Trump gives farmers $16m in aid amid prolonged China trade war by Ana Swanson, New York Times, 23 May 2019)

China, in turn, has apparently substantially increased its subsidies to its own companies, a move that the Financial Times says is “likely to further strain trade talks with Washington”. (China paid record $22bn in corporate subsidies in 2018 by Tom Hancock and Yizhen Jia, 28 May 2019)

Clearly the Financial Times does not partake of the view that what is sauce for the goose is sauce for the gander!

Meanwhile the Financial Times is also reporting: “With both Moscow and Beijing under fire from the US – whether through sanctions or President Donald Trump’s trade war – Mr Putin and Mr Xi have struck up a warm friendship that defies decades of mistrust between their countries …

“The risk of new US sanctions on Russia have accelerated efforts by Moscow and Beijing to safeguard deals through measures such as non-dollar payment systems …

“The two countries’ militaries … trained side-by-side last September in Russia’s largest war games since the cold war. This was the first time that China had been invited to take part in Russia’s flagship annual exercise. The first gas pipeline between Russia and China is set to start pumping in December, joining an already-operating oil supply link.

“Bilateral trade rose 24.5 percent last year to hit a record $108bn, surpassing forecasts. Chinese officials say they are aiming for $200bn.” (Russia strengthens China ties in defiance of bellicose Trump by Henry Foy and Christian Shepherd, 5 June 2019)

Nevertheless, it would appear that in the short term, maybe for several years, the various embargoes issued by US imperialism to prevent technology companies supplying hi-tech components to China is likely to hinder China’s further technological development to a considerable extent. One of the companies prevented by the embargo from dealing with China is the British company ARM, based in Cambridge.

“The Cambridge-based company, which is owned by Japan’s SoftBank, said it was forced to cease sharing its technology with Huawei to comply with a US banning order, issued last week.

“The step is a big setback for the Chinese telecoms equipment maker, which was dealt a series of blows … when four large mobile operators in Japan and the UK pulled planned launches of new Huawei smartphones due to the US banning order.

“While Arm is not a US company, its designs include intellectual property from a number of US companies that it has bought … making them subject to the export controls.

“Huawei had planned to increase production of its own chips after the news of the ban … But these designs rely heavily on Arm’s technology.

“‘There really isn’t anybody out there who does what Arm does. The time to create a working processor from scratch, particularly of the complexity of Arm processors, is measured in years and hundreds of millions of dollars,’ said Scott Hover-Smoot, general counsel at chipmaker Graphcore, who has worked in the semiconductor industry for the past 25 years, including at TSMC.

“‘For Huawei to come up with an alternative is not going to be cheap, easy or fast. But they have known for two or three years they’ve been under investigation by the US government and these are some of the brightest people in the world. I’m confident they have a plan B in place,’ he added.” (Huawei chip unit hit as Arm withdraws licences by Madhumita Murgia and Nic Fildes, Financial Times, 22 May 2019)

In this context, Mike Wong, vice-president of China sales and marketing at Semtech, has stated: “The trade war is good for both the US and China. The US gets to protect its intellectual property and China is forced to further develop its semiconductor industry.” (China pushes self-made chips in response to US threats by Yuan Yang, Nian Liu and Sue-Lin Wong, Financial Times, 30 May 2019)