Shadow-boxing ahead of Xi-Trump meeting

By Frank-Jürgen Richter Source:Global Times Published: 2017/4/5 21:28:39

Illustration: Luo Xuan/GT

Shadow-boxing is a training exercise used to prepare one's muscles, but who can forecast how Chinese President Xi Jinping and US President Donald Trump might prepare before they meet at the latter's golf club in Florida. This is an important meeting between the leaders of the two most economically powerful nations on Thursday and Friday when they will have much to talk about and to get to know each other face-to-face. Trump has avowed that he wishes to talk about trade and making it fair.

Globalized trade, which Xi has rightly supported, involves complex trade in unfinished goods. This trade often involves a degree of circular movement. For instance, motor components from the US move to Mexico and partially finished components return to the US for re-work and are subsequently exported to Mexico from which a car is later exported to the US for sale. Similar round trips may be observed in components for Apple products, with intellectual core parts exported to several nations in Asia followed by final assembly in China before being imported into the US. Academics and institutes like the OECD, IMF and the World Bank are reviewing models to make unique trade gaps clear - this is to be a value added concept, but it is not ready for use. For now we will stick with the notion that globalization does create jobs for many people around the world. I noted that the globalized marketplace is complex - a point raised by Chinese Vice Foreign Minister Zheng Zeguang on March 31 when he said that the China-US trade imbalance was mostly the result of differences in the two countries' economic structures and noted that China had a trade deficit in services.

The nature of markets and the stages of a nation's growth are interwoven. The US has been defined as a mature economy for years, and like other mature nations its GDP growth has been steady and close to the global norm. The global norm, though fluctuating, has slowly fallen from 4.3 percent per year in 1961 to 2.6 percent in 2015, according to World Bank data. China, an emerging economy, has shown very high growth in some years (14 percent in 2007) and now is predicted to hit 6.5 percent in the coming year, much larger than the expected 2 percent in the US. In mature economies many firms are slow to change production practices, especially if labor policies protect jobs, whereas in emerging economies labor markets are flexible, and managers buy the newest of machines, including robots which can greatly boost productivity. It has not been a surprise to find production moving from the US and Europe to Asia as its managers invested in labor, machines and modern production methods, embracing globalization supported by efficient supply chain management. It is probably an error of judgement by Trump to categorically state he wants "jobs returned" as US infrastructure (labor, capital and management ideas) are obsolescent while China is embracing globalization, innovation and education.

Individually the two leaders are quite different. Trump appears to be flamboyant and strongly "for his people" as he constantly affirms via his public Twitter account. He frequently uses Twitter to lambast injustice as he perceives it with phrases like "fake news," referring to facts that may or may not be true or which may have been simply misinterpreted (a description often used by his official press secretary). On the other hand, Xi is attentive to the words of others. He voices his views clearly so his partners abroad and at home are left in no doubt as to his meaning - which the 140-character limit on Twitter is often unable to do.

Xi has been in office for four years and we have become more used to his character, but Trump, having assumed office only on January 20, has only left his mark on us via his tweets before and after his inauguration. He has stated he is simply making America great again by bringing back jobs he thinks have been stolen by China.

 On March 31, Trump signed an executive order commanding a 90-day research programme "to investigate all trade abuses, and, based on those findings, will take necessary and lawful action to end those many abuses."

The details of the meeting between Xi and Trump will remain confidential but I am sure new developments and cooperation will be publicized. No doubt, shadow-boxing will be practiced by both sides - but it is better to shadow-box and be nimble than land real blows, which would create a global disaster. My hope is that Xi's experience and diplomatic finesse will leave an impact on Trump, and enable both nations to continue their strong economic and political partnership.

The author is founder and chairman of Horasis, a Swiss-based think tank.


blog comments powered by Disqus