Why America and China Prefer a Trade War Over a Real War

 In China, Australia, FVEY, P5

While China is tight­en­ing its coer­cive cam­paign against Australia, now targeting the coal industry, its ambas­sador to the United Nations, Zhang Jun, last week led a protest of 26 nations against eco­nom­ic coer­cion by the United States.

‘We con­tin­ue to wit­ness the appli­ca­tion of uni­lat­er­al coer­cive mea­sures, which are con­trary to the pur­pose and prin­ci­ples of the UN Charter and inter­na­tion­al law, mul­ti­lat­er­al­ism and the basic norms of inter­na­tion­al rela­tions’, he told the United Nations human rights committee. He spoke on behalf of a group of nations includ­ing the major tar­gets of US sanc­tions: North Korea, Cuba, Venezuela, Iran, Palestine, Russia, Syria and Zimbabwe.

Zhang drew atten­tion to the Non-Aligned Movement’s con­dem­na­tion of uni­lat­er­al coer­cive mea­sures and urged their elim­i­na­tion to sup­port the effec­tive­ness of nation­al respons­es to the Covid-19 pan­dem­ic.

The con­tra­dic­tion of call­ing out US eco­nom­ic coer­cion while imple­ment­ing its own reflects China’s per­sis­tent refusal to acknowl­edge that it ever deploys its eco­nom­ic power over other nations for polit­i­cal pur­pos­es.

Even when it launched a con­cert­ed cam­paign against South Korea over its 2017 deci­sion to host a US anti-mis­sile system, China declared before the World Trade Organization that it had done noth­ing. The cam­paign, which includ­ed a ban on tour groups, a boy­cott of Hyundai and the forced clo­sure of 70% of the Korean-owned Lotte super­mar­kets in China, was ulti­mate­ly relaxed after South Korea nego­ti­at­ed a mil­i­tary deal to ‘nor­malise’ rela­tions.

As I explain in my new ASPI report, Economic coercion: sanctions and boycotts—preferred weapons of war, released today, both the US and China have inten­si­fied their use of eco­nom­ic coer­cion over the past three years.

The two have rad­i­cal­ly dif­fer­ent meth­ods. The US struc­ture of eco­nom­ic sanc­tions is highly for­malised. A Treasury depart­ment, the Office of Foreign Assets Control, main­tain lists of sanc­tioned organ­i­sa­tions and indi­vid­u­als run­ning to more than a thou­sand pages and impos­ing fear­some penal­ties for infrac­tions.

China’s system is infor­mal, rely­ing on boy­cotts and reg­u­la­to­ry inter­ven­tions to deny access to the vast Chinese market. These prac­tices have a long his­to­ry. The first aca­d­e­m­ic study of Chinese coer­cion was con­duct­ed in 1930, trac­ing suc­ces­sive boy­cotts of prod­ucts from the US, the UK and Japan over the pre­vi­ous 25 years.

By deny­ing that its actions are offi­cial­ly orches­trat­ed, China both escapes account­abil­i­ty and encour­ages others to second-guess its wishes to avoid becom­ing a target of its ret­ri­bu­tion.

Since the Australian gov­ern­ment dis­pleased the Chinese gov­ern­ment in April this year by call­ing for an inquiry into the ori­gins of the Covid-19 crisis inde­pen­dent of the World Health Organization, pro­hib­i­tive tar­iffs have been placed on Australian barley exports, beef imports from sev­er­al of the largest Australian proces­sors have been sus­pend­ed for alleged health infrac­tions, an anti-dump­ing inves­ti­ga­tion has been launched into Australian wine, and Chinese gov­ern­ment advi­sories have warned stu­dents and tourists against trav­el­ling to Australia for safety rea­sons. Coal indus­try reports say the order went out last week to Chinese steel mills and ports to halt Australian coal pur­chas­es.

While Australia is unlike­ly to be the target of US sanc­tions, Australian busi­ness­es are at risk of suf­fer­ing col­lat­er­al damage. The US asserts extra-ter­ri­to­r­i­al power with its sanc­tions, saying some­one may deal with a sanc­tioned entity or with the United States, but not both.

An Australian com­pa­ny that inad­ver­tent­ly sold goods to Iran, for exam­ple, could face pros­e­cu­tion in the US with the risk of heavy fines and a ban on trans­act­ing in US dol­lars. The largest fine for breach­ing US sanc­tions was US$8.8 billion imposed on France’s largest bank, PNB Paribas, in 2014.

The Trump admin­is­tra­tion has seen eco­nom­ic coer­cion as a much cheap­er alter­na­tive to mil­i­tary inter­ven­tion. Ahead of the 2016 elec­tion, Donald Trump declared, ‘War and aggres­sion will not be my first instinct.’ Rather, he said, ‘finan­cial lever­age and sanc­tions can be very per­sua­sive — but we need to use them selec­tive­ly and with total deter­mi­na­tion’. Trump dou­bled the rate at which sanc­tions are imposed, while the level of penal­ty also increased.

The spread of coun­tries affect­ed by US sanc­tions has also widened. The US has even imposed eco­nom­ic sanc­tions on Europe, bar­ring any firm that par­tic­i­pates in a gas pipeline from Russia to Germany from any oper­a­tions in the United States.

The increas­ing use of eco­nom­ic coer­cion by China has par­al­leled its grow­ing eco­nom­ic power. It has been par­tic­u­lar­ly marked this year as China deals both with attempts to allo­cate respon­si­bil­i­ty for the Covid-19 pan­dem­ic and with the emerg­ing nation­al secu­ri­ty con­cerns in many nations about the risks of Chinese invest­ment. Boycotts and other trade actions have been threat­ened, and in some cases imple­ment­ed, against the UK, Germany, Canada, the Netherlands, the Czech Republic, Sweden and Australia.

Economic coer­cion has been rising as the insti­tu­tion­al under­pin­ning of inter­na­tion­al trade has become weaker. The WTO has lost its abil­i­ty to adju­di­cate dis­putes, since its appeal panel no longer has a min­i­mum quorum of judges after the US vetoed all appoint­ments. Countries are impos­ing tar­iffs, trade quotas and anti-dump­ing penal­ties at a much greater rate, often out­side WTO guide­lines. In the face of rising trade bar­ri­ers, the G20 has stopped call­ing on its mem­bers to resist pro­tec­tion­ism.

It is a global trade envi­ron­ment that makes it easier for coun­tries to use trade as a weapon. As a rel­a­tive­ly small coun­try, Australia’s strong inter­est is in pre­serv­ing a global trade envi­ron­ment under the gov­er­nance of the WTO. It will even­tu­al­ly be a loser in a world where trade rela­tions are gov­erned by the exer­cise of eco­nom­ic power.

While Australia needs to show resolve in the face of Chinese coer­cion, it should also strive to halt and if pos­si­ble reverse the ero­sion of the global trade insti­tu­tions, by work­ing with allies and region­al part­ners on reform.

This arti­cle by David Uren first appeared in the Australian Strategic Policy Institute’s The Strategist in 2020.

Image: Reuters

National Interest source|articles

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