E-bills, e-signature, the electronic transfer of funds – advancements in technology are bringing about remarkable changes in the business landscape, domestically and internationally. All this change is facilitating the faster movement of goods across borders and forcing governments to keep pace. Negotiations for regional trade agreements have proved an important forum for government consultation about technology.
File Photo/PIB
Between US President Donald Trump’s zero-sum disputes with China and Iran, UK Prime Minister Boris Johnson’s brinkmanship with Parliament and the European Union, and Argentina’s likely return to Peronist populism, the fate of the global economy is balancing on a knife edge. Any of these scenarios could lead to a crisis with rapid spillover effects.
The pervasiveness of clothing made in China in U.S. markets is certainly one of the things that comes to mind when talking about the balance of trade between the two nations. But there is a hidden price tag on all the clothing that is made in China. It’s a considerable sum—and growing—that is skewing the trade relationship and putting its future at risk. That hidden price tag is water.
Chinese companies appear to be trying to dodge the tariffs imposed by the United States as part of a punishing trade war by redirecting their shipments through Cambodia. China’s exports to Southeast Asian country have been steadily rising since start of trade war. Meanwhile, Cambodia’s exports to US in first three months of 2019 rose 22 per cent to US$820 million.
To Chinese observers, the US president’s rapid flip-flops on Xi Jinping and the imposition of tariffs are giving off hints of desperation. China has learned its lesson by not dancing to Trump’s tune, and instead can afford to hunker down for a drawn-out negotiating process.
The US and China won’t be the only ones affected in the trade war raging between the two countries. As companies scramble to find ways around the ever-increasing tariffs that the world’s two largest economies impose on each other’s goods, other countries are being drawn into a conflict that might have no winners.
To present and future Chinese leaders, managing economic change while maintaining social stability is much more important than figuring out how to respond to the social media rumblings of a sitting US president. For an economy as much as an individual, too much of a good thing can be detrimental. In the run-up to the global financial crisis, China’s economy, and more importantly, Chinese jobs, depended on exports.
Unlike the 2008 global financial crisis, which was mostly a large negative aggregate demand shock, the next recession is likely to be caused by permanent negative supply shocks from the Sino-American trade and technology war. And trying to undo the damage through never-ending monetary and fiscal stimulus will not be an option.
The US president promised tariffs on Chinese goods as part of the trade war would help bring jobs back to the United States, but while firms are leaving China, it is the likes of Vietnam, Indonesia, Cambodia, Mexico, and Bangladesh that are benefiting the most.
