• Special Edition: Saving Democracy

    This week’s mini-drama over President Trump’s Fourth of July speech, with all its military accompaniment, shouldn’t distract anyone from the far more significant story of global democratic decline on this 243rd anniversary of American Independence.
    Dangers are accelerating to the democratic ideals that the American Revolution inspired. If no unanticipated shock disrupts current trajectories – say a democratic uprising in China, a Russian regime change or, still significant, a Venezuelan dictator’s decline – autocratic powers will surpass democracies in their economic size and influence within the coming decade. 

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  • A Financial Statecraft Strategy for the United States to Address the Rise of China

     For the first time since the fall of the Soviet Union, the United States finds itself in a great power competition, this time with China. In the post-World War II era, this competition has many more, and more sophisticated, financial battlefields than in the past. In the field of sanctions, there are two issues posed by Chinese behavior: first, the use of Chinese actors to evade sanctions regimes targeting third parties; second, the use of Chinese actors domestically for goals that violate international norms, including on human rights, cyberspace, and territorial sovereignty. Unlike prior enforcement challenges, China’s financial system is of such a scope that large-scale sanctions infractions are difficult to punish with a normal suite of secondary sanctions, highlighting the need to target new sectors of the economy.

    With this in mind, Washington should adjust its coercive economic strategy to reflect a broader use of tools beyond sanctions. The end goal of a sanction should not merely be a penalty, but rather a change in an actor’s behavior. Given the degree of political interference in China’s banking system via formal state ownership and the indirect influence of opaque party committees, penalties imposed against the country’s banks, which conduct the majority of their operations in the domestic market, are unlikely to produce a meaningful change in behavior. Although in past disputes with European banks, the threat of secondary sanctions was potent, the wide array of state tools to support sanctioned banks, coupled with China’s hostility to the use of sanctions, reduces this leverage.

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  • Trump, Xi Pause US-China Trade War

    Trump lifts some restrictions on Chinese telecommunications firm Huawei

    US President Donald J. Trump agreed on June 29 to lift some restrictions on Chinese telecommunications giant Huawei and delay imposing new tariffs on Chinese goods. These concessions were announced following a meeting between Trump and Chinese President Xi Jinping on the sidelines of the G20 summit in Osaka, Japan, at which the two leaders agreed to restart trade negotiations between their countries.

    “Frankly, this was all fairly predictable,” said Mark Linscott, a senior fellow with the Atlantic Council’s South Asia Center and a former assistant US trade representative (USTR) for South and Central Asian Affairs.

    “The two sides had already made progress before and intensifying the war is in neither side’s interest,” Linscott said, adding, “At this point, it seems a lot easier to impose tariffs than to lift them, so avoiding new ones makes a lot of sense, particularly to allow more space for negotiation.”

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  • Special G20 Edition: Historic Test for a World Adrift

    The G20 this weekend faces its biggest collective challenge since the group of world leaders first met in November 2008 in the jaws of the financial crisis. A toxic trifecta of growing political instability, escalating trade tensions and slowing global growth would be challenge enough, but the perils don’t stop there.

    Beyond that, the 19 leaders of the world’s largest economies and the European Union gather as history’s tectonic plates shift underneath them. How the G20 plays out in its group setting – and perhaps more importantly in the sideline meeting between US President Donald Trump and Chinese leader Xi Jinping – will shed light on whether today’s leaders are up to the challenge of navigating those unsettling, interlocking shifts.

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  • The Trump-Xi Summit and Beyond

    It would be comforting to believe that an agreement between the United States and China that deescalates the current trade war and resolves a number of key problems between the two would restore tranquility and mutual harmony. But history tells us that frictions and occasional disputes between a rising power with high aspirations and ambitions and an established power that has become accustomed to occupying a position of preeminence tend to be the norm.

    There is reason to assume this will be the case for the United States and China—countries with very different political and economic systems, very different historic and cultural perspectives, but very similar aspirations for global and regional preeminence, or at least equality, in economic strength, technological advancement, and military capability. But these need not, and with skilled management by the leaders of both nations should not, lead to major political, economic, or military confrontations. That will be a decades-long responsibility of and challenge for both countries.

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  • Can Xi and Trump Pause their Trade War in Osaka?

    US President Donald J. Trump and Chinese President Xi Jinping may agree to a temporary ceasefire in their ongoing trade war when they meet in Osaka, Japan, on June 29, but a full trade deal is unlikely, according to Bart Oosterveld, C. Boyden Gray fellow on global finance and growth and director of the Atlantic Council’s Global Business and Economics Program.

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  • US-China Trade War: The Issues Ahead of the Trump-Xi Meeting

    In order to bring to an end, or at least significantly deescalate, the current US-China trade war, numerous issues will need to be either resolved, placed on a course toward resolution, or managed in a mutually agreed way. It is difficult to see a breakthrough agreement being reached by US and Chinese negotiators prior to the meeting in Japan between US President Donald J. Trump and Chinese President Xi Jinping on June 29 or by the leaders themselves. Perhaps the best we can hope for would be agreement on a few items as a show of progress and good faith, and a commitment not to take further adverse actions against one another for a designated period of time while negotiations continue. Something more than that would be warmly welcomed by markets, by a wide range of businesses and consumers, as well as by many in the world who fear massive disruption if escalation continues.

    Most of the issues the two nations continue to grapple with relate to difficult systemic or “structural” differences on such matters as protection of intellectual property and trade secrets; equal access and rights for foreign investors in both the United States and China; a level playing field for businesses; and a consensus on what are appropriate amounts and types of government support for critical 21st century technologies and state enterprises.

    And even if US and Chinese negotiators surprise us by reaching an agreement that both Trump and Xi can sell to their publics as a major success, that agreement will be unlikely to resolve all of the economic differences between the United States and China. This is just the beginning of a much longer process.

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  • How the US-China Trade War Could Impact US-EU Negotiations and the WTO

    The US-China trade war could be a complicating factor in the US-European Union (EU) trade negotiations and undermine the World Trade Organization (WTO). 

    China has developed close economic ties, including through the Belt and Road Initiative, with a number of Central and Eastern European countries and several Southern European countries, like Italy and Greece. Many EU members see an important economic benefit in being more closely engaged with China on BRI trade and investment projects and many have become major users of Chinese telecommunications and other technologies.

    In coming negotiations, will the United States say to the EU “as a precondition for making the deal you have to reduce your ties with China or agree not to further increase them or not participate in BRI projects or not buy certain Chinese advanced technology products?” And will China step up its efforts to involve greater numbers of European countries in the BRI, further develop its markets in the region, and apply pressure on countries to use Chinese companies in domestic projects as well as purchase Chinese technology or Chinese products rather than American ones?

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  • The Global Implications of an All-Out Trade War

    An all-out trade war between the United States and China will slow growth not only in these two countries, but also in countries that sell substantial amounts of goods in both markets—which means most countries in the world. Growth will decline not just because of the direct quantitative effects of tariffs and other barriers, but also because of major disruptions to supply chains, adverse effects on profitability of many companies, investment uncertainty, and fears about the future course of the confrontation.  

    Both China and the United States are also likely to attempt to establish “zones” or “spheres” of economic/trade/investment/rule-making influence, or preeminence, to broaden and deepen their market positions in their regions, and worldwide, at the expense of the other. This will be particularly true with respect to advanced telecommunications and information technology. Recently, for example, Chinese President Xi Jinping and Russian President Vladimir Putin agreed that the Chinese telecommunications firm Huawei would cooperate with MTS, Russia’s largest mobile operator, to develop a 5G network for Russia.

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  • US-China Trade War: The Dangers of Disruption

    A central factor in the escalation of US-China tensions relates to technology. The issues on the table go well beyond conventional trade disputes; tariffs get most of the press attention, but they are only part of a much bigger picture. Both the United States and China are already imposing, or considering imposing, restrictions on imports from each other of advanced high-technology products. In the process, they would be aiming at making their economies and companies less dependent on the other’s supplies of such technologies.  
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