Trump´s Asia tour and the prospect for Asia and the world

von Ralf Ostner

If you compare the results of the Xi-Trump-summit with the election campaign Trump who questioned the One China principle, planned a trade war, called China a currency manipulator, wanted to impose import sanctions, the new Trump is a very cooperative Trump who wants to get solutions for the trade imbalances and Northkorea, but doesn´t speak about human rights. Xi Jinpings announcement that China will liberalize and open up its markets is a good basis for a sinoamerican understanding and compromise.It won´t be a sinoamerican G-2 as former US geostrategist Brzezinski proposed, but this meeting is really a positive gain for the world. Trump perceives Xi as a strong leader who will do the best for his country, but it was the fault of previous American goverments that China could use free trade agreements for its advantage. Therefore he and Xi have to find a new compromise that the US trade imbalance will be reduced and that China will open its markets for US capital. The decision of the 19th Partycongress of the CPCh is exactly realizing this. That China opens up its financial sector for majority shares of foreign capital is very much what Trump demands. He will push liberalizations of other areas. However a trade war is becoming less probable as China liberalizes its markets. It will depend more on Trump how far he wants to push the Chinese liberalzation.

The second big topic is Northkorea. Trump and Xi agreed that the denucleraziation of Northkorea should be a longterm goal, but that diplomacy should be the main instrument for the solution of the crisis. However, Northkorea under no circumstances will denuclearize, but would at best only stop its nuclear tests and missile tests. Even if China and Russia would boycott Northkorea, Kim Youngun would let his people starve instead of giving up its nuclear power status. China wants Northkorea to start economic reforms like China under Deng Xiaoping, stop its nuclear and missile tests and to restart the 6-party talks, What Trump wants is unclear, but it seems that he doesn´t want to solve the problem by multilateral talks, but by a two-men show and direct talks between him and Kim Yongun. Therefore the Xi-Trump-summit is a deescalating event, but breeds no real bilateral solution.

The APEC summit also has mixed results. While Trump repeated his goal to get rid of multrilateral free trade agreements, Xi replaced the USA by pronouncing China sa the avantgarde of freetrade, globalization and multilateralism. The Trump-USA cancelled TPP, but China wants to replace it by a network of new multilateral freetrade agreements with APEC, the Asian countries and Europe. Japan as second regional Asian leader tries to regroup TPP against China and 11 former TPP leaders agreed to sign a freetrade agreement on its own. Japan also tries to sign a Japanese-European Freetrade Agreement with the EU (JEFTA). The Asian countries see that China is becoming the major economic power in Asia and the Pacific and hope that Japan can counterbalance this by a new TPP without the USA. However, this framework can only rely on the hope that Trump won´t be reelected in 3 years and that the USA will rejoin the new TPP. Xi JInping won´t miss this historic opportunity to get a Chinese TPP, but much of it depends which conditions Chinas will grant the other TPP members.

Another factor is that the liberalization of the finacial markets in China and the USA will reshape the whole financial archtitecture of the world. On the one side it will give a big boost for globalization.On the other side it will globalize the risks for a new finacial crisis. China gives majority rights and shares to foreign banks and insurances, but Blomberg perceives this as a compromise to Trump´s national economic pressure and the need to diversify the bad loans of Chinese banks, shadow banks and other finacial institutions and state agency who accumulated debts to the brinkmanship of default besides currency and trade surpluses. Bloomberg perceices the Chinese liberalization as ambivalent—as a chance for economic growth, on the other side as a possible reset of the Us financial crisis as Chiese default swaps get diversified and sold on the Chinese and the international markets as junkbons and financial products noone understands. At he same time the new Fedchief Powell thinks about the deregukation of the US financial markets and banks. Bloomberg Tv said that it would be only a gradual change, that Powell doesn`t want to get rid of the Dodd-Frank Act, but it´s not sure how far the Fed will push the deregulation of the financial markets. The combination of the liberalization of the Chinese financial market and the US financial market could led to a further globalization of financial boom and then crisis in the future.

Trump said at The APEC meeting that he wants to get rid of monopolies in trade, protect intellectual property rights and to cut state subsidies. This was addressed mainly at China. But China is liberalzing and making efforts to cut state subsidies. Howebver Trump should realize that China won some advantages by copying and economic espionage, but hasready reached the status of a hightechnation which develops its own technology as speed trains, quantum computers or artificial intelligence. It´s no wonder that the representatives of the Silicon Valley issue warnings that China will surpasas the USA in quantum technology and artificial intelligence.Trump should realize that US competivness and jobs are not that much reduced by trade imbalances and globalization per se, but because of a productivity gap, lack of investment in education and digitalzation and automatisation. Much will depend if Trump will be the president for a second term or if the Democratic Party will have a new candidate who could prevent another Trump term. Some people hope that Mark Zuckerberg could be the next rival for Trump: Young. Liberal, globalist, new technologies and antiestablishment asan outsider.

Conclusion: Trump´s Asia tour was deescalating, the Xi-Trump summit is a gain for the world as it tries to get compromises on sinoamerican and Northkorean conflicts. However: Much will depend how China and the USA will manage their bilteral relations as core relations for Asia and the world.


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