Analysis: US-China Technology war

Reading time: 8-10 minutes.

There are different kinds of war that takes place and some of them end up costing lives. However, a Technology war doesn’t cost you lives but it might end up with both positive and negative impacts.

A Technology war is a fight to become ssuperior in technological advancement. This becomes significant because of the use of technology is not only restricts to industries but Military. The weapons in this war can be restricting tech export, high investment in R&D, subsidies to the pertinent businesses etc.

How did it start?

The Technology war came as a part and parcel to the Trade war between US and China. The catalyst to this trade war was Trump’s concern that the US imports $540 Billion every year from China which is 17% of their total imports. Whereas China only imports $120 Billion each year from the US which is only 4% of the US exports.

The US had $420 Billion deficit over China. Trump’s concern that the US is giving them so much business but China is not doing the same for them. Trump also concerned that they are helping China come closer and even become better than them where they both are actually competing against each other.

On March 22, 2018, Trump imposed 25% tariff on some products from China. To tackle this, China started tit-for-tat measures and increased tariffs which has led to this trade war. Since 1979 China has never conceded to the trade threats issued by the US.

China had the advantage of Cheap Labour, strong manufacturing setup etc whereas the US was good at innovation, technology development. Both the countries were dependent on each other for their resources.

Significant Developments

After several attempts for negotiation between the countries, the trade war lasted for almost two years. On January 15, 2020, the countries signed ‘Phase 1’ deal for relaxations from the tariffs. The deal running into 86 pages required China to buy more of the US Products including $200 Billion of farm produce over the period of next two years. On the other side, the US will relax the tariffs on $120 Billion worth of goods. However, it retains the tariffs imposed on $360 Billion of goods so that it makes sure China holds its end of the bargain.

US have accused China of technology theft, cyber espionage and other IP violations. It was also accused of ‘Forced Technology Transfer’ by the US, EU and Japan.

Both countries have tried to topple each other through various measures in the recent past. China’s unfair policies for foreign companies and the US banning Huawei. Hence, the ‘Phase 1’ deal needs China to refrain from forced technology transfer and the ban on Huawei is also relaxed.

Trump insisted on signing on ‘Phase 2’ of the negotiations right after the implementation of ‘Phase 1’ without waiting for the elections at the end of the year. But, since the pandemic outbreak, the deal is nowhere close to being contemplated upon.

Implications for India

A study by the UN body estimated that India gained about $755 million in the first half of 2019 due to the trade war coupled with technology war.

India can be a substitute for the US manufacturers who are looking for mildly skilled and cheap labours for various technological companies for eg. Apple Inc. India’s non-alignment policy in a dispute of two countries gives it an opportunity to form amicable relations with both the US and China. India can provide both the countries with its services and take advantage of the trade war given India makes improves its policies accordingly.

Critical Analysis

In a period of reverse globalization by major economies of the world restricting foreign competitors and promoting domestic businesses, the steps by both the countries are justified to an extent. Both the countries were doing what was necessary for their national interest. Even Russia declared to replace Wikipedia with Russian and more reliable version. Bills were also proposed to preinstall Russian tech in computers and smartphones.

The competition between US and China is clearly more than economic advantages. It squeezes the diplomacy, power and ideology involved.

After Trump took the office of President the relations have depreciated because of his aggression toward China. The administration has stated that the US wanted to reduce the trade deficit with China. They have also contested that they have been treated unfairly by the existing rules and that the rules need to be changed. These problems have led to slower growth and rising public debt.

The US wants to protect national security by confining the transfer of technology to China. The companies warn the government that cutting the market access to China can affect them instead since the revenue from the big market is collected which allows us to infuse that into innovation and technology.

Due to the Huawei ban, it has also decreased US attractiveness to European and other countries. Foreign companies have already started to avoid American components and technology since they worry that the access can abruptly cut off.

On one hand, companies are threatening to leave if the rules are not relaxed whereas on the other hand it is said that national security is threatened by China and some short-term revenue loss is warranted.

To contrast the tariffs imposed on China, it has adopted a firmer approach by doubling the indigenous innovation and development of technologies. China has directed government institutions to remove foreign computer equipment and software in three years.

Considering China’s ambition to make themselves a high-tech powerhouse and technological leadership, Trump wants to slow down China’s progress toward emerging as a high-tech superpower.

In fact, the US has trapped itself by challenging China. China will eventually develop similar technologies or even surpass the Americans and force them out of business. China will do the same in high tech industry what it did to Steel and Aluminium.

China cannot be blamed for their progressive policies for becoming technologically superior as this has been the central goal for decades. It is sensible for any country to pursue technological advancement to grow their economic and fortify national security. China has been repetitively failed to do that; hence intensified measures are justified.

The concerning part is the strategy adopted i.e. supporting domestic industry at the expense of its foreign competitors.

Conclusion

The conflict between the US and China for power was unavoidable looking at the MIC 2025 launched by the Chinese Government in 2015 to build a superpower economic empire.

The current war has established China’s dependence on the other economies for technology and hence, the decisions of the Chinese government are even more appreciated.

A technology war, unlike other wars, is an unending competition to become better than the other country. The US can cut them off the important technologies but it will only delay the development but cannot stop them. This war definitely slows the pace of innovation but creates competition to come up with better technology.

The problem lies in the complex technologies and their immersion in our societies leading to growing insecurity. What appeared to be only a technological or economic conflict but it endangers international peace, development and stability.

Author: Vishal Mandal from Symbiosis Law School, Pune.

Editor: Silky Mittal, Junior Editor, Lexlife India

Analysis: US-China Trade war

Reading time: 8-10 minutes.

The trade war is an economic turmoil conflict between the two countries. The countries in trade war levy hefty tariffs on imports of goods whereas in response the countries retaliate similarly which enunciates the promulgation of reduction in international trade. Due to increasing competition and rapid dynamic needs and wants of the society is the reason for the emergence of trade war. The country in conflict raises hefty tariffs or hindrance in import and of products in response to the barriers created by the other country

The proliferation of trade war emerges when a nation strives to create more jobs and increase economic capital of the country. The tariffs are the major source of stipulating profit incurred by export of products in the global market. As a result, satisfying products enunciates the prospects of more demand of the particular geographical product, which would receive more orders from the global customers, thus, unleashing the more job and profit opportunities for the country.

The global demand of the product unleashes the zeal to produce more products and increase tariffs. This increases the economic competition with the rival country which in turn creates a platform for trade war conflict between the countries. The recent example of a prominent aspect of trade war is US- China conflict which in turn both the countries disentangles the most of the economic relationship with each other.

Significant Development

 The ongoing conflict, US-China trade war has impacted the incurrence of hefty tariffs on import and export of goods, which not only affects US and China but also many intermediary countries. The whole world is getting affected with the trade conflict between these two countries.

The trade war between China, led by President Xi Jinping and the United States, led by President Donald Trump has been started in July, 2018 when China superseded the United States by becoming the largest economy of the world. Soon after that, President Donald Trump began levy tariffs and other trade barriers on China. The Unites States have accused China of the involvement of unscrupulous unfair trade practices, including inducement of forced technology transfer, theft of intellectual property rights, lack of market access for companies incorporated in America and creating a biased pricing range of products through state subsidies of chinese companies. Meanwhile, China believes that the United States is trying to restrict the rise of China being the global economic power.

In January 2020, The President Donald Trump and China’s Chief negotiator signed the first phase of a new trade agreement with China after two years of turmoil between the US- China that have rattled the economies all around the world. The deal includes the $200 Billion purchase of American machinery, goods and services by China inclusive of special tariff charges for China. This deal has reshaped the relations of China-US for the first time towards a future of fair and reciprocal trade.

Implications for India

Despite the ongoing tension between the US-China trade war, India is seen as an emerging trade partner in future. The United States and China are on its peak of levying hefty tariffs to each other. China said that it would impose higher tariffs on $60 billion US goods from 1st June, 2020 in retaliation against US tariff hike over Chinese products.

This has proliferated the much awaited significant shift in the manufacturing sector in India which could be a golden opportunity for India. India has already gained $755 million dollar additional exports mainly of chemical, ores and metals to the US.

The United Nations in a report has said that India has the potential of becoming a boom sector for export of products and is among the few economies that can take benefit from the ongoing trade tensions between China and the United States.

Critical Analysis

The US-China trade war has impacted the economy all over the world rigorously which could spark a recession. The Trump administration has advocated tariffs to reduce US trade deficits and promote domestic manufacturing. The United States stated that China has manipulated their currency unscrupulous.  China was costing the American economy the hundreds and millions of dollars a year because of unscrupulous trade practices which in turn is tampering the due process of relations between the two countries. Trump said that the United States has the trade deficit of $500 billion a year, with the additional intellectual property theft costing additional $300 billion a year. However, China is having a perception that the ideology of putting hefty tariffs is to curb the rise of China as the world’s largest global economic power.

Both the countries have put hefty tariffs against each other’s products. Trump policy aims to encourage the consumers to buy more of American products by making imported goods much more expensive. The USA has levied  more than $ 360 billion tariffs of chinese goods, meanwhile China has retaliated with tariffs on more than $110 billion on US products

Conclusion

The proliferation of ongoing trade war between US-China has impacted the economy all around the world. This has objectified the current scenario of being the world’s largest economic power, despite being the overall development of the world. Although both the countries come together in January, 2020, it is all about showing trade war settlement between the countries. China has started imposing tariffs on above $60 billion goods from the US, while the US has removed the ties with China and also stopped the funding to world trade organization to some extent.

This dispute seems to be never ending because United states of America is the largest economic hub of the world, although china has superseded US in 2018, due to which the imposition of tariffs have been promulgated which not only affects the economy of both the countries, but affecting the economies of all over the world.

Author: Jagrit Chawlal from Guru Gobind Singh Indraprastha University.

Editor: Silky Mittal, Junior Editor, Lexlife India