Dalian, People’s Republic of China, 1 July 2019 – As the trade war between the US and China moves into truce, but not yet comprehensive agreement, uncertainly still rules, agreed panellists at a CNBC debate on the first day of the World Economic Forum’s Annual Meeting of the New Champions.
“The implication of the trade war is going to be so much broader than whatever impact it may have on business in the US and China,” said Charles Li, Chief Executive of Hong Kong Exchanges and Clearing. “This will be a long, long process before it’s over.”
Li compared the trade war to two runners, with the second runner closing distance in a manner that the race leader thinks is unfair. “Either you run faster to create the distance again, or you find a way to slow the other runner down.”
For the time being, there is no immediate end to the race in sight. None of the panellists predicted that there would be a resolution between the US and China on trade by the end of the year.
“The business community is very pleased that they are going back to the negotiating table … and that additional tariffs are going to be postponed for the time being,” said Timothy P. Stratford, Managing Partner, Beijing, at Covington & Burling. “What we are most concerned about is all the remaining uncertainty.”
“National security and trade policy are different fields,” he added, “with different rationales and goals they are trying to achieve.” He warned: “Mixing them together can really complicate things. They both need to be addressed in parallel, because they impact each other, but you have to keep them separate.”
“It’s a temporary truce,” reminded Mari Elka Pangestu, Professor of International Economics at the University of Indonesia, “but the issues behind the trade tariffs and deficit go deeper, into the perception of unfair trade practices, intellectual property and technology. I’m not sure it can be resolved anytime soon.”
Pangestu stressed the need for a multilateral rather than a bilateral resolution, so that all stakeholders can participate. “When two elephants fight,” she said, “countries like Indonesia don’t want to be trampled; we need to be agile.”
China’s loss can also be South-East Asia’s and ASEAN’s gain, as US firms seek alternative supply chains and manufacturing bases. But these could only be short-term gains, Pangestu warned, emphasizing that, for Indonesia in the long term, “it’s better that we go back to a rules-based system and more certainty.”
“We are very happy to hear that both the US and China have agreed to come back to the negotiating table,” said Yi Xiaozhun, Deputy Director-General of the World Trade Organization. However, he voiced the hope that multilateral arbitrage can help the US and China to resolve their differences.
“The WTO is a rules-based organization,” Yi stressed. “If some members feel their business opportunities are jeopardized by other members, they should come to the WTO to raise their concerns.”
“A lot of smaller economies are also affected by this trade war,” added Yi. “The current economic situation in the world does not look good. Uncertainty has reduced the confidence of investment, and global supply chains are disrupted. We hope that uncertainty can be reduced … and the WTO can move forward to more liberalization rather than moving back to managing trade.”
“Uncertainty is causing a lot of delay in investment decisions,” concurred Pangestu. “At the end of the day, it’s consumers who have to pay.”
Repercussions run deeper than rising prices. “Americans are concerned that the Chinese government will find other ways to show its displeasure,” warned Stratford, citing different types of retaliation including audits, investigations and the inability to get business licences.
Stratford noted: “One possibility is that the Government of China might decide it would be easier to deal with another president, and wants to see the results of the  election. Although I agree that, whether you have a Republican or a Democrat in the White House, the US will never go back to what their China policy was before.”
“Both sides are suffering pain,” Stratford said, and seek a solution. But the resolution will not come easily or swiftly. “We’re moving into a process that might take three or four years.”
The World Economic Forum’s 13th Annual Meeting of the New Champions is taking place on 1-3 July 2019 in Dalian, People’s Republic of China. Convening under the theme Leadership 4.0: Succeeding in a New Era of Globalization, more than 1,800 business leaders, policy-makers and experts from over 80 countries will participate and explore more than 200 sessions.
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