News India Times

he United States and China are clearly on a collision course. Chi- nese companies abscond with intel- lectual property, and President Trump introduces tariffs on Chinese goods; President Xi Jinping responds with his own levies, soTrump adds more. China al- lows the value of its currency to fall, and the United States brands it a currency manipula- tor.We are now on the verge of all-out eco- nomic warfare. These are the world's two largest economies, and the collapse of trade be- tween themwould hardly bring either one to a grinding halt. But the combatants are not evenly matched. China might seem in a bet- ter position to cope with a trade war, since it is a heavily managed economy and the gov- ernment squashes political resistance. Yet its every maneuver carries enormous risks. Meanwhile, Trump, whomanages a durable and flexible economy, is not exactly seeking victory for the American way of doing busi- ness. His approach, in some ways right out of Beijing's playbook, wouldmake our econ- omy quite a bit more like China's. The breakdown in trade between the two countries is already causing pain in both economies, as soybean farmers in the Mid- west and Chinese textile exporters in Guangzhou can attest. The battle will inten- sify if rising tensions close off investment flows and dampen the movement of tourists and students between the two countries. But the U.S. economy is about 50 percent larger than China's, and is less dependent on trade, so its prospects look better. And China ex- ports more to the United States than it im- ports from the United States (a fact that clearly riles upTrump and was a key instiga- tor for the trade war). So the near-termpain will be greater for China. But Beijing does have some advantages. One is the structure of its (mostly) command economy, which is dominated by state enter- prises. The majority of banks in China are also state-owned, making it easy for the gov- ernment to generate a surge of cheap credit - and the subsequent investment that boosts growth. The second advantage is the struc- ture of China's political system, in which dis- sent is easier to shut down and bad news about the trade war can be filtered out. Still, even a state-dominated economy withmany economic weapons has to be cau- tious about which ones it uses; some of them could backfire badly. One of China's greatest weapons in a trade war is its ability to disrupt the work of Ameri- can companies that want to sell into China's enormous and fast-growing markets or that use China as part of their global supply chains. But other foreign companies and in- vestors could also begin to see China as an unpredictable and volatile business environ- ment, unconstrained by the rule of law. This would hurt China's plans for modernizing its economy with the help of foreign invest- ments and foreign technological andmana- gerial expertise. China could also further cheapen the value of its currency, the renminbi, to offset U.S. tariffs. Here, too, the government faces constraints. Fear of a major devaluation could cause foreign investors to pull their money out of China, and domestic investors might follow. This happened in 2014-15, when a modest government-orchestrated de- valuation set off panic-driven capital out- flows in anticipation of further depreciation. Moreover, even an autocratic government cannot count on getting carte blanche from its people. Xi is not immune to domestic po- litical pressures andmust carefully manage the tricky balance between using nationalist sentiments as a rallying cry and actually de- livering good economic performance. Theoretically, China can stimulate a flag- ging economy by ordering a burst of invest- ment that boosts gross domestic product growth in the short term. But this would probably generate more bad loans in an al- ready fragile banking system. A protracted trade war would also halt evenmodest mo- mentum towardmarket-oriented reforms, a putative objective of the Chinese govern- ment. This would hurt the economy's long- term growth prospects. And China's plan to shift the focus of its economy from staid and inefficient state enterprises to high-produc- tivity and high-value industries will fall short if it loses access to technology from the United States and otherWestern nations. In some ways, Trump seems more con- strained than Xi because of America's demo- cratic political system, its more laissez-faire economy and the limits on his executive power. But he, too, has some elements in his favor as he does battle with China. Trump has the advantage of managing an economy that is enormously flexible and resilient. And getting tough on China resonates not just with his political base but even with Democ- rats, many of whomhave long called for ag- gressive U.S. action against Chinese trade and currency practices, even if they disagree withTrump on tactics. Yet in exercising his power, he could end upmaking America's economy a bit more like the state-dominated one operated by Beijing - and, in so doing, permanently dam- age the U.S. free market. -S PECIAL T O T HE W ASHINGTON P OST News India Times August 16, 2019 2 Opinion T Published weekly, Founded in 1975. The views expressed on the opinion pages are those of the writers and do not necessarily reflect those of News IndiaTimes. 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Road, 29 Adarsh Society Ahmedabad 380009 Tel. 26446947 F ax. 26565596 Professor at Cornell University and a senior fellow at the Brookings Institution Here's TheProblemWithThe DemocraticDebates By Jennifer Rubin T he Democratic debates haven't done what they are surely intended to do. They have not allowed lesser-known candidates to break through, swayed voters or put any of the candidates in their best light. Not surprisingly, given that the debates are run by media outlets and put on for rat- ings, they've created conflict but no lasting impact on the race. The latest IBD/TIPP poll finds: "The for- mer vice president leads the Democratic field with 30% support. [Joe] Biden is fol- lowed by ElizabethWarren at 17%, Bernie Sanders at 15% and Kamala Harris at 11%." Likewise, the latest Morning Consult poll has the race roughly back to where it was before the debates: Biden at 33%, Sanders at 19%, Warren at 15% and Harris at 9%. Candidates lauded for strong debate performances - such as Sen. Cory Booker, D-N.J. - remain mired in the low single digits. Nor have the debates really affected how the Democrats stack up against President DonaldTrump. The IBD/TIPP poll finds: "Each of those candidates had an edge over Trump, but only Biden garnered an outright majority. Biden ledTrump by a comfortable 54%-41% among registered voters. Among independents, Biden ledTrump 59%-35%." That has also remainedmostly unchanged since Biden entered the race. The debates surely don't clarify the candi- dates' stances onmajor issues - does anyone think, for example, that voters understand the differences between Sanders's and Har- ris's healthcare plans? Nor do they provide a forum conducive for candidates' displays of leadership and rhetorical skills. The format creates disjointed, chaotic events and en- courages the moderators to pit candidates against one another on policies they haven't even explained, leaving many voters befud- dled. In fact, all the candidates seembetter when not forced into the debate format that puts a premiumon attacks and sound bites. The debates roil the coverage for a week or so but, soon enough, the race reverts to the mean. Morning Consult, in the wake of the second debate, found: "Along with losing 3 points in vote share, Harris's net favorability dropped by 11 points (seven points more than any other candidate)."Yet since the sec- ond debate, Harris has knocked it out of the park in a series of TV appearances, showing passion, exuding moral heft and skewering the president on his embrace of white na- tionalism and his refusal to take action on gun safety. And frankly, the wrong people have gotten on the stage, in part because the DNC al- lowed candidates to gain entry by accumu- lating donors, giving an advantage to candidates with gobs of money (former Maryland congressman John Delaney, for ex- ample) to drumup donations. It is also a sys- tem ripe for manipulation. Rep. Tulsi Gabbard, D-Hawaii, an infamous apologist for Syrian leader Bashar Assad, may have gotten a boost fromneo-Nazis who bragged that they've helped her qualify for the de- bates by donating to her campaign. Using donors as a criteria also favored current of- ficeholders who had access to their existing donor lists to help qualify for the debates. -T HE W ASHINGTON P OST