Posts Tagged ‘trade’

U.S. Shift Boosts Afghans, Risks Pushing Pakistan Toward China

August 22, 2017

Afghan president says move to help counter Taliban, but Pakistani officials believe there is no military solution.

A member of the Afghan security forces fires on Islamic State militants on April 11 during an operation in eastern Nangarhar province.
A member of the Afghan security forces fires on Islamic State militants on April 11 during an operation in eastern Nangarhar province. PHOTO: NOORULLAH SHIRZADA/AGENCE FRANCE-PRESSE/GETTY IMAGES

Updated Aug. 22, 2017 1:22 p.m. ET

The Trump administration’s tougher approach to Pakistan bolstered Afghan officials fighting the Taliban, but officials and analysts in Islamabad warned that Washington’s new stance encourages it to deepen ties with China and risks fueling the 16-year war in Afghanistan.

A day after President Donald Trump said the U.S. would expand its military involvement in the country, Afghan President Ashraf Ghani said Tuesday the greater U.S. role would help counter the Taliban, which has expanded the territory it controls in recent months.

“The U.S.-Afghan partnership is stronger than ever in overcoming the threat of terrorism that threatens us all,” Mr. Ghani said. “The strength of our security forces should show the Taliban and others that they cannot win a military victory. The objective of peace is paramount.”

President Donald Trump said U.S. policy in Afghanistan and South Asia will “change dramatically,” adding that he will push Pakistan to fight terrorism more effectively. Photo: Reuters

Three Takeaways From Trump’s Afghanistan Speech
President Trump outlined his new stance to combat terrorism in Afghanistan on Monday night, saying that U.S. troops will continue to stay in the region and that the fight will only become more intense. The WSJ’s Gerald F. Seib gives us three takeaways from the speech. Photo: Getty

But Pakistani officials believe there is no military solution to the Afghan war and that peace talks with the Taliban are needed, not additional U.S. troops and the “fight to win” position announced by Mr. Trump.

“The policy announced is a recipe for instability. It won’t work. It has been tried, tested and failed,” said Mushahid Hussain, chairman of the Senate defense committee in Pakistan’s parliament.

On Tuesday, Pakistani officials also bristled at Mr. Trump’s comments, in which he said that Pakistan continued to harbor “agents of chaos,” and threatened to cut American aid unless that changes.

Afghanistan and its Western allies have long accused Pakistan of providing covert support to the Taliban and harboring the group’s leaders. Islamabad denies the allegations, although it has acknowledged some influence over Taliban officials.

Joining the U.S. war on terror has cost Pakistan tens of thousands of lives and massive economic losses, according to Pakistani officials.

“No country in the world has done more than Pakistan to counter the menace of terrorism,” Pakistan’s Ministry of Foreign Affairs said on Tuesday. “It is, therefore disappointing that the U.S. policy statement ignores the enormous sacrifices rendered by the Pakistani nation in this effort.”

Pakistan’s foreign minister, Khawaja Muhammad Asif, reiterated Pakistan’s “desire for peace and stability in Afghanistan” in a meeting Tuesday with the U.S. ambassador, David Hale, the ministry said. Mr. Asif is due to travel to the U.S. for talks with Secretary of State Rex Tillerson in the next few days.

The new pressure on Pakistan will deepen Islamabad’s partnership with China, as will Mr. Trump’s call on Monday for India to “help us more with Afghanistan,” analysts said.

“Pakistan will be telling America, ‘Don’t push us too hard’,” said Rustam Shah Mohmand, a former Pakistani ambassador to Afghanistan.

China has a $55 billion infrastructure-building program in Pakistan. On Tuesday, China’s foreign ministry said “Pakistan is on the front lines in fighting terrorism and has made great sacrifices and contributions to fighting terrorism. The international community should fully affirm the efforts by Pakistan.”

Islamabad, meanwhile, accuses archenemy India of using Afghan territory to support jihadist and separatist militants that fight Pakistan. In the 1990s, a proxy war between Pakistan and India for influence in Afghanistan tore the country apart in a civil war.

“This is a real apprehension in Pakistan that America is going to use India’s presence inside Afghanistan to wage a proxy war against Pakistan for India’s own reasons and for the reason that they will be able to subvert the China Pakistan Economic Corridor,” said Rifaat Hussain, a defense analyst based in Islamabad.

New Delhi said it was ready to help more in Afghanistan. The foreign ministry said India would continue its reconstruction efforts in Afghanistan, where it has built dams, roads, government buildings and other infrastructure. India provides millions of dollars in aid to Afghanistan and trains Afghan security forces.

The ministry said it welcomed Mr. Trump’s remarks on “confronting issues of safe havens and other forms of cross-border support enjoyed by terrorists.”

But India also remains wary of aggravating tensions with Pakistan. Vivek Katju, a former Indian ambassador to Kabul, said India would watch closely for signs of how Mr. Trump planned to implement his tough talk on Pakistan.

The Taliban on Tuesday warned the U.S. against widening its role in Afghanistan, saying they will continue fighting until all American troops have departed Afghan soil.

“If America doesn’t withdraw its forces from Afghanistan, the day won’t be far when Afghanistan shall transform into a graveyard for the American empire,” said Taliban spokesman Zabiullah Mujahid.

According to the United Nations, the group now has “significant influence” over, or fully controls, some 40% of Afghanistan’s territory, home to around a third of the country’s population.

In his speech Monday, Mr. Trump didn’t spell out troop numbers. He said conditions on the ground, rather than timetables, would determine his administration’s approach, even as he noted that the U.S. wouldn’t remain in Afghanistan indefinitely or write “a blank check.”

former president Barack Obama’s decision to announce U.S. plans for withdrawal in 2014 was criticized for emboldening the Taliban at a time when the U.S. was seeking a peaceful resolution to the war.

U.S. Army Gen. John Nicholson, the commander of American and international forces in Afghanistan, stressed Tuesday that Washington had no timetable for the pullout of U.S. forces from the country.

“Our future presence will be based on conditions and not arbitrary timelines,” Gen. Nicholson said. “This new strategy means the Taliban cannot win militarily. Now is the time to renounce violence and reconcile.”

U.S. officials say Mr. Trump’s revised approach will include an increase of up to 4,000 U.S. troops. The U.S. currently has about 8,400 troops in the country, working alongside about 4,000 troops of the North Atlantic Treaty Organization.

The U.S. forces both train and advise the Afghan military and fight with Afghan troops against the Taliban and the local affiliate of the militant group Islamic State, which has gained a foothold in eastern Afghanistan in the past year.

In Brussels, NATO Secretary-General Jens Stoltenberg said the alliance joined the Trump administration in its commitment to Afghanistan, adding that the alliance would discuss “the way ahead” there—an apparent reference to what Mr. Trump said Monday would be a U.S. request to NATO to send additional troops to the country.

Some Afghans remained skeptical about the Trump’s administration’s plans, calling them vague about the envisioned role of the U.S. military in the country and about how it will win more cooperation from Pakistan.

“What kind of action will he take against Pakistan if it continues to harbor terrorists? What are his pressure tools?,” asked Atiqullah Baryalay, a retired Afghan army general and security analyst. “His policy seems ambiguous and unclear…. Meanwhile the war continues in the country. It intensifies day by day.”

Write to Saeed Shah at and Margherita Stancati at


These Days, All Roads Lead To Beijing

The success of the new Silk Roads depends on delivering win-win scenarios.

Huffington Post

07/28/2017 01:54 pm ET

Tourists ride camels in the Mingsha Shan desert, part of the ancient Silk Roads, during the Silk Road International Cultural Expo in Dunhuang City. Sept. 20, 2016.

When Chinese President Xi Jinping arrived in Astana, the capital of Kazakhstan, at the beginning of September 2013, few thought it was anything but another ordinary visit. Xi’s predecessor, Hu Jintao, had been to the Kazakh capital several times and usually talked about how he welcomed good relations with one of China’s neighbors to the west. But when Xi began his speech, it was obvious that something new was afoot. The Chinese president was offering more than the usual banal platitudes. He was talking about the future, and he was talking about a plan.

For more than 2,000 years, he said, the peoples who live in the heart of Asia had been able to coexist, cooperate and flourish despite “differences in race, belief and cultural background.” It was a “foreign policy priority,” he went on, “for China to develop friendly cooperative relations with the Central Asian countries.” The time had come, he said, to make economic ties closer, improve communication, encourage trade and enhance monetary circulation. The time had come, he said, for a “Silk Road Economic Belt” to be built. The time had come to breathe new life back into the old Silk Roads, a series of trade routes that once connected Asia, Africa and Europe.

Cynics listening to the speech would have been forgiven for thinking this was wishful thinking. Ever since the fall of the Iron Curtain, there had been talk of old connections rebooting and new Silk Roads surging to life. Indeed, just two years before Xi’s speech, Hillary Clinton, then U.S. secretary of state, gave an upbeat talk in Chennai, on the southeastern coast of India, in which she outlined her hopes for the future. “Turkmen gas fields could help meet both Pakistan and India’s growing energy needs,” she said, “and provide significant transit revenues for both Afghanistan and Pakistan. Tajik cotton could be turned into Indian linens. Furniture and fruit from Afghanistan could find its way to the markets of Astana or Mumbai and beyond.”

A map illustrating China’s Belt and Road Initiative at the Asian Financial Forum in Hong Kong. Jan. 18, 2016.

It all sounded positive and exciting. The problem was that nothing ever came of it. As a senior official at the Asian Development Bank pointed out in 2011, it was all very well talking of massive infrastructure projects like roads, energy plants and pipelines. But “unless the job is funded, it ain’t going to happen.” Anyone can have a vision. What matters is turning it into reality. When historians look back at the first two decades of the 21st century, it is unlikely that many will focus their attention on the failure of the U.S. to follow up on the project outlined by Clinton.

It will be another matter when it comes to tracking what happened after Xi left Astana. Barely two months later, in November 2013, the Central Committee of the Communist Party of China promised to take matters forward. “We will set up development-oriented financial institution,” the announcement stated, “accelerate the construction of infrastructure connecting China with neighboring countries and regions, and work hard to build a Silk Road Economic Belt and a Maritime Silk Road to form a new pattern of all-round opportunities.”

Since then, nearly $1 trillion has been earmarked for projects that form part of the Belt and Road Initiative. The scale of proposed investment is breathtaking, comparable only to the rebuilding of Western Europe after World War II when the Marshall Plan provided capital, expertise and energy to pull half a continent devastated by fighting and suffering off its knees.

The scale of the initiative is breathtaking, comparable only to the rebuilding of Western Europe after World War II.

The Belt and Road Initiative promises to do more. Tens of billions of dollars have been pumped into the Silk Road Fund and a handful of policy and development banks to push ahead with major investments in Asia, Africa and Europe across multiple sectors. In June, Commerce Minister Zhong Shen said terms had been agreed upon for at least 24 new deals in Kazakhstan alone, with a value of more than $8 billion that included investment in energy, mining, the chemical industry, mechanical manufacturing, agriculture and digital exchange.

Then there is the $55 billion that is due to be invested in Pakistan, of which around two-thirds is to be spent on building 21 power plants that will transform the energy security of a country where outages and blackouts interrupt the work day, reduce productivity and affect family life. Some experts believe Chinese investment might account for 20 percent of the Pakistan’s GDP over the next five years and boost growth by as much as 3 percent per year — an astonishing indication of the potential power of the shot in the arm that might be produced by the re-galvanization of the Silk Roads.

Given the context of forging present and future connections across continents, it is not surprising that much attention is being paid to the past. Precedents and parallels are important in providing intellectual credibility and framing the overarching vision of what is at stake. As Xi put it at a major forum in Beijing in May, the “ancient silk routes embody the spirit of peace and cooperation, openness and inclusiveness, mutual learning and mutual benefit.”

It is not surprising, of course, that the emphasis should be placed on the positive exchanges that were enabled and facilitated along the Silk Roads, rather than pointing out that disease, environmental change and violence also sometimes coursed along the arteries connecting east with west. Nevertheless, it is striking to note that while the rhythms along the Silk Roads were not always smooth, they compare favorably when set alongside those of Europe, whose history was shaped by almost never-ending confrontation and warfare.

The rhythms along the Silk Roads compare favorably when set alongside those of Europe, whose history was shaped by almost never-ending warfare.

The Silk Roads of the past were an abstract series of connections. There was no one single route or road connecting China across the center of Asia to the Mediterranean but rather a criss-crossing spider’s web that linked oasis to oasis, village to village, town to town. Most of the interaction along the Silk Roads was local in nature and involved petty transactions. Movement of high-value, high-status items — silks and other textiles, ceramics, spices, fruit, precious metals and jewels — was smaller in quantity but caught the eye of commentators as well as consumers.

People in the past were as curious about the world as we are today and were keen to try new tastes, consider new fashions and learn about new ideas. What has changed, of course, is the speed at which we are connected in the modern world: news and information moves more or less instantaneously from one side of the world to another, while we are able to travel thousands of miles quicker and more cheaply than any generation in history before us.

The Belt and Road Initiative therefore fits in alongside the paradigm of the old Silk Roads insofar as there is little congruity to which regions, countries and places fall within the geographic parameters of the scheme and which do not. In fact, some 60 countriesstretching across Asia into Europe and Africa are part of the initiative, representing some 60 percent of the world’s population.

As Chinese state media has noted, while the leadership used to talk in terms of China playing an important role in the international community, the language has recently changedto talking of China as a “guide” for others and to Xi as a leader of the “new world order.” Nowhere is this change better illustrated than in the video above, released to mark the Belt and Road Initiative forum in Beijing in May. “Why is there conflict and war? Why is there prejudice and famine? What’s wrong with the world?” sings a mournful cartoon character. “What can we do?” runs the refrain. The answer, set out to comfort those worried by pollution, inequality, warfare and change, is clear: “China has a solution.”

That solution involves building a shared future for mankind — something Xi articulated in the spring of 2017 at the World Economic Forum in Davos, Switzerland, where he talked of economic and environmental sustainability and of the importance of cooperation. “When encountering difficulties,” he said, “we should not complain about ourselves, blame others, lose confidence or run away from responsibilities. Instead we should join hands and rise to the challenges.”

Few had any doubts who or what he had in mind when he said that or when he warned of the dangers of trade barriers being put up. U.S. President Donald Trump had talked regularly of imposing tariffs on trade with Beijing. Xi was pre-empting potential moves from a new White House administration, noting at Davos that “pursuing protection is like locking oneself in a dark room. While wind and rain might be kept outside, that dark room will also block light and air.” Troubles in developed economies had been caused by the “excessive chase of profit by financial capital and a great failure of financial regulation,” he said.

The first freight train directly connecting China to the U.K. arrived in London on Jan. 18 after a journey of 18 days and roughly 7,500 miles.

One of the key elements behind this massive investment is the preparation for China’s medium to long-term future. With energy needs expected to triple by 2030, securing oil and gas to fuel economic and industrial growth has been a priority. This is one reason why funding has been made available for pipeline construction but also for forward purchases of oil like the massive deal with Russia’s Rosneft, purportedly worth $270 billion.

Wider commercial and strategic aims are also part of the story. Connected by new roads that run through the China-Pakistan Economic Corridor up into western China, the Pakistani port city of Gwadar offers opportunities and options for both trade and security. Sending goods overland to Gwadar and onward significantly reduces the cost and time compared to shipping them from ports on the Pacific coast. Doing so provides an alternative to the anxieties over territorial issues in the South China Sea but also reduces the risks of passage through the pinch point of the Strait of Malacca, which handles almost all China’s maritime traffic. It also offers access to the Indian Ocean and the Gulf for Chinese navy ships, which are stationed and serviced out of Gwadar, ostensibly to provide protection for trade routes.

There is growing realization in Beijing that while it may be going too far to claim that China’s future depends on its neighbors, working to upgrade and improve the neighborhood is good for everyone. There are, of course, many reasons to do so. Leadership roles require the assumption of responsibilities— one reason why Chinese diplomats are increasingly active in shuttle diplomacy between Afghanistan and Pakistan, urging both nations to form a bilateral “crisis-management mechanism” to patch up a relationship that is often rather sketchy.

The answer — set out to comfort those worried by pollution, inequality, warfare and change — is clear: ‘China has a solution.’

There is more to this than playing a role, though. Chinese troops have reportedly been operating either just inside Afghanistan, in the Wakhan Corridor, or close to the border the two countries share, which is just under 50 miles long. Several terrorist attacks in Xinjiang by Muslim extremists have raised fears of contagion of militant ideas and activities — leading to a heavy crackdown on the Uighur population in western China that has included putting soldiers on the streets and banning some Muslim names and the sporting of beards.

The attention being paid by Beijing to states beyond its western border has of course had the effect of raising the profile and importance of the provinces in western China itself, which have become among the fastest growing in the country. The Belt and Road Initiative has helped fuel a growth spurt in regions that were falling behind the prime strip along the Pacific coast. One expected side effect of the investment abroad is a rebalancing of China’s own demographic and socioeconomic profile, spread more evenly around the country.

That virtuous circle also lies behind some of the drive to provide credit lines and expertise for projects across Asia and beyond. They offer outlets for excess capacity at a time when China’s industrial growth is slowing down and the economy is shifting toward services. Improving links, making border controls quicker and more efficient, and agreeing on common standards to enable optimal velocity of exchange opens up potentially lucrative — and huge — markets for Chinese manufacturers and businesses.

Only about 6 percent of households in India have a computer, for example, and less than a third have a refrigerator. Countries like Pakistan (population 190 million), Bangladesh (160 million) and India (1.3 billion) are potential gold mines, especially if new infrastructure provides reliable energy and enables improvements in roads, railways, ports and digital networks. Xi talks about the new Silk Roads being a “win-win” situation. He might even be right.

Xi Jinping and Nursultan Nazarbayev, the president of Kazakhstan, at a ceremony celebrating economic cooperation and energy agreements. Sept. 7, 2013.

But he might not be. These are still early days. Given the scale and breadth of what has been envisaged, it is important to recognize that plans will change and reshape over time. Some projects will inevitably work out better than others; some will be more complicated, more troublesome and less rewarding than others. The success of the initiative will depend not only on how lessons are learned from when things go wrong but which lessons are learned: bad experiences can sometimes increase resolve and improve decision-making in subsequent projects. But they can also be off-putting and close doors entirely.

And what sounds exciting to Chinese ears often sounds positively threatening to others. The high visibility of Silk Roads investments has sharpened antagonisms in some quarters. New Delhi has reacted badly to announcements from Beijing about the new Silk Roads, partly due to hurt pride and a sense of being outmaneuvered by a rival. At stake is the long and difficult relationship that India has had with China going back centuries. Competition and animosities still run high, fueled by a long-standing, unresolved border dispute.

Xi talks about the new Silk Roads being a ‘win-win’ situation. He might even be right.

Alarm bells have also gone off, however, because of the proposed investments into Pakistan, an even greater rival to India than China, where upgrades to the army and economy have led to howls of complaint. The Indian government conspicuously avoided the Beijing forum in May, refusing to send an official delegation and instead issuing a sour statement about all that is wrong about the Belt and Road Initiative. “We are of firm belief that connectivity initiatives must be based on universally recognized international norms, good governance, rule of law, openness, transparency and equality,” read a statement issued by India’s Foreign Ministry. The statement said the Belt and Road Initiative would lead, among other problems, to an “unsustainable debt burden” for countries involved in Beijing’s plans.

Not to be outdone, India has been working on its own versions of the initiative, spawning multiple schemes to collaborate on projects with Bangladesh, Burma and Thailand — the “Act East” policy, the Trilateral Highway project and the “Neighborhood First” scheme. India has also developed a “Go West” strategy that is centered on creating a port facility at Chabahar in southeastern Iran, to mirror and rival Pakistan’s Gwadar Port.

Robust rhetoric gives the impression that direct confrontation between India and China may not be far away. Memories of the war between the two countries in 1962 still loom large half a century later ― in recent months, a stand-off on the Dolam Plateau has caused military activities to rise sharply and stoke tensions that already run high. The Indian defense minister angrily noted this month that “the India of 2017 is different from the India of 1962,” General Bipin Rawat, the chief of staff of the Indian Army, stated that India “is fully ready for a two-and-a-half front war” — presumably meaning being able to fight China, Pakistan and dissidents in India simultaneously.

Although bluster like this can have consequences, it is also dangerous to let overenthusiastic declarations and denunciations take center stage. After all, there is no reason why India’s own version of the Belt and Road Initiative cannot succeed just as China’s can. And there’s no reason why the two cannot complement each other. Indeed, the fact that attention in Delhi has turned to how to best understand and react to activity led by Beijing should be welcomed and seen as part of a new Asian age where old connections are remade, new ties are forged and mutual opportunities are explored.

An Indian Army helicopter flies over a peak in the Western Himalayas. Oct. 12, 2016.

The development of the Belt and Road Initiative and the responses in India are being watched carefully in Moscow. Russia has been careful to offer warm words of encouragement, with President Vladimir Putin noting that he had “no doubt that we will work together … [to] benefit both the Chinese and the Russian peoples,” welcoming “a new stage of cooperation in Eurasia.”

But Russia has also been keeping its options open. The Kremlin has been conducting vigorous and regular diplomatic activity in the Gulf, the Middle East and Central Asia — and also with India. Indian Prime Minister Narendra Modi was welcomed to St. Petersburg this summer “to discuss a wide range of issues related to strengthening the privileged strategic partnership between Russia and India.” Putin is not just watching from the sidelines — he is thinking about how to best participate during a time of transition.

Hopes are partly set on the Eurasian Economic Union, a free trade area set within a wider vision of joint investment, intelligence sharing and mutual interests. This body, made up of Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia, overlaps with the Belt and Road Initiative — at least according to Putin. Rather than compete with China’s plans, he has said, “the main thing we should do is combine our efforts” — suggesting that the EEU is Russia’s own version of how to improve connections across the heart of Asia.

What sounds exciting to Chinese ears sounds positively threatening to others.

Countries from the Pacific through the Indian Ocean, Persian Gulf and the Mediterranean recognize the potential possibilities of the Silk Roads. But many also have limited choices. “Other countries have lots of ideas but no money,” said Hun Sen, the prime minister of Cambodia. “But for China, when it comes with an idea, it also comes with the money.” The lure of possible investment is not welcomed by all, as angry demonstrations in Kazakhstan in 2016 over the possibility of opening up land for Chinese buyers proved. Many in Pakistan are wary about potential suffocation by Chinese investment, both because of its sheer scale and firepower, but also because they worry that they’ll lose control of the entire supply chain, with Chinese farmers using Chinese pesticides and fertilizers to grow crops that are gathered by Chinese workers, transported on Chinese vehicles and sold to consumers in China.

Adding to these problems is the asymmetry of the Belt and Road Initiative. While China is keen to open up new markets abroad, it is not opening up its own domestic market. Kenyan President Uhuru Kenyatta is one leader who has been vocal about the need to “increase opportunities for Kenyan goods to penetrate the Chinese markets.” “If [China’s] win-win strategy is going to work, it must mean that, just as Africa opens up to China, China must also open up to Africa,” he said.

This proved a sticking point at the Beijing forum this year, where representatives of the European Union refused to sign a joint statement about the wonders of the Belt and Road Initiative. The EU was not able “to confirm our joint commitment to international trade rules and to a level playing field for all companies,” according to Daniel Rosario, the EU spokesman for trade. As a statement issued by the French embassy in Beijing noted tartly, the initiative’s success depends on “open, rules-based public tenders and reciprocal market access.”

‘If [China’s] win-win strategy is going to work, it must mean that, just as Africa opens up to China, China must open up to Africa.’Kenyan President Uhuru Kenyatta

We are living in a time of change in a world where power, wealth and expectations about what tomorrow will bring are in flux. Eight hundred years ago, a similar massive shift in the center of gravity took place when Genghis Khan and his heirs built the land empire connecting the Pacific coast of China with the Mediterranean. The initial, sudden wave of conquest gave way to peace and to what is sometimes called the Pax Mongolica — the Mongol peace — a long period of stability, rising prosperity and cooperation. The Mongols paid the price for not commissioning historians to preserve their legacy. Today they are synonymous with violence rather than tolerance, with crude use of force rather than sophistication and with haphazard destruction rather than careful planning.

Once upon a time, all roads led to Rome, as the saying goes. These days, all roads lead to Beijing. In the coming years, much will depend on how well China executes its plans for the future and how well it can choose projects that really deliver a win-win scenario not just for business tycoons and political leaders but for local populations. Much will also depend on the ability to explain what is going on and to not seek the best bargain but rather the best long-term deal. Perhaps most important of all, it depends on being able to win goodwill through building relationships that are ultimately based not on commercial and economic interests but on mutual respect.

History teaches us that the cornerstone for this geopolitical alchemy lies in education. Learning about each other’s histories — about what has mattered in the past and what matters in the future, and being able to understand grievances, slights and petty rivalries — is what will ultimately decide how successful the Belt and Road Initiative will be in the long term.


UK sets out Brexit wish list on goods sold to EU

August 21, 2017


© AFP/File / by Ben PERRY | A third round of Brexit negotiations is due to be held next week

LONDON (AFP) – British goods placed on the market before Brexit should be sold in EU countries under current conditions even after the UK leaves the bloc, the British government said on Monday.The government also emphasised that current negotiations about the divorce are “inextricably” linked to future trade arrangements and should therefore be discussed at the same time.

In a paper ahead of the next round of UK-EU talks next week, the government said: “We want to ensure that goods which are placed on the market before exit day can continue to be sold in the UK and EU, without any additional requirements or restrictions.

“This means that where products have gone through an authorisation process prior to exit, for example a type approval for a car, this approval should remain valid in both markets after exit,” it said.

Britain’s Brexit minister David Davis said setting out the proposals “will help give businesses and consumers certainty and confidence in the UK’s status as an economic powerhouse” following Britain’s departure.

“It is clear that our separation from the EU and future relationship are inextricably linked,” he said.

– ‘Clock is ticking’ –

But there was a cool response from Brussels.

European Commission spokesman Alexander Winterstein restated the EU position that there first has to be “sufficient progress” on three key issues: the rights of EU citizens, the financial settlement and the future of the Ireland-Northern Ireland border.

“The important thing to realise is that the clock is ticking, that we have no time to lose and that we need to get on with it,” he said.

A third round of Brexit negotiations is due to be held next week.

Last week, Britain laid out its desire for a “temporary customs union” with the European Union after Brexit but EU officials dismissed the proposal as “fantasy”.

The government proposed to continue for around two years the kind of tariff-free arrangements that apply now to EU-UK trade in goods, again to give businesses more time to adapt to new post-Brexit systems.

Britain’s biggest lobby group, the CBI, welcomed the UK’s latest proposals, while urging swift agreement between London and Brussels.

“The only way to provide companies with the reassurance they need is through the urgent agreement of interim arrangements,” CBI director of campaigns John Foster said in a statement.

“This would ensure that goods and services can still flow freely giving companies the certainty they need to invest,” he said.


by Ben PERRY
BBC News
Brexit: UK publishes more EU negotiation plans
EU flag and Big BenImage copyrightPA

The UK government has set out proposals to ensure trade in goods and services can continue on the day the UK leaves the EU in March 2019.

A position paper calls for goods already on the market to be allowed to remain on sale in the UK and EU without additional restrictions.

It also calls for consumer protections to remain in place.

The Brexit department aims to keep pressure on the EU ahead of the third round of talks in Brussels next week.

A second paper calling for a reciprocal agreement to ensure continued confidentiality for official documents shared by Britain with its EU partners while it was a member state has also been published on Monday.

Further papers are due in the coming days, including one on the crucial issue of the European Court of Justice – a sticking point in talks.

Brussels is refusing to discuss future arrangements, such as trade, until citizens’ rights, the UK’s “divorce bill” and the Northern Ireland border have been settled.

EU leaders reiterated their stance last week as the UK published proposals about new customs arrangements.

Mr Davis said the latest batch of publications would “drive the talks forward” and “show beyond doubt” that enough progress had been made to move to the next stage of talks.

EU’s response

David Davis said: “These papers will help give businesses and consumers certainty and confidence in the UK’s status as an economic powerhouse after we have left the EU.

“They also show that as we enter the third round of negotiations, it is clear that our separation from the EU and future relationship are inextricably linked.

“We have already begun to set out what we would like to see from a future relationship on issues such as customs and are ready to begin a formal dialogue on this and other issues.”

David Davis
David Davis is eager to start trade talks. Credit PA

But European Commission spokesman Alexander Winterstein said the UK’s position papers would not alter the framework for talks drawn up by chief negotiator Michel Barnier and approved by the other 27 EU member states.

“There is a very clear structure in place, set by the EU27, about how these talks should be sequenced and that is exactly what we think should be happening now,” Mr Winterstein told a Brussels press conference.

“So the fact that these papers are coming out is, as such, welcome because we see this as a positive step towards now really starting the process of negotiations.

“But as Michel Barnier has said time and again, we have to have sufficient progress first on the three areas of citizens’ rights, financial settlement and Ireland, and only then can we move forwards to discussing the future relationship.”

He added: “Hopefully we can make fast progress on the three areas I have mentioned because once we have reached sufficient progress there, we can move on to the second stage.”

A Downing Street spokesman said: “Both sides need to adopt a flexible approach. We are working at pace. We are confident we will make sufficient progress.

“David Davis has said we want to move to the next stage in October.”

‘Dispute resolution’

Monday’s publications urge the EU to widen its “narrow” definition of the availability of goods on the market to also include services, arguing this is the only way to protect consumers and businesses trading before Brexit.

The goods and services paper calls for:

  • Guarantees that goods on sale before exit day, in March 2019, can continue to be sold in the UK and EU, without any additional requirements or restrictions
  • Products that have been authorised for sale in the EU, such as approval for a certain model of a car, should remain valid in both markets after exit
  • UK consumer protection watchdogs should continue to have access to information about unsafe products, such as medicines and food, and “mechanisms to take action with respect to non-compliant goods”

Business group the CBI described Mr Davis’s position on trade as a “significant improvement” on EU proposals which would create a “severe cliff-edge” for goods currently on the market.

But CBI campaigns director John Foster said: “The only way to provide companies with the reassurance they need is through the urgent agreement of interim arrangements.

“This would ensure that goods and services can still flow freely, giving companies the certainty they need to invest.

“The simplest way to achieve that is for the UK to stay in the single market and a customs union until a comprehensive new deal is in force.”

The most contentious of the week’s publications is expected to be about “enforcement and dispute resolution”, as it tackles the question of the UK’s future relationship with the European Court of Justice.

Theresa May has promised the UK will leave the jurisdiction of the EU court, with the government saying Parliament will “take back control” of its laws.

But the EU has insisted the ECJ must have a role in enforcing citizens’ rights, and how to enforce any future trade deal has yet to be agreed.

Other papers expected this week will look at how to maintain the exchange of data with other European countries and future “co-operation” between the different legal systems.

Crawford Falconer takes up post as UK’s top trade negotiator — “Open markets at the core of the post-war global order.”

August 21, 2017

BBC News

Liam Fox and Crawford Falconer
Crawford Falconer, right, will begin his new job this week

The man in charge of negotiating the UK’s trade deals once Brexit is finalised, starts his job this week.

Crawford Falconer will take up the post of chief trade negotiation adviser at the Department for International Trade.

Leaving the single market would mean the UK would have to establish new bilateral trade agreements, but cannot formally do so until after Brexit.

However, one economist suggested Mr Falconer would already be “building bridges” with the European Commission.

The UK faces a huge challenge in resetting its trading relationship with the EU and other countries when Brexit takes effect.

Trade pacts that have been negotiated by the EU with the rest of the world will no longer apply to the UK, while Britain will also need to define new trading relationships with the EU itself.

Membership of the EU has meant the UK does not have a large bank of trade negotiators with recent experience.

A New Zealander, Mr Falconer has more than 25 years trade experience. He has represented New Zealand at the World Trade Organization (WTO) and held various posts in foreign and trade affairs in his home country.

Prof Alan Winters, from the University of Sussex’s UK Trade Policy Observatory, said Mr Falconer’s experience and contacts at the WTO would mean the groundwork for separating UK trade policy from Brussels would be made easier.

“He knows quite a lot of the main players at the WTO and can build bridges at the European Council, which is good as there is work to be done right now,” he said.

“There is work he can do, such as discussions on whether the UK uses replicas or changes trade agreements that we have with nations by way of membership with the EU.”

One suggestion has been that initially trade agreements could be adopted by the UK in their current form – replicating them – at the point of Brexit, to be altered subsequently as new deals are agreed.

International Trade Secretary Liam Fox said of the new appointee: “Crawford Falconer brings a wealth of international trade expertise to our international economic department, ensuring that as we leave the EU, the UK will be at the forefront of global free trade and driving the case for international openness.”

Mr Falconer will lead trade policy and negotiation teams at the DIT. His appointment was first announced in June.

See also:

Britain’s post-Brexit trade deals will make world safer place, new trade chief vows


THE Government’s new chief trade negotiation adviser has said the trade deals Britain can strike after Brexit could help boost global security.

Crawford Falconer tells The Telegraph that Britain will lead efforts to avoid conflict by creating new trade allies around the world.

Crawford Falconer, the Government’s new chief trade negotiation adviser, said the trade deals Britain can strike after Brexit could help boost global security

Crawford Falconer, the Government’s new chief trade negotiation adviser, said the trade deals Britain can strike after Brexit could help boost global security

Last week, the Government conceded that the UK will not be able to implement any free trade agreements under a proposed customs transition deal which will expire around two years after Brexit in March 2019.

But Mr Falconer, who will work alongside International Trade Secretary Liam Fox from this week, says that the UK can help promote stability by striking deals with nations that want to benefit from the country’s democratic reputation

He said: “There is a powerful political and security element to getting this right.

“History is littered with instances of the destructive political consequences of closed markets.

“This was a lesson well understood at the end of the last century’s global conflicts

“It was at the core of the post-war global order.”

He added:”And the UK was nothing less than one of the chief architects of that order.

“Many countries still recognise that open trade policies directed at engaging with others are at the core of any strategy to improve the global prospects for political openness and stability. They are already looking to partner with us to re-energise that agenda.”

Mr Falconer is an experienced trade negotiator who also served as New Zealand’s ambassador to the World Trade Organization.

It comes as The Daily Express reports how Britain has seen £50billion invested in the UK and the promise of 44,000 new jobs since the Brexit vote.

Change Britain campaign group found firms from around the world were bringing their business to the UK.

Chairwoman Gisela Stuart, a former Labour MP and Leave campaigner, told the newspaper: “Workers and businesses will continue to prosper once we’ve left the EU as we begin to strike our own free trade deals with growing economies around the world, spreading wealth and creating jobs throughout the UK.”

US business economists fret over Trump policy agenda

August 21, 2017


© AFP/File / by Heather SCOTT | US business economists worry about the prospects for President Donald Trump’s policy agenda, and the potential damage to the economy from his trade and immigration policies
WASHINGTON (AFP) – US business economists worry about the prospects for President Donald Trump’s policy agenda, and the potential damage to the economy from his trade and immigration policies, according to a survey released on Monday.The survey findings add to Trump’s accelerating alienation with the business community. CEOs fled his advisory councils last week to distance themselves from his both-sides-are-to- blame response to a white supremacist rally in Virginia in which one woman among a group of counter-protesters was killed.

Although the survey was completed more than a week prior to the those events, they reflect growing concerns among businesses that had been cheered since the election about the possibility of seeing tax reform and infrastructure spending that could boost the economy.

“I do think that is some of the concern, that everything that has transpired recently, especially over last week, may impair the administration’s ability to get its legislative agenda passed,” said Frank Nothaft, a policy analyst with the National Association for Business Economics.

Stressing that he was not speaking for the NABE panelists in the semi-annual policy survey, Nothaft told AFP that the administration has a number of very important legislative proposals that could stimulate growth and boost spending.

However, “with everything that’s transpired it puts that legislative agenda at jeopardy. Will anything get passed?”

While the survey showed most economists judge fiscal policy to be “about right” currently, they “quite pessimistic about prospects for ‘meaningful, revenue-neutral tax reform’ in the near term,” the survey showed.

– ‘Unfavorable scores’ –

Conducted July 18 to August 2 with 184 members, the survey showed only a 10 percent probability of such legislation this year and a 15 percent (median) probability of passage in 2018.

Over half the respondents said tax reform could add less than one percentage point to real GDP growth over the next 10 years, while a third put the impact on growth at between one and two percentage points.

Business economists also worry about the “unfavorable consequences” of Trump’s trade an immigration policies.

In those areas “survey participants give the administration unfavorable scores,” said NABE Policy Survey Chair Richard DeKaser, who also is executive vice president and corporate economist at Wells Fargo.

Nothaft, chief economist at CoreLogic, explained that anything that clouds the environment for businesses to make investment decisions, whether for exports or imports, can cause firms to delay spending and impact the economy.

When policies are “in flux and the environment can change dramatically, companies may hold back,” he said, noting that “investment is an important part of GDP and economic growth.”

Meanwhile, restrictions on immigration hurt companies that are having trouble finding workers, notably in homebuilding and high-tech.

– Yellen out –

On monetary policy, Nothaft said the survey shows economists now have a “much stronger belief” compared to six months ago that the Federal Reserve will raise the benchmark interest rate one more time this year.

While 61 percent said monetary policy was “about right,” 53 percent are expecting a third rate hike, NABE said, although there is less agreement about next year.

In contrast, market economists have become increasingly doubtful about the prospects for another move, which was expected in December, given persistently low inflation even amid historically low unemployment rates. Even central bankers are divided about how fast to move rates.

However, 67 percent expect Trump to replace Fed Chair Janet Yellen when her four-year term ends February 3.

About half expect White House economic adviser Gary Cohn to replace her, although the survey was completed before this week’s rumors — denied by the White House — that Cohn was planning to resign.

Meanwhile, most economists see only a 10 percent chance Congress will fail to take action to raise or suspend the limit on government borrowing, before the US defaults on its debts. The government is expected to hit the debt ceiling in mid October.

by Heather SCOTT

US launches China trade secret probe

August 19, 2017

The top US trade negotiator has described China’s industrial policies as a “very serious problem.” US President Donald Trump has accused China of cheating the US economy out of “hundreds of billions of dollars.”

A US flag and China flag at a hotel in Peking (picture-alliance/AP Photo)

Washington on Friday launched a formal investigation into China’s alleged theft of US intellectual property days after US President Donald Trump urged the American trade representative to consider a probe.

“After consulting with stakeholders and other government agencies, I have determined that these critical issues merit a thorough investigation,” US Trade Representative Robert Lighthizer said on Friday announcing the start of an inquiry concerning intellectual property.

Read more: Can Trump succeed in curbing China’s intellectual property ‘theft’?

US companies operating in China have long complained about China’s failure to protect industrial secrets. However, they have also been reluctant to press hard against Beijing in fear of losing access to China’s expansive market.

Even before assuming office, Trump railed against US trade policy with China. He has accused the communist nation of cheating the US economy out of “hundreds of billions of dollars in trade.”

“China has been taking out massive amounts of money and wealth from the US in totally one-sided trade, but won’t help with North Korea. Nice,” Trump said in a sarcastic tweet published in July.

China has been taking out massive amounts of money & wealth from the U.S. in totally one-sided trade, but won’t help with North Korea. Nice!

China will ‘not sit idle’

Earlier this week, Lighthizer said China’s industrial policies have posed a “very serious problem” to the American economy. Read more: China is US’ biggest creditor once again

Beijing has yet to respond to the investigation. However, earlier this week China said it would “not side idle” if the US took action that undermined trade ties, warning a strong response with “appropriate measures.”

The United States is China’s second-largest trading partner following the European Union. In 2016, the US had a trade deficit with China of nearly $310 billion (268.7 billion euros).

ls/sms (AFP, Reuters)


‘No Deal’ With EU No Disaster for Post-Brexit U.K., Says Report

August 18, 2017


By Charlotte Ryan

August 17, 2017, 7:01 PM EDT
  • Britain should pursue trade regardless of EU ‘threats’: IEA
  • EU’s other 27 members make up U.K.’s biggest trade partner
U.K. Prime Minister Theresa May

 Photographer: Simon Dawson/Bloomberg

A U.K. trade deal with the European Union after Brexit is desirable but not essential, the Institute of Economic Affairs said, in support of Prime Minister Theresa May’s repeated assertion that no deal is better than a bad deal.

Britain should walk away from talks on a post-Brexit trade deal if the EU offers bad terms that lead to a protectionist and costly agreement, the IEA, a free-market think tank, said in a report on Friday. Instead, it said the country should trade with the EU under World Trade Organization rules, seeking a policy of zero tariffs while brokering free-trade agreements with major trading partners including the U.S.

“Many people believe that disaster will befall us if we do not forge a deal with the EU,” said Jamie Whyte, research director at the IEA. “In fact, we could unilaterally eliminate all import tariffs, which would give us most of the benefits of trade, and export to the EU under the umbrella of the WTO rules.”

Looming trade discussions are shaping up to be one of the trickiest tasks on the agenda of Brexit negotiators. Britain and its business lobby groups are seeking as “frictionless” as possible commerce with the EU post-Brexit, while EU politicians signal that Britain won’t be able to benefit from the same access once it’s no longer a member.

‘Fantasy’ Plans

For now, the talks are in abeyance, with the EU saying it will not discuss a future deal until the issues of citizens’ rights and Britain’s exit bill are resolved. The slow pace of talks so far has stoked fears Britain will leave the EU before trade talks conclude.

The IEA paper comes days after the U.K. released a document on customs which Guy Verhofstadt, the European Parliament’s point person on Brexit, derided as a “fantasy.” In a tacit acknowledgment that time is ticking down, Britain is seeking a transition period between Brexit day in March 2019 and the day when new trade arrangements can set in. During that period, the U.K. would leave the EU’s customs Union, allowing it to broker new trade deals with third countries, but customs arrangements with the bloc would be largely unchanged.

Trade will not stop after Brexit even if the two sides fail to agree to a deal, the IEA said. Instead, the exchange of goods would continue under WTO rules, which would prevent the EU from charging punitive taxes on goods, while tariffs would hurt EU consumers, according to the policy analyst. It recommended that Britain unilaterally get rid of such duties with trade partners including Europe, while encouraging them to do the same.

Bargaining Chip

“Compared to an outcome in which the U.K. and the EU traded under WTO terms, there would be benefits for the U.K. to unilaterally liberalizing as it would reduce the cost of imports,” said Thomas Sampson, an economist at the London School of Economics, who hadn’t seen the IEA report. “The cost is you’re giving away the bargaining chip that you would normally use to get concessions out of the EU.”

The U.K. should pursue its own trade policy regardless of “threats” from the EU, the IEA said. The country could seek free-trade agreements with countries such as Canada, Australia and New Zealand and use a tariff-free approach to become a “super-Singapore or super-Dubai.”

However, Sampson cautioned against dismissing the importance of the EU when negotiating future deals. The bloc is the U.K.’s largest trading partner accounting for almost half of all imports and exports in 2016.

“The U.K.’s priority should be to do everything it can to secure an agreement with the EU,” he said. “The potential gains from securing an ambitious new agreement with the EU are much larger than those of negotiating with the U.S. or any other country.”

Steve Bannon Interview Raises New Questions About His Standing at White House

August 18, 2017

Less than three weeks ago, a similar interview with Anthony Scaramucci resulted in his ouster

Updated Aug. 17, 2017 6:19 p.m. ET

Steve Bannon’s standing as White House chief strategist took a hit after a liberal political magazine published an extended interview in which he referred to white supremacist groups as “clowns,” said President Donald Trump’s pro-business advisers were “wetting themselves” and—contrary to the president’s public positions—dismissed the potential for military action in North Korea.

People close to Mr. Bannon were concerned Thursday…


Bannon’s interview: A blunder or intentional ploy?


  • Some sources say Steve Bannon intentionally spoke to the American Prospect
  • The remarkable comments were reminiscent of what got Bannon into hot water earlier this year

Bridgewater, New Jersey (CNN) — White House chief strategist Steve Bannon is privately offering shifting and conflicting explanations for the strikingly candid interview that could further imperil his already shaky standing inside the West Wing.


Sources close to Bannon first said the chief strategist did not know he was being interviewed when he spoke over the phone with Robert Kuttner, the co-editor of The American Prospect. But the same sources now say the chief strategist granted the interview as part of a ploy to distract from the criticism President Donald Trump has been facing over his response to the violence in Charlottesville sparked by a white supremacist rally.
“Bannon knew full well this would distract from criticism,” a source familiar with Bannon’s thinking said.
A second source familiar with Bannon’s thinking said the chief strategist was trying “to divert attention from Charlottesville criticism” by offering the controversial comments to the American Prospect reporter, knowing the comments would grip headlines.
Bannon has declined to comment and did not respond to CNN’s inquiry asking about the conflicting accounts.
Bannon’s remarks may have served to momentarily divert attention from the President’s controversial response to the violence in Charlottesville, but his comments also offered damaging insight into the divisions inside the Trump administration and showed the chief strategist undercutting the President on the most significant national security issue facing the administration.
While Trump promised to rain “fire and fury” on North Korea should the rogue regime continue to threaten or attempt to strike the US or its allies, Bannon dismissed North Korea as a “sideshow” to the larger economic conflicts between the US and China and argued there is “no military solution” to the crisis.
The remarkable comments were reminiscent of what got Bannon into hot water earlier this year, when a narrative began to set in that he was effectively running the White House.
Bannon also offered unprompted criticism of fellow advisers to the president, including National Economic Council Director Gary Cohn, whom Bannon placed among those he is fighting “every day” to push a harder line on international trade issues.
Those comments in particular could land Bannon in trouble with the President and his recently-installed chief of staff John Kelly, who just two weeks earlier ousted White House communications director Anthony Scaramucci after he badmouthed colleagues in vulgar terms to The New Yorker.
Scaramucci later said he did not believe his conversation with The New Yorker reporter had been on the record, and later conceded he made a mistake.
Robert Kuttner, the Prospect editor who interviewed Bannon on Tuesday, wrote in his article that “the question of whether the phone call was on or off the record never came up.”
“This is also puzzling, since Steve Bannon is not exactly Bambi when it comes to dealing with the press. He’s probably the most media-savvy person in America,” Kuttner wrote.
Bannon, the former Breitbart chief, is known for being particular media savvy and — like other experienced Washington hands — knows that all conversations with reporters are on the record unless an agreement is reached beforehand.

Sigmar Gabriel: Germany’s Hard-line Turkey policy is paying off

August 15, 2017

German Foreign Minister Sigmar Gabriel has praised his government’s move to put “economic pressure” on Turkey. Germany overhauled its policy toward Turkey in response to the jailing of German journalists and activists.

German and Turkish flags

On Tuesday, Foreign Minister Sigmar Gabriel praised the government’s decision to overhaul its policy toward Turkey, telling la newspaper that Germany’s hard-line approach and “economic pressure” were paying off.

Gabriel spoke after the Turkish government, led by President Recep Tayyip Erdogan, officially withdrew a blacklist of 680 German companies it had accused of having links to terrorist organizations. Among the listed companies were the carmaker Daimler and the chemical firm BASF.

Read more: German Foreign Minister Sigmar Gabriel seeks tougher EU line on Turkey

“There was a broad debate in Turkish society,” Gabriel told Tuesday’s edition of the Kölner Stadt-Anzeiger, “and Erdogan was forced to concede that the blacklist was a misunderstanding.”

In July, Gabriel outlined a “reorientation” of government policy toward Turkey. As part of the sharper measures, German businesses were advised against investing and doing business in Turkey. That measure is believed to have prompted Ankara to swiftly make a U-turn on its blacklist and assure Berlin that no German companies were under investigation.

Germany’s government also updated its travel warning, notifying citizens that they would incur “risks” by traveling to Turkey. The Foreign Ministry’s travel website also advised German nationals in Turkey to exercise “heightened caution” as consular access had been “restricted in violation of the obligations of international law.”

Read more: As German spat deepens, Turkey draws tourists from elsewhere

Gabriel admits sanctions hit small businesses

Germany’s top diplomat acknowledged that the hard-line measures weren’t without consequence. “Our travel warning is, of course, also affecting the wrong people: the small hotel owners, the restaurant owners and waiters in western Turkey who cater towards European and German customers.”

Nevertheless, Gabriel said, Germany must protect its citizens.

“We cannot accept that President Erdogan can simply arrest and imprison German nationals,” Gabriel said.

Relations between the countries reached a new low when Turkey’s government arrested of a group of rights campaigners,  including the  German citizen Peter Steudtner, in July. Berlin has also demanded the release of the German-Turkish journalist Deniz Yücel, who was arrested in Istanbul in February and now faces charges of inciting hatred and producing terrorist propaganda on behalf of the outlawed Kurdistan Workers’ Party – all of which he emphatically denies.

dm/mkg (dpa, AFP)

Donald Trump sends tough signal to China on unfair IP, tech practices

August 15, 2017

WASHINGTON – The United States in effect served notice on China on Monday (Aug 14) by opening an investigation into unfair trade practices focused on intellectual property (IP) and advanced technology.

But punitive action is still about a year away, and conclusions may also depend on the outcomes of the current international pressure campaign on North Korea led by the US, but in which China has a key role as the Pyongyang regime’s economic lifeline.

While the US administration has not linked trade issues with progress on North Korea, the President has explicitly linked the two. China insists that any action on trade must conform to World Trade Organisation (WTO) rules, and must not be linked to North Korea, where it says Beijing’s influence is limited.

Mr Trump’s memo directs US Trade Representative Robert Lighthizer to determine whether to launch an investigation – which in turn could give the President authority to take measures under Section 301 of its Trade Act, against China if it finds that country is damaging American interests by stealing IP or unfairly forcing transfer of technology.

For the US, this has long been a major bone of contention with China. A 2017 report of the US’s IP Commission on “The Theft of American Intellectual Property” estimated that in 2015 “anywhere from US$58 billion to US$118 billion of counterfeit and pirated tangible goods may have entered the United States.”

Yet the US business community is not entirely united, analysts say.

“Some see the potential for retaliation the Chinese could take against their commercial or market access issues wholly unrelated to IP” Amy Celico, a former senior director for China at the USTR and currently head of the China team at the consultancy Albright Stonebridge Group, told The Straits Times.

“But other industries feel they are facing an existential threat to their ability to operate in the Chinese market and they agree that something has to happen, the administration has to stand up to China on unfair trade practices.”

Mr Trump told journalists at a brief event where he signed the memo “Washington will turn a blind eye no longer.”

“I’m directing the United States Trade Representative to examine China’s policies, practices, and actions with regard to the forced transfers of American technology and the theft of American intellectual property.”

“We will stand up to any country that unlawfully forces American companies to transfer their valuable technology as a condition of market access. We will combat the counterfeiting and piracy that destroys American jobs, we will enforce the rules of fair and reciprocal trade that form the foundation of responsible commerce” he said.

Left unsaid was the question of North Korea. The US has been pressing Beijing which accounts for some 90 per cent of North Korea’s trade, to pull the plug on Pyongyang to force the regime to stop its nuclear missile programme.

On August 11 Mr Trump said “We lose hundreds of billions of dollars a year on trade with China. They know how I feel. It’s not going to continue like that but if China helps us, I feel a lot differently toward trade.”

“Certainly it seems the administration is trying to use every possible tool in dealing with this critical issue of North Korea” Ms Celico said in a phone interview.

“The Chinese have come out quite forcefully as they see it as a stick the administration is using to get China to be more aggressive in dealing with North Korea, and they are disavowing any kind of linkage as destabilising for the bilateral relationship.”

“The problem for President Trump is he’s the one who linked these two issues. Looking into launching an investigation rather than launching an investigation, would seem to be responsive to Chinese pressure.”

Ms Yun Sun, a Fellow at the Stimson Centre in Washington, told The Straits Times: “It’s an investigation at this stage, it could take a year.”

“With the Party Congress coming up President Xi Jinping does not want any major instability in foreign affairs. Also, Jared Kushner and Ivanka Trump are supposed to visit China to pave the way for President Trump’s visit.”

“I think the Chinese will appear to be angry but I don’t see any substantive retaliation on trade” she said.

The ‘Fire and Fury’ Crisis: Trump Risks a Backfire Over China and North Korea

August 15, 2017

U.S. president walks a dangerous line with Xi Jinping by pressuring Beijing on trade and Pyongyang conflict

U.S. President Donald Trump, left, and Chinese President Xi Jinping walk together at Mar-a-Lago in Palm Beach, Fla., during an April meeting. Mr. Trump is increasing pressure on Mr. Xi over trade issues and North Korea tensions.
U.S. President Donald Trump, left, and Chinese President Xi Jinping walk together at Mar-a-Lago in Palm Beach, Fla., during an April meeting. Mr. Trump is increasing pressure on Mr. Xi over trade issues and North Korea tensions. PHOTO: ASSOCIATED PRESS

Aug. 15, 2017 5:37 a.m. ET

SHANGHAI—By ordering his first trade action against Beijing, while amping up pressure on Chinese leaders to rein in Pyongyang’s nuclear menace, U.S. President Donald Trump is bringing to a head two of the most intractable problems that bedevil U.S.-China relations.

There are hints that Mr. Trump’s hard-nosed strategy could be having an impact—at least in the near-term. After repeated North Korean threats to launch missiles toward the U.S. Pacific territory of Guam, Pyongyang suddenly backed away from that threat Tuesday. And China has signed on to U.N. sanctions that will slash North Korea’s already meager foreign revenues by another $1 billion.

But Mr. Trump’s strategy comes with risks; each issue—trade and North Korea—is volatile enough to upend the relationship.

Mismanaged, one could ignite a trade war, the other to scenarios that lead to military conflict.

To avoid these dangers, the two sides would have to reconcile clashing views on Asian security, which shape their divergent approaches to North Korea, and incompatible economic systems, which drive trade frictions.

Successive U.S. administrations have delayed the reckoning that Mr. Trump now seeks, precisely because the chances of pulling off such a diplomatic outcome are so improbable.

Indeed, Washington may have missed the opportunity long ago when it had more leverage. The Chinese economy is now powerful enough to withstand any trade sanctions; it is less dependent on exports, whereas U.S. corporations are more reliant than ever on access to China’s consumer markets. A tit-for-tat trade war would hurt both sides, and damage U.S. friends and allies in global supply chains that run through China.

Meanwhile, Chinese President Xi Jinping, riding a wave of assertive nationalism he’s helped to whip up, aims to diminish the U.S. presence in Asia and weaken its alliance system. He has no interest in any kind of arrangement for the Korean Peninsula that would strengthen America’s position there, and allow Washington to turn its attention to other flashpoints like Taiwan and the South China Sea.

Beijing’s bottom line: the status quo in North Korea is preferable to the upheaval required to take out its nuclear weapons, most likely including regime change.

White House officials insist there is no linkage between the North Korean issue and Monday’s presidential order to examine whether an investigation is warranted into Chinese requirements that U.S. companies give up technology in return for market access, as well as outright intellectual property theft.

One Week of Escalation With North Korea
An escalation of threats between Washington and Pyongyang has rattled world leaders, injected uncertainty into markets, and sparked fear of a nuclear showdown. The WSJ’s Shelby Holliday takes a look back at the week. Photo: AP

Yet Mr. Trump has explicitly made the connection. This was the grand bargain he dangled to Mr. Xi: help me on North Korea and I’ll go easy on trade. He’s rapidly losing patience, though. “Our foolish past leaders have allowed them to make hundreds of billions of dollars a year in trade” Mr. Trump tweeted, “yet they do NOTHING for us with North Korea, just talk.”

That’s been the U.S. complaint for years. Now, North Korea is on the point of perfecting intercontinental ballistic missiles able to strike the U.S. mainland.

And mercantilist policies, like forced technology transfers, have become an integral part of China’s state-led industrial model, imperiling America’s long-term economic prospects.

We’re moving toward a climax on two fronts in a crisis atmosphere.

To be sure, Mr. Trump is acting cautiously and deliberately, despite heated rhetoric. An investigation into alleged Chinese trade abuses could take up to a year, leaving ample room for compromise.

On North Korea, he has stressed the need for cooperation, although his threat to unleash “fire and fury” against North Korean Leader Kim Jong Un was as much intended to scare Beijing into action as to rattle the Korean dictator.

Some think Mr. Trump is deploying Nixonian “Madman Theory” to make Chinese leaders believe he is crazy enough to unleash chaos on their doorstep. In a phone call last week, Mr. Xi urged Mr. Trump to “avoid words and deeds that increase tensions.”

A nightmare for Beijing is a North Korean collapse that brings U.S. troops pouring across the 38th parallel, running into Chinese forces headed in the opposite direction to impose order, prevent a refugee wave and secure “loose nukes.”

Avoiding worst-case scenarios is a challenge as great as any the U.S. and China have facedsince diplomatic normalization in 1979.

Henry Kissinger, an architect of that breakthrough, writes in The Wall Street Journal that instead of subcontracting to Beijing the task of achieving American objectives on North Korea, the only feasible approach is “to merge the two efforts and develop a common position.”

But the gap between Beijing and Washington remains immense.

Hours ahead of Mr. Trump’s announcement on trade, Beijing said it would start implementing bans on coal, iron ore, seafood and other products. But it won’t go so far as to cut off fuel and food supplies.

When it comes to trade, Beijing brought so little to the table during the first round of formal talks with the Trump administration they broke up with no joint statements, action plans or even a press conference. The implication is that China feels no sense of urgency, nor does it fear a showdown.

Write to Andrew Browne at