 | I won’t identify him, because our conversation was off the record - and he was incandescent with anger, which was unusual for him. The man was a senior German manufacturing chief. He was raging against the Chinese for “stealing my ideas”. He meant cutting-edge technology. |
He admitted he knew what he was getting into. The deal was that he’d make a lot of money, selling his expensive products to China, as long as he partnered up with a local firm and genuinely made things locally, to benefit Chinese workers. Fair enough, so far.
Extremely valuable know-how was part of that process. He contended that it was ripped off by his partners. And now he was competing on valuable contracts in Europe, against his former friends, who were featuring his hard-won research.
A year ago an Australian alternative investment manager made me laugh with the phrase “It’s easy to get money into China. It’s getting it out again that’s the problem.”
But my conversation with the German industrialist was more than ten years ago. The time to deal with those criticisms was then, not now. And not with the sledgehammer approach of red-blooded protectionism.
| The vast size of the marketplace in China over-rode any caution or criticism for a very long time, for foreign investors. From Chengdu to Beijing, from Shanghai to Xian, it’s amazing to see the sheer number of vehicles made by Toyota, Nissan, BMW, Ford and VW. For status or for utility, or both. Five of the top ten selling cars in China are foreign-badged. |  |
In recent days, ahead of the spring meetings of the IMF and World Bank, the US and Chinese Presidents have been trying to tone down the trade war threats and have even been saying nice things about each other… Although that varies every day.
So, I’m reminded of a conversation with Pascal Lamy, former head of the World Trade Organisation, in which we were exploring how to cope with protectionist pressures around the time of the Great Financial Crisis.
So, I’m reminded of a conversation with Pascal Lamy, former head of the World Trade Organisation, in which we were exploring how to cope with protectionist pressures around the time of the Great Financial Crisis.
 | Nations were not only talking about putting up barriers to cheap imports, to keep money at home, but were also banning some essential exports (rice, for example). Contracts were being torn up. Trust was breaking down. There was a danger of a downward spiral. |
Lamy’s strategy was surprisingly mild, on the surface of it.
“We don’t ask members never to raise tariffs”, he explained, “We just ask them not to do it right now”.
And then the WTO schedules a follow-up meeting in a couple of months. And asks the same thing.
If that strategy was agreed, and stuck to, before you really knew it, six months or a year had passed, and conditions had improved, or didn’t seem so threatening. In other circumstances too, the phrase “kicking the can down the road” was popular. It seemed to work : trust and confidence increased, as did trade levels.
Perhaps Donald Trump’s shock tactics will work...
President Xi’s offer to revisit the compulsory joint-partner conditions, for example, is interesting.
LATEST : China will allow full foreign ownership of car firms by 2022 - BBC
When Trump gets re-elected in a couple of year’s time (oppositions don’t win elections, governments have to lose them, as the adage goes), it’ll be because he’ll be able to point to one or two examples like this for his voters. He may have proved the only President to get a North Korean leader to negotiate about his nuclear weapons, for example.
| Trump might even find it easier, come the mid-terms, if Republicans lose a few seats in Congress. They’ve not made his life easy so far… Maybe they’ll become more malleable. Maybe any new Democrats will get used to him. In the distant past, Donald Trump has, after all, resembled a Democrat trapped in a crazy tycoon’s body. He’s even thinking about signing the USA up to what he called the disastrous Trans Pacific Partnership - although largely as a measure to contain China. |  |
President Trump’s voters ignored for years the fact that their cheap T-shirts and then whizzy smart phones which made them feel so happy were coming from China, at the cost of local jobs.
The consensus is that attempts to re-patriate jobs won’t succeed through protectionism and reducing global trade. Or by angering China. His focus, instead, should be on mitigating job losses and sharing out the increased wealth that global trade brings.
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