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Monday, 3 April 2017

Xi and Trump: a Celebration of Mercantilism?

In a couple of days' time, a large Chinese delegation - led by President Xi - will arrive, not at the White House in the US Capital but at Mr Trump's 'resort' in Florida. Reminiscent of Emperor Tiberius's pleasure palace on the Dalmatian coast, this huge investment in hedonism is both an advertisement for Trump's business success and a clear indicator of his taste: which is self-evidently popular with many rich Americans.

Thus Mr Xi and his team will have a marvelous visual aid as they make their assessment of the new US President. Their preliminary briefings have told them of his career, his experience of setbacks as well as successes, of the explanation for his teetotalism and of his reputed sexual history. They have also studied his strangely non-political career including his highly individualistic, largely self-funded campaign for the Republican nomination in the General Election. And they will be acutely aware of the extent to which his much-trumpeted economic policy - of putting America first, and ditching all inhibiting policies and even treaties - resonated with the depressed and deprived former Democrat voting trade unionists of the depressed ex-industrial regions. The economic development of China over the past couple of decades is the exact opposite of the dereliction of the coal and steel producing centres that used to dominate much of the US economy; and the rise of cheap Chinese exports onto the world market is a very conspicuous component of the explanation for the rise of the rustbelt.

China has been so hugely successful, in major part, by remaining a centrally-planned, command economy, While paying lip-service to their application to the World Trade Organisation and to other international agencies which are imbued with dogmatic market economics, the Chinese state has remained essentially protectionist. Thus it has grown. Meanwhile the United States has allowed the Econocracy to dictate the parameters within which policies have been formulated, and the conspicuous results of those policies are visible in the mid-west and in other depressed zones across the USA. Mr Trump has not been able to get his immigration-limiting decrees through the US court system; and his Liberal enemies have gloated about that: but that stumbling block has in no way vitiated any of his more extravagant promises and his most frequently-asserted policy intentions.

This weekend's meeting between Trump and Xi brings together people with very similar policy intentions, in general: but the success of Trump's policy must be detrimental to Chinese exports to the USA. Compromise must be found. Over recent decades China has become by far the largest holder of US debt, which is quite a big bargaining chip. The recent statement byTrump that if China will not restrain North Korea the US will do so, unilaterally, provides another bargaining chip.

We are in for a very interesting few days. There will be no 'winner' as between Trump and Xi; but we will know next week whether they can 'do business' or if there is to be a new cold war.

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