USA v China Trade War: January Chill or Thaw?

Analysing USA-China Relations; the technological gap factor in Great Power Politics: lessons from theory

As a trade delegation from China arrives in Washington today, the world watches with bated breath. By now, the ongoing US-China trade war is old news. Whether this trade delegation will manage to draw out some concessions or not remains to be seen but one thing is for certain: this is not the beginning of the end but the end of the beginning.

What the international media has labelled as the trade war is, in fact, the first potent step the USA has taken to hit China where it hurts. China’s economic growth was already stuttering before the trade war began. How much the sanctions have contributed to the slowdown is a matter of debate. There is a second – hidden – aspect of the trade war however which is underanalysed.

The arrest of Huawei executive Meng Wanzhou was the opening move in that game. Why’s that? Let’s get theoretical – with some background. It is common knowledge that China’s economy has been closing the gap with the United States’. Most analysts will tell you that this is because the unique aspects of China’s economy. That is true – but only to an extent.

China’s development has also been fuelled by another crucial factor – that is, the rapid adoption of Western, especially American, technologies. Huawei is an example of that. Now, the technological gap between great powers has always been more important for global geopolitics than the economic gap. Why’s that? Technological capacity translates directly into what Paul Kennedy in his book ‘The Rise and Fall of the Great Powers’ called productive capacity base of nations. Economic power is fundamentally the combination of this productive capacity and trade relations. While trade relations are typically not under the control of individual nations – they depend on the global environment and decisions taken by other nations (as we see in the case of the US-China trade war); the productive capacity of nations is a permanent asset.

Now, China has been building its industrial base for decades. What is lacked to push its productive capacity to the maximum was access to technology. (These, as it is, are the two main components of productive capacity, along with a third, resources. So, productive capacity = industrial base + resources + technology.)

One of the primary ways in which China has been closing the technological gap is by flouting the international intellectual property regime. Much of it, done through the agency of corporations like Huawei. Now, China, along with other developing nations often speaks out against the global IP regime. It is often argued that international IP rules have been created by developed Western countries to ‘hold back’ developing countries and keep them dependent on more ‘advanced’ economies.

Whichever side of the argument one is on: it is quite clear that the United States has realised that the technological gap between it and China is too close for comfort. So, as the Chinese trade delegation opens negotiations, we should expect the United States to take some kind of (strong) position on IP protection. And the Chinese? Well, they would want some relief from the sanctions to begin with. And, if possible, a deal to provide legal relief to Miss Wanzhou – who seems to have become a pawn in this larger game.

Let’s wait and watch.