If you happen to believe that miracles do not happen anymore, you are well advised to do some serious rethinking. When the President of the United States of America starts to vehemently defend economic and trade policies of a rather closed minded and protective nature – to say the least, that is – and even openly admits it while the President of the People’s Republic of China, supposedly of a socialist/communist background, can’t stop hailing the tremendous advantages of free trade and globalisation to an extent of describing the latter as irreversible, then the aforementioned idea becomes very much doubtful.
This is exactly what happened with Donald Trump and Xi Jinping in their speeches delivered to the “Asia-Pacific Economic Cooperation” Forum (APEC) hosted by Vietnam last week, posing a number of important, and indeed, somehow worrying questions pertaining to the future of world trade, the redistribution of roles therein, the ties and relations that will regulate it, and the balance of power expected to be prevalent in the mid – to long term.
It is quite apparent that we are facing a grave change in the international economic context and a paradigm shift marginalising the European role – while maintaining its political influence – and unleashing a fight of an entirely new nature in which the Americans are voluntarily withdrawing from competing for emerging markets, obviously not minding to hand over control to China in this regard, in exchange for protecting their local 323 million consumer market, as to implement Trump’s campaign slogan “America first”. This indeed seems to be very much coherent with America’s obvious inability to influence Chinese monetary policy, where the Jinping government continues to manipulate foreign exchange rates at will to maximise exports, which have by far exceeded low quality and low cost merchandise.
Seeing China invading international services and project management markets might actually be the most worrisome factor at large for the United States. Chinese shipping giant “COSCO” – to name just one example – is for instance right now running ports pivotal for world trade, such as Egypt’s, east of Port Said, and it looks as if nobody will able to stop them from continuing to do so in the foreseeable future.
At the same time, and while the US is making huge concessions to China on the international economic arena, there is nothing whatsoever guaranteeing that Trump can replicate the “isolation policy” experiment conducted by four successive American presidents (Wilson, Harding, Coolidge, and Hoover) in the aftermath of the first World War, for about 15 years. Back then, the United States withdrew from international economic life except for some foreign investments in a number of promising countries, while maintaining the closure of its own markets. This however was in a totally different political environment and is hence not very likely to repeat itself.
If what we anticipate here does happen, however, the countries of sub-Saharan Africa will potentially be the biggest winners, given the density Chinese investments in the area, making the People’s Republic the region’s largest single FDI provider. According to a report published by “Ernst & Young” last May, Chinese direct investments in these countries are totalling $66bn since 2005, distributed over 293 different projects and having created approximately 130,000 jobs.
Most Arab countries on the other hand will suffer heavy losses. Their only real economic ties to China are trade balances clearly favouring China with deficits of $18bn for Saudi Arabia, $4bn for Kuwait, $18.5bn for the UAE, and about $7bn for Egypt. If we were to disregard the oil exports of the Gulf countries, these deficits will be even more.
Also, Chinese FDI in the three mentioned Gulf countries combined barely exceeds $12bn since 2003, most of which is in the oil sector, of course. As for Egypt, China does not even appear in the top ten list of foreign direct investors.
In conclusion, China makes one gain after another in front of the backdrop of Trump’s reckless and senseless economic policies that lack any sort of reasonability and will eventually make the whole world pay for it alongside the Americans.
Mohamed Shirin El Hawary is Political Economist