How Can Companies Push Back on China? Be Like Australia.
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How Can Companies Push Back on China? Be Like Australia.

By Isaac Stone Fish
Thu, Dec 3, 2020 1:39amGrey Clock 3 min

Drinking together has always been a way to show solidarity. And that’s what Australian allies are doing, in response to Beijing’s newest trade sanctions on the country’s wine industry. Taiwanese legislators posted photographs of themselves with bottles of Australian wine, while a Swedish politician urged people to stand up to Beijing by “drinking a bottle or two.” Even the U.S. National Security Council joined in with an unusually punchy tweet. The bandwagoning may be awkward at times, but it contains an important lesson: The best way to push back against Beijing’s coercion is through a unified response.

For more than six months, Beijing has been waging a trade war against Australia. The latest salvo—up to 212% tariffs on Australian wine, announced on Nov. 27—threatens to decimate the country’s roughly $3 billion wine industry, and adds to a crowded list of tariffed items. The total amount targeted is now roughly $20 billion. Beijing has blamed Australia for a “series of wrong moves,” and announced 14 political disputes it expects Canberra to rectify in order to improve the relationship.

This is not a new tactic for Beijing. Since the 1990s, Beijing has made public examples of foreign institutions, people, and countries, and used that to scare others into acquiescence. After the Houston Rockets’ then general manager Daryl Morey tweeted about Hong Kong in October 2019, for example, Beijing froze the NBA out of China for a year, leading to hundreds of millions of dollars of lost revenue for the organisation. Reached for comment, an NBA spokesperson forwarded NBA Commissioner Adam Silver’s recent comments, where he said that the NBA’s response to the China scandal was, “We support freedom of expression.”

The NBA incident wasn’t the first. After the independent Nobel committee’s 2010 decision to award the Nobel Peace Prize to the Chinese dissident Liu Xiaobo, Beijing drastically curtailed Norway’s salmon exports to China. Companies like Marriott and the South Korean conglomerate Lotte have been targeted, too.

The strategy Beijing is using against Australia—coordinated complaints, economic punishment for political crimes, and an insistence that the other party is solely at fault—is remarkably similar to what Beijing did to the NBA. What’s new is Australia’s response.

The crucial difference lies in Australia’s smart insistence in not facing China alone. Since the beginning of its trade war, Canberra has strengthened old alliances and built new ones. It has agreed to develop a supply chain resilience program with Japan and India, signed a free trade deal with Indonesia, and benefitted from political support of countries like France, New Zealand, and especially the United States. Australia has urged its allies to understand that the more it yields to an attack by Beijing, the worse it is for its partners. This is especially true with the countries in the so-called Five Eyes intelligence sharing partnership, whose other members are Canada, the United Kingdom, New Zealand, and the United States.

The other major difference is Canberra’s willingness to publicly criticise Beijing. The NBA’s responses were almost uniformly milquetoast, including from normally outspoken stars, like LeBron James, who called Morey “misinformed.” Compare that to criticism of Beijing across the Australian political spectrum: Prime Minister Scott Morrison has posted criticisms on Chinese social media, while Penny Wong, the leader of the opposition in the senate, called one of Beijing’s recent actions “gratuitous” and “inflammatory.”

Corporations can learn from Australia. When faced with Beijing’s ire, businesses need to partner more closely with their home governments and their global competitors. Organisations like the U.S.-China Business Council already serve as platforms for companies to coordinate and share grievances. But they do so mostly privately, and with an overwhelming desire to maintain positive relationships with Beijing. They argue that staying quiet in public helps companies maintain leverage and keep their China presence. “China can’t make good on its promises to further open its economy if there is no longer anyone there—or that could be there—to open to,” a spokesperson for the council said.

Chambers of commerce need to understand that publicly and privately pushing back against Beijing with American and other home government support when one of their members is targeted is better in the long run for all member companies. In certain cases, Congress should consider an antitrust waiver for firms that are collaborating to challenge Beijing.

Will publicly and multilaterally pushing back against Beijing help Canberra succeed in reducing tensions without showing weakness? It’s difficult to say—in large part because Beijing’s responses to these situations are uneven. Sometimes Beijing holds the grudge for years, and sometimes it calms down in weeks, or even days. The capriciousness of the response is a sign of strength, not weakness—it pushes the adversary to overcompensate, to seek to right the relationship. But standing strong and not yielding is Australia’s best hope for a healthy future relationship with both China and the United States. And Australia’s allies are stepping up. In late November, the Trump administration announced plans to work with Australia to counter Beijing’s economic hostage-taking. “The West needs to create a system of absorbing collectively the economic punishment from China’s coercive diplomacy and offset the cost,” a senior administration official told the Wall Street Journal.

Corporations targeted by Beijing can effectively engage their allies, both in governments, and in the business world, but most don’t. As tensions between the United States and China continue to worsen, it’s imperative that they build support from their home governments—and that they speak out when Beijing targets them.



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Growth in size of U.S. market gives him extra leverage in trade negotiations with other countries

By JOSH MITCHELL
Thu, Nov 14, 2024 3 min

Donald Trump will retake office in a global economy substantially transformed from eight years ago—one much more reliant on the U.S.

It means that the president-elect’s plans, including across the board tariffs, could pack an even greater wallop on other countries than the first round of “America First” economic policy. It also gives Trump much more leverage in negotiations over trade policy.

Strong growth since the pandemic has expanded the U.S.’s weight in the global economy. Its share of output among the Group of Seven wealthy nations is higher than at any point since at least the 1980s, International Monetary Fund data shows.

Growth in China, the world’s second-largest economy, has slowed. Germany, the largest European economy, is contracting. Many poorer economies are buckling under the weight of high debt.

U.S. gains in global output partly reflect the strong dollar, which pushes up the value of American output relative to that of foreign economies. But they also result from substantial increases in U.S. productivity compared with the rest of the world.

The changes in the global economy have made America, not China, the premier destination for foreign direct investment, enlarging the exposure that foreign companies have to the U.S. economy and changes in government policy. A booming U.S. stock market has attracted huge flows of investment dollars.

“The fact that much of the rest of the world is now struggling to generate demand on its own provides more reason for countries to try to reach some sort of accommodation with Trump,” said Brad Setser , a senior fellow at the Council on Foreign Relations.

Trump started imposing tariffs in 2018, primarily on China but also on Europe and other allies. Those tariffs fractured global trade, weighing on large exporting economies in Asia and Europe, while not obviously hurting the U.S., which is less reliant on foreign demand than its trading partners. Trump campaigned on a promise to impose at least a 60% tariff on China, and an across the board tariff of 10% to 20% on everywhere else.

America’s superior economic performance has been driven in part by energy independence and massive government spending, said Neil Shearing , chief economist at Capital Economics in London. Since the U.S. now exports more energy than it imports—including millions of barrels of oil each month to China—the nation as a whole benefits when energy prices rise, unlike for net importers such as China and Europe.

The upshot: America’s traditional role as the centre of gravity in the global economy has become even more pronounced in the years after Trump’s first-term tariffs, the pandemic, and Russia’s full-scale invasion of Ukraine.

U.S. influence over Europe’s economy is a case in point. The U.S. has cemented its position as Europe’s largest export market as trans-Atlantic trade surged in recent years and China’s imports from Europe stalled. The U.S. has replaced Russia as Europe’s major source of imported energy. Europe runs big trade surpluses with the U.S. but big trade deficits with China.

The result is access to the U.S. market is far more important for Europe than access to European markets for the U.S. That asymmetry will give Trump leverage in trade negotiations with Europe, according to economists.

Germany exports around 7% of its entire manufacturing value-added to the U.S., but Germany imports only around 0.8% of value-added in U.S. manufacturing, according to a September paper by researchers at Germany’s Ifo Institute for Economic Research.

“German business is vulnerable to Trump,” said Marcel Fratzscher , president of the Berlin-based economic research institute DIW Berlin.

Parts of Asia have benefited from the changes in supply chains sparked by Trump’s initial trade war with China. Many manufacturers, including Chinese ones, moved factories to places such as Vietnam and Cambodia. For the past two quarters, Southeast Asia’s exports to the U.S. have exceeded those to China.

But that now leaves them more exposed to across the board tariffs, a policy that Trump advisers say will be necessary to force manufacturing back to the U.S.

To be sure, Trump’s policies could create countervailing forces. Tariffs would decrease imports and potentially weigh on productivity, but tax cuts would drive up household and business spending, including, inevitably, on imports. Other countries could retaliate by placing tariffs on U.S. goods.

Meanwhile, a tight U.S. labor market has pushed up wages, which is good for those workers. But it could pressure employers to raise prices, in turn making them vulnerable to foreign competition.

Many economists are girding for a different type of trade war from Trump 1.0, when trade fell between the U.S. and China but was diverted elsewhere.

“As long as protectionism refers only to one country, China, the world can live with this,” said Joerg Kraemer , chief economist at Commerzbank. “The thing becomes difficult or dangerous if you implement tariffs on all countries. This would be a new era in global trade.”