USA – China – EU : Who will win the AI race? (Part 2)

USA – China – EU : Who will win the AI race? (Part 2)

1. February 2021 0 By Horst Buchwald

USA – China – EU : Who will win the AI race? (Part 2)

Biden will not continue Trump’s trade policy

New York , Feb. 1, 2021

Now that the Biden – Administration has been in office for a few weeks, more and more experts are wondering whether the new guy will continue the trade policies of his predecessor Trump, tone them down, work with partners or even reshape them.

As it stands, China’s standing in Washington has not improved. Territorial disputes with its neighbors, the crackdown on Hong Kong and reports of mistreatment of ethnic Muslims are major contributors. But accusations of technology theft and espionage also persist. “The ground has shifted significantly,” Nathan Sheets, a former Treasury undersecretary for international affairs in the Obama administration, said recently.

Katherine Tai, Biden’s trade representative, has long taken the position that “we face stiff competition from a growing and ambitious China – a China whose economy is managed by central planners who are not subject to the pressures of political pluralism, democratic elections or public opinion.”

For Raoul Leering, one thing is clear: Beijing must make changes if it is to make progress . The global trade analyst at ING is convinced: “It will depend on China, on the speed with which they reform and change their policies, to see if Biden will cut back on trade barriers.”

His suggestion to Beijing: the Chinese could give up their claim as a developing country. But it insists on that status even though it has become one of the largest producers and a middle-income society. Under WTO rules, it says, this allows the Communist Party to protect industries and intervene more in the economy. Giving this up “would be a very important gesture,” Leering said.

 

Trump’s record: losses, losses , losses

Whatever path Biden will take, this is certain: he will in no way pick up where Trump left off. Why this is so, shows a selection from the balance sheet of his trade policy:

Trump’s first blow in 2017 was a $360 billion tax hike on Chinese imports. Beijing retaliated with tariff increases and suspended imports of soybeans. The hardest hit were the U.S. – agricultural states , which had voted for Trump in 2016.

The U.S. trade deficit with China decreased by 19% in 2019 compared to the previous year and by 15% in the first nine months of 2020. This did not meet Trump’s goal of moving jobs to the United States. Importers instead shifted to Taiwan, Mexico, and other suppliers. The overall U.S. trade deficit fell slightly in 2019, but then rose nearly 14% by last November.

Meanwhile, the Congressional Budget Office estimates that tariff increases cost the average U.S. household nearly $1,300 last year. Businesses postponed investments, reversing some of the benefits of Trump’s 2017 corporate tax cuts.

A study by the U.S.-China Business Council and Oxford Economics found that the U.S. economy lost 245,000 jobs because of the tariffs. The study said even a modest reduction would create 145,000 jobs by 2025.

Trump increased pressure by denying access to U.S. technology to telecommunications equipment giant Huawei Technologies Ltd. and other companies that U.S. officials view as potential security risks and threats to U.S. industrial leadership. Americans were ordered to sell stakes in Chinese companies that Washington says have ties to the military.

The Communist Party responded by promising to accelerate its two-decade-old campaign to make China a “technological power” in its own right.

Campaign finance records show that the Democratic candidate was the clear favorite in Silicon Valley, with big-tech companies and their employees among the top donors to Biden’s campaign. Google parent Alphabet, Microsoft, Amazon, Apple and Facebook were among the top five of the top seven donors to Biden’s 2020 campaign committee . That’s according to federal data compiled by the Center for Responsive Politics, a Washington-based nonprofit that analyzed donations from employees and political action committees of each company. U.S. law requires individuals who contribute $200 or more to a presidential campaign to disclose their employers.

Big – Tech voted for Biden

At the same time, it was revealed that none of Trump’s top donors to the presidential campaign came from the technology sector. The Center for Responsive Politics found that the president was heavily supported by employees of government agencies, airlines and the defense industry.

Alphabet’s employees and political action committee, for example, donated a total of $3.7 million to Joe Biden’s campaign committee last year, making it the largest financial supporter of the Democratic Party candidate. Meanwhile, employees of the search engine giant donated less than $69,000 to Trump’s campaign, according to the Center for Responsive Politics.

While there are several reasons why Silicon Valley was eager to see Biden in the White House, a major factor was the hope that he would undo the damage done by the Trump administration’s push to decouple China and the U.S. from technology.

“A lot of the tech companies have not liked Trump’s approach when it comes to China,” said Rob Atkinson, president of the Information Technology and Innovation Foundation, or ITIF, a Washington-based public policy think tank.

Since the U.S. blacklisted Huawei Technologies last year, American suppliers to the Chinese tech giant have suffered billions of dollars in lost revenue. This year, the Trump administration’s broader crackdown on Chinese tech companies like TikTok threatened to take an even greater toll on America’s tech industry as tensions between the two superpowers escalated.

“The Trump administration has made it more difficult [for U.S. tech companies] to negotiate with China, sell to China, and manufacture in China. … There has been some retaliation against U.S. tech companies because of Trump’s China policies,” Atkinson added.

Several U.S. companies, including Apple, had reportedly warned the White House that the planned ban on the Tencent-owned messaging app WeChat could cripple their entire China business, which in the iPhone maker’s case accounts for about 15% of its total revenue.

Meanwhile, the U.S. semiconductor sector has already lost billions from the Huawei ban. Mobile chipmaker Broadcom, for example, which derived 5% of its revenue from Huawei, said the loss of that one business unit cost it $2 billion in 2019. The industry faces a potential $49 billion loss in revenue if the decoupling of the U.S.-China supply chain continues, Nikkei Asia previously reported.

In addition, Beijing recently passed a new law controlling the export of sensitive goods, services and technologies to counter Washington’s escalating restrictions on Chinese tech companies – a move that will make it harder for tech companies to do business across borders and potentially lead to even more lost revenue.

But while many in Silicon Valley believe that a Biden presidency would go some way toward reversing the U.S.-China decoupling and bringing stability back, some Chinese tech industry participants are less optimistic.

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