Biden Will Not Change Trade Dispute With China in the Technology Sector

Friday, February 12, 2021

Lucas Leiroz, research fellow in international law at the Federal University of Rio de Janeiro.

The new American president, Joe Biden, has promised to change the policy on China initiated by Donald Trump. However, the Chinese are not confident that this will mean any improvement in bilateral relations. Among Chinese analysts and experts, expectations about the new American government are realistic or even pessimistic. With regard to the trade war, the government advises Chinese companies to give up any “illusions” about Biden, especially in the technological sector, which tends to become the point of greatest rivalry between the two nations.

Undoubtedly, the importance of the technological progress has become a central point in the dispute between the world powers in recent times. The rise of 5G technology, artificial intelligence, big data, and fintech technology are key points for all contemporary national strategic planning. In general, these sectors are currently dominated by private companies, even in countries with a strong state, such as China, where Huawei stands out as the technological giant. However, good relations between the private sector and the State are essential for common planning.

The strong Chinese state has managed to supervise its private sector, including with extremely high investments and with strong interference in corporate decisions – something that is typical of China’s political and economic tradition. In the US, relations between government and technology companies have been a little more unstable. The big tech firms, apparently, have good relations with Biden, but these same companies showed a clear interest in the fall of Trump and acted strongly in favor of the government’s transition precisely in the moments of greatest instability, as happened when the former American president was banned from all social networks and digital platforms, for example.

This calls for particular attention from the Chinese. With Trump, despite his aggressive speech, there was a conflict of interest between the government and a private sector committed to Deep State’s plans, but with Biden, the American technology giants act in partnership with the government and both have a common agenda. In other words, although Biden seems more liberal, with him, the American State will act with much more force in the management of some companies – and, in the same way, the managers of these companies will have much more influence in the decisions of the government. This mutuality of interests between the state and companies worries Washington’s international rivals.

In recent interviews and pronouncements, Biden has demonstrated that his behavior towards China will not be in the sense of stopping the trade war, but of following it taking into account international standards. This is quite typical of Biden’s speeches – considering that he adorns his political program with legalism and humanitarianism – but it reveals little about what may arise from the trade dispute. Despite his “defense of international standards”, Biden made it clear that there will be extreme competition between the two countries, which justifies all Chinese concern.

Biden Administration has not yet announced its official policy regarding the technology sector and China, but with the new president’s pronouncements, we can deduce that it will be strictly aimed at protecting American interests and that the possibilities for international cooperation and negotiation with Beijing will be limited to this condition. This means that the commercial and technological war will only increase even more, since, in the same sense, the Chinese will not abdicate their interests to guarantee any agreement.

There is an apparent Chinese advantage at one point. Chinese companies are already able to formulate a long-term planning, while Biden has to resolve a series of problems and tensions previously left by Trump towards China. The sanctions against Chinese technology companies left by the former president, such as the ban on TikTok and various investment restrictions on Americans interested in investing in China are examples of Biden’s priority problems. These sanctions do not please the American business community, which loses profits from the impact of these policies. Biden, if he really wants to materialize his plans, will have to find a balance between ensuring the conditions for an American technological supremacy and guaranteeing the interests of the American business community. The American private sector is much more interested in investing in China – which is a growing market – than the Chinese private sector is interested in investing in the US – which is a falling market. This was a central point of the trade war that Trump did not understand, and that Biden must admit.

Trump made several irrational decisions allegedly trying to secure American interests. His actions hurt the plans of several American businessmen and created a tense scenario that was not focused on competition, but on mere US-China opposition. Biden will try to change that by acting in accord with the technological business community, which means reviewing several of the sanctions imposed by the previous government. At the international level, however, little is likely to change.

Biden is likely to impose even tougher sanctions than Trump on countries that have cooperated with China in the technological sector. The former president, despite being rhetorically hostile, was passive in the face of the choice of most countries in the world to allow Huawei to operate in their 5G markets – this type of position is not expected from Biden, who appears to be more interventionist. Still, it must be emphasized that government incentives to the private market will be equally intense and the US and China will work to create a new arms race in the technological sector, which will be encouraged by governments and operated by companies. However, it remains to be seen whether Biden will really be able to manage the interests of the American business community as the Chinese state can manage the interests of its national companies.

Source: InfoBrics