 Hello and welcome to NewsClick. Today we are going to discuss the trade war between China and the United States and the state of the global trade. To do this, we have with us Rajat Nag, who has been an observer on the economic issues for a long time, also with the ADB earlier, and Vishu Jindhar, who teaches economics in the Jahlal Nehri University. Not the best of places at the moment currently, but leaving that out. Rajat, let's start with you. No let-up on the China-U.S. trade sanctions against each other that we can see? Well, since these decisions are being taken very irrationally, I would have to say that I'm afraid we don't know. There is no economic rationale for what's happening on both. And it started with Trump. And it started with Trump for totally sort of, you know, political personal reasons. But it's hurting both. And of course, in the short run, it perhaps will hurt China a bit more. But the U.S. is not coming out if it unscathed at all. But the problem in this is that it is not a rational decision being taken by, say, the U.S. And China, my own feeling would have been better off not reacting. They have, in that sense, played into the U.S. hand. This did for time. But I can understand why they had to do it too. Yeah, but the answer to your question, I think this will continue for a while. And the next presidential election in the U.S. will probably be this marker at which things, hopefully, would improve if it's not Mr. Trump. Yeah, let's sort of not predict the U.S. elections. But more than that, the U.S. hardening towards China is appearing to be across the board. And in fact, even the other side, quote unquote, the democratic side, is also coming out very hard against China. And it seems to be something which strategic as well as economic interests are trying to now combine to say long-term we need to disengage from China because they really are our global competitor. And that's what the long-term threat is. I think we should parse it into two segments. At one level, yes, you're absolutely right. But that was the U.S. position for a long time. Seeing China as a threat and also sometimes as a strategic partner, seeing it as a competition and seeing it as a rival. So in that sense, there was always this tension. And of course, bottom line is that China has a rising power challenging the authority of the only superpower. Those tensions were always there and playing out. But I think what was happening in previous administrations, there was a strategic view that if China is a rival, how do we contain it? How do we play with it? How do we not play with it? What has happened with this administration in the U.S.? All of those strategic issues have gone out the window or at least are not playing as important a part. Therefore, the overlay of these personal emotional things are coming in. It's a collision course which has been said. And it's a collision course which has come into play. You know, Vishyajit, I would like to also ask you about what is its impact for the larger trade scenario in the world? Because just as Trump seems to have launched, shall we say, various strikes against the Chinese in trade sanctions and other spheres, there is also this issue that he has hamstrung the WTO completely. And he's setting basically the unilateral demand that all countries which have adverse trade balance with United States has to balance the deficits, while others with whom U.S. has a positive balance. Of course, there is no question of doing that there. Do you think that the WTO hamstringing plus the kind of sanctions that has been done on the United States, on China, not China alone, but also the European Union is being threatened. It has also trade sanctions even against other allies that the U.S. is doing. Of course, India being one of them or one of the allies which Mr. Modi seems to want to be, as we saw in Haldi Modi. So how do you see this part of it playing out? I think, you know, Trump's assault, I would say, against the WTO is, again, hurting him as well. He has dealt a body blow to the multilateral trading system. The entire rules-based system is now in serious jeopardy, especially because, you know, the appellate body, which is virtually non-existent, will be non-existent actually on the 11th of December. But it's actually, you know, almost almost gone now. Was the critical, you know, body which was responsible for enforcing all the disciplines that countries or the commitments countries are taken as a part of being a member of the WTO? That's going to be in a coma because the U.S. is not letting a judge be appointed. That is right. So now, at this point, we have two appellate, they have three appellate body members and for any panel to be formed, you need three judges and two of them are retiring on 10th of December. So from 11th of December, you'll have only one appellate body member left, which means that, you know, the appellate body can't meet. And therefore, they cannot adjudicate on the findings of the panel, the dispute settlement panel. And unless and the findings of the appellate body was final and binding on all the members. Which means that essentially no dispute settlement procedure would really exist in terms of the resolution to the WTO. That is right. No, let me clarify. You know, there will be dispute settlement panels. But the panel, the decision of the panels are not binding on the members. It's only when they build the appellate. It's only when they build the appeal and then the appellate body gives a ruling and that is when it becomes effective. Now, the interesting part of this whole story is that it's not that the U.S. has backed off from, you know, just filing cases against, you know, other members. So this, you know, the demise of the appellate body is also going to hurt the U.S. Because the U.S. also will find that it is not able to use the WTO for its own purposes. So now, you know, they've actually shot them themselves also on the foot. You know, of course, both of you are saying that I could argue that the United States has outlived, according to itself, the utility of WTO for its own benefits. And yes, of course, it will also have some adverse effects, as you say. But on the whole, little benefit is what they believe. And I do not somehow see that there's Trump or the U.S. shooting itself on the foot, having harmed the U.S. economy, because the U.S. economy seems to be doing quite well at the moment. That's what at least Trump, Mr. Trump says. I don't I don't think that is absolutely correct because, you know, the U.S. economy is also feeling the pinch. But it has low unemployment rate at the moment. At this point, yes. It has reasonable growth at this moment, unless things go really all right in the next three months or there's a war in West Asia, which could happen. That, of course, everybody goes down the tube. The recession hasn't hit the U.S. So why do you say the U.S. is fairly feeling the pain? I think probably take it from the other side. One thing that has happened with the Trump administration, because they are presenting all of these in such an adversarial, rhetorical, rude, whatever words you might want to use. But if you look at the attitude of the U.S. to us, WTO previously was not that friendly. I mean, they did think that the ruled based system was not something they will want to abide by, as Mr. Hill says, when it didn't suit them. But it was done within a certain framework of diplomacy, of certain framework of international rules and multilateralism. No, we have agreed. The Trump has been very cruel. Yeah, but therefore, it's not as if, in a sense, the Trump administration's come in sort of suddenly sort of changed everything, which was very different before. What has happened is, is exacerbated A and B, as Bishwit Guaid rightly says, they, I think, do not necessarily see anything in the long term strategic interests of the U.S. itself. So the trade war, for example, or its views about WTO is not going to help the U.S. in the long run. As a matter of fact, U.S. is much better off in a multilateral setting than not. To your point about the economy, I think it is true, the U.S. economy is doing well, but a large part of it is something that reforms had started much earlier. And secondly, the big tax cuts which have come and pushed the consumption, etc. So time will tell whether the economy in the U.S. is fundamentally strong and robust, but the trade war they've started with China is going to hurt them. It is actually hurting them. You don't see them in the macro numbers as yet, but I think you'll start to see them. And the economy is going to start to slow down. So let me also, you know, see one of the concerns that American economists have is that the tax cuts that Trump had offered, they haven't actually resulted in higher investments. That's right. Yeah. So, you know, the whole narrative that Trump had actually sold while cutting the taxes was that now I'm actually doing this favor to these big guys and they in turn will do me the favor by raising investments, investments, because yeah, they haven't because, you know, this is this is the grand plan that Trump has, you know, those will make America great again and and and and and start start rolling of the rust belt. You know, that is not happening. So you're absolutely correct that whatever happened during the Obama administration, I would say that part of it was also, you know, the effect of the pump priming that happened after the recession. So all that has actually happened after a lag and is as is as is usual. And and therefore, you know, what we are seeing is the is the fag end of that, you know, that push so happened to get that. Both of you are saying essentially is that this is going to bite in the medium term may not show itself in the short term because this kind of economic changes that take place do not show itself immediately. Right. And the second point that both of you made, which also applies to India, for instance, is that when you give capitalist more freedom to keep their money, whether they will invest or not depends on the state of the economy. That means are people going to buy all of that takes into account whether they will invest or not, not just because they have got more money because there are other avenues of spending that money in the U.S., in the U.S. is also slightly different because, you know, the the capitalists had actually got used to not investing in U.S., the investing all of the base. That's exactly what I'm saying. Yeah. Therefore, they have financial channels which does not necessarily mean investing domestically in the industry. And that's why is, you know, you find Trump coming back regularly and telling these guys, you know, you come back and invest here. So I'm not actually helping you to go to China, go to wherever, but you come and invest here. So so so, you know, the the long term behavior of American capital, which is that they're not actually investing in the U.S. And still continues. And that that that still continues. And and I would just extend by saying it's nothing to do with American capital per se, any capital. I mean, you're talking about basic theory of comparative advantage. You're talking about the benefits of globalization and you can't have it both ways. You can't talk about the benefits of globalization and then say invest domestically. Roger, you know, the fundamental issue that the United States has is said, I'm exceptional. So all of you have to follow these rules. But I want to have my cake and eat it too. And this is exactly what Mr. Trump is really telling everybody. Yeah, but again, I mean, you know, I would say that it would be natural for anybody to want to do that. If I have the power, I'll use it. Now, you know, China or the U.S. They don't have the power now. That's the point. So it's not as if it's the U.S. saying it, which would be different to the Europeans saying it or the Chinese saying it. They're saying it because they think they can actually enforce it. I think the point that Vishwajit and I are both making that you can't. You can't defy some of the fundamental principles of economics for too long. You can do it for a period, but it doesn't work. You cannot do it against, at the moment, rising technical prowess in different parts of the world and actually a failing American infrastructure in economy because investments, the flip side of giving capital, all of this largesse, which is what successive American governments have given, is also that you don't invest in infrastructure. You don't invest in roads. You have to only see when you go to the United States and to China, the differential investment taking place infrastructure. And if you wanted to do priming of the pump, as you talked about, one of the easy ways would have been to invest in the infrastructure. Instead of that, you have given really largesse capital. But this is part of the larger story that we have discussed on several occasions on your show. And that is basically the center of gravity of the economic power, certainly shifting eastwards. And that's what we're seeing. So the large number of issues at play by the fundamental one is that the economic power is gradually moving east. And Asia, in particular, will account for almost half the global GDP in another about 30 years. Well, that's what it used to do for a very long time. Right, go back to what it was. And it is also half the world's population. And I think that is the fundamental problem that Trump is battling with. He knows very well that the center of gravity has moved away. And he's trying his best to get it back to where it was, maybe for three decades. The question simply is that with bluff, bluster, and the big stick, how far can you stop, as it was said, can you stop the waves? And this is really what is now happening, post-colonialism, that with independence of this economy, there is a growth. And we are seeing the reassertion of people finally becoming the economy. And you can arrest it temporarily. You can, as you said, by stronger measures, temporarily try and arrest it, which may be possible for one, two, three years. But if you look at the long-term, not. And that's what we really see. Another thing which is happening very interesting has happened already. Today, Trump has become the biggest protectionist. Of course. So three decades back, this whole process of globalization started in Washington, the Washington Consensus. Today, the driver of globalization is Beijing. So I think discussing somewhere else that I think we should now rename this as Beijing Consensus, the new wave of economic integration that has started. So Washington Consensus is passe. Washington has gone completely protectionist. And the new wave of integration will come from the East. Like you said, that the whole center of gravity has moved in more ways than one. So it also means that who has the technological lead, not right now, but in the future. That will also change some of these terms that we are talking about. And we are seeing a passing of an age and beginning of a new age, perhaps. And this is the attempt by an aging power to still keep its dominance to other beings. And that seems to be what explains Trump. Thank you very much, Rajat and Visujit for being with us. And also we hope that we'll be here to see how this pans out, whether Trump loses or wins the next election. Thank you very much. This is all the time we have for NewsClick today. Do keep watching NewsClick and also visit our website.