 Hello and welcome to News Clixoom Mapping Fortlines where we discuss major geopolitical issues around the world. Today we're going to be talking about the scenario in the US, China trade war or what is called the trade war. Although it's mainly the United States acting against China. So recently we had the US decision to ban TikTok and WeChat from app stores in the coming week. And China has just spotted very strongly asking the United States to stop bullying and even inaugurating its own list of unreliable entities. So this definitely does mark yet another phase in what has been going on over the past few months. We have with us Praveen Prakash to talk about this. Praveen, to quickly begin with, how do you see the latest last two days of the development? So you've talked about this before of course. But again, this marks a very concrete step and it now looks like China after holding back for quiet some time and hoping that say the councils might prevail is likely to take action as well. Well, this is really fracturing the world on a number of fault lines, not one. So one of it we have already been commenting on the trade come tech war, that's one element of it. But it also has now the prospect of fracturing the world on financial issues, financial terms and we'll discuss how that's likely to happen. But also in terms of the supply chains because the US and China are the biggest economies in the world. They had trade relations. There's an enormous amount of trade that goes on between the two. And if that relationship fractures, then we're going to see of course the consequences on a wide range of issues. And the last is of course the internet, you know, which has been regarded as something which everybody accepts is common communications, etc, etc. But if this trend starts to develop further, then we are likely to see the internet fracture into a number of national networks. And then we are going to see a qualitatively different future than what we have seen today. So I think there is a huge number of issues over here, but taking up the first issue that you raised. One is of course, the WeChat has been banned. So that's almost immediate. But TikTok has been given a reprieve of a different kind, no more downloads of TikTok are possible, but they have 100 million users in the United States. They can still use it till November 12th without any fresh downloads, which means TikTok still gets a certain kind of grace period within which then whether Oracle can settle its accounts, convince the United States and have either Biden's hand over the TikTok app completely to them or Biden's itself or TikTok headquarters itself in the United States. All of these are there in a step that preceded in this. Chinese had already said that a lot of the software technology that TikTok holds or Biden's holds, that is subject to export restrictions because that's artificial tools that they are using, other software tools they are using. So there are export control regulations that are there. So they had made clear that transferring TikTok Biden's property will not be that easy. And Chinese would have a say on that, even if Biden's therefore loses a considerable amount of its money, because if it could sell, for instance, the TikTok, even in the United States and four or five other countries that have been talked of, all of which are headquarters of which was the US arm of TikTok, then that would, could conceivably, would be 10 to 20 billion dollars. So that's the money where Biden's would have had. And the normal course probably even more, because TikTok as you know, was really an app which was having enormous amount of spread among the youngsters, teenagers. So this is one part. And you also talked about the other response that China has said, they had prepared just like the US is preparing entities list. They had an unreliable entities list in which lot of the big American companies are there. So if they now say that all those unreliable entities which are there, we will not buy equipment from them. We will not buy goods from them. What you are going to see, therefore, is a cascading effect that, for instance, Boeing, of course, Boeing itself is down in the dumps at the moment. But if it wasn't, it would not have been able to access the Chinese market because it would be considered an unreliable entity. So how many of these players and China is a big buyer of American goods as well. If that happens, then others will benefit. It could be Chinese local companies, of course, but could also be European companies. We are not in the race at the moment because we have also decided to follow the American route banning apps and so on. So I don't think at the moment we'll be looked upon. Indian companies will be looked upon as particularly reliable entities either. But given the fact that our footprint has been relatively much smaller in China, it makes a difference to us but may not make such a big difference to us in the long run. But definitely for the Chinese and American trade, it means essentially sundering, breaking apart the supply chains which have bound them together. And if the Americans are not going to supply chips and other equipment to the Chinese, then there is a huge number of companies in China who buy these chips. But the major Chinese chip manufacturers do consider China as a big market for them. So that was already happening with the Huawei issue. But now with this, we are really starting to look at retaliation possibly from the Chinese companies, Chinese side. I think part of it they were holding off thinking if it lasts till the elections, let's see what the new administration does. But let's be clear that whether it's a Biden administration or a Trump administration, these processes that have been set at large. I think these processes will continue and there is going to be a large amount of bipartisan support on the issue of China at the moment. So I think you are going to see a slow unraveling of the global trade system with this step and certainly a sundering of technologies and also internet. So these are the new elements that are coming in and I think therefore this particular step that the US has now taken may not appear by itself as the big one. But this is finally the one in which Chinese are now I think considering retaliation, whether they will hold off till November, we do not know. But it does appear they are preparing the grounds for retaliation as well. And probably in this context, China and the US are simultaneously also been talking, you had multiple rounds of negotiations about the tariffs that were imposed by the US first and subsequently on China. At various points, there have even been certain kinds of agreements where the countries have decided to hold off for some time. So in this context, one question would be that, what would be the kind of impact on the US itself? Because we have talked quite a bit about China, the kind of crunch they may face. But what about the United States? Is it likely to also affect very heavily US industries, lead to a further economic decline? What are the possibilities there? You know, let's be very clear, China today is the major manufacturing power in the world. In fact, if we say, we can also call it the global flat factory. This is where a lot of the manufactured goods, particularly not essentially the chips at that level, but almost all the components, other components as well as the finished goods today have Chinese equipment in it. Either in it or it is Chinese equipment. So China is a powerhouse in terms of manufacturing and it is also one of the largest food importers. Now, as you know, the United States has been exporting food items, grains and so on. So China was a major buyer of that. And of course, for the, if you go to any American store, very large number of the goods really come from China, including textiles, they come from other places also. But certainly on manufactured items, the Chinese goods are a major item in the United States. So how easy is it going to be to separate the supply lines so that Americans don't buy from the Chinese and Chinese also do not buy from the Americans. How can that happen? This is a torturous process. It's not going to be easy. It's not going to happen that day. But if this process continues and there is nothing that stops it, both might at some point say uncle and give up. That's a different issue and come to an agreement. But I think the way it is developing, it's just not a trade war anymore. We started by calling it a trade war. Then it became expanded to include the 5G. Then it from 5G, it went to the denial of technology, particularly chip manufacturing, not the chips themselves, the chip manufacturing equipment. That was bad. And then the American expansion of that argument to say anything that American machines touch or American software touch is also bad. As you know, ARM processors, which is essentially the design of the chips, this was something which was sanctioned at one point. ARM thought that they were out of it. It's a soft bank owned company. They thought they were not covered under it. And they recently had said they have taken legal advice. They're not banned under it. But now the United States is negotiating to certain companies with soft bank to buy ARM. Then of course it becomes again an American company. So US is not stopping any of its measures. And they're not saying that if China does ABC, then we will stop. That's not the trajectory it is on. It is saying that we are doing all this. We are going to see that China is not able to compete with us on a whole bunch of things. We are going to free our networks, our allies networks from Chinese equipment. So it said all out what they have launched on technology terms. It's no longer an issue of quid pro quo, which is why the trade war was that if we do a certain set of things, we will relax our trade terms. This is really saying it doesn't matter what you do. We're not going to give you chips, chip making. We're not going to let you do a we're not going to let you come into markets, our markets with these kinds of things. So it is basically saying that on questions on issues of high tech, you have to surrender the high ground to us. You cannot enter those areas. And I think that is where the battle is shaping up the battle of chip making. It's not a battle over manufacturing of chips, but it's a battle over how do I get even to set up a factory, which then can manufacture chips to a design. So it's really the tools of chip manufacture that have been that have been brought under the agreement under the trade bars that the US has launched. So I think it goes much more. But there is also a financial aspect of this. This we can talk later, which will come to how the financial war that US has, what are the weapons it has, and what are the possibilities there. But let's be very clear. This is a battle not being fought on one ground. This is a war being fought on multiple fronts. And all these fronts do not seem to have an end goal. Saying if you give this, we can reach an agreement, which as I said was what the trade war is about. But this is basically subjugate yourself, surrender, and then we'll discuss the terms kind of battle. So I think this is going to be what will define the next few years in both in technology and in trade terms. And regarding the trade aspect, one thing we also talked about earlier is how this phase is marked, maybe the end of the global trade regime that came in the 90s. And it's interesting because earlier this week, the WTO did say that the US tariffs were not in conformity with global trade norms, but it is no power to actually implement or do anything regarding that except beg the US to change its policies. So how do you see this panning out in terms of what is the likely scenario as this regime kind of crumbles and the world with the world regime. You know, we were always very confused. Why was the United States going after WTO? Because it had benefited as a single country, perhaps the most from WTO. This is if we see the economic benefits, the financial benefits, it went much more to the developed countries, particularly the rich countries. And certainly China made a lot of concessions regarding intellectual property, a whole bunch of other things in order to be able to get into WTO. And all of that at that point of time was dictated by the United States, otherwise they would not have been able to enter the WTO itself. So having said that, why did the United States actually start moving against WTO by refusing to nominate or accept nomination of the people who are the dispute settlement tribunal. Now this first settlement tribunal is the actual final arm, which looks at trade disputes. And once a judgment is given, you can go to the dispute settlement tribunal and if that doesn't say, pronounce in your favor, then you've lost the case. Now if the dispute settlement tribunal does not exist and the US refusing to nominate anybody's nomination on the dispute settlement tribunal effectively means I think there is one tribunal member still there, but you need three members for a tribunal. So the dispute settlement process is a default. You can pronounce judgments, but because the tribunal finally does not exist anymore, you can appeal against that and that's it. There will be no hearing on that. So we were all wondering why is the United States doing it? From it is the beneficiary of WTO. Now it's become very clear they're doing it because they're going to violate WTO regime and impose sanctions on China, which are not in conformity with the trade rules. And they are going to use what's called the nuclear option. That means national security. If we use that, then you have an exception in WTO, but then WTO can still say, is that a legitimate exercise of the WTO rules that you consider the whole bunch of things as national security, including, you know, goods of kinds, which have nothing to do with security whatsoever. So how do you really do that? And having done that, now it's becoming quite clear. The reason for making the WTO dispute settlement process dysfunctional was a part of the plan by which then they would do all of this. But, you know, they have a second instrument which people haven't really talked about. And that instrument, which of course they're using against Meng, the finance, chief finance officer of Huawei. Now that is how do you bring foreign nationals under U.S. law and which is what actually the case against Meng is. Without going into details, it's important to note that was a similar case in which started in 2014, 2013-14 against Alstom. Alstom was a big power plant equipment manufacturer, manufactured boilers and turbines. And it had a financially tough time. And it was on the basically it was offered for sale to different companies. G was trying to buy it. Siemens was trying to buy parts of it. And so was the other companies in Europe who were also thinking of buying it, maybe also the Japanese. What happened was at that point of time, under the Foreign Corruption Prevention Act that the U.S. has, they looked at Alstom officials who had bribed or promised bribes for a contract in Indonesia. None of it should normally have come under the purview of the United States. It's a French company. The recipient of the bribe, if it is, wasn't Indonesia. So why would the U.S. come into the picture at all? How would U.S. laws come into the picture? Then it transpires that the FCA provisions are such that finally, if for instance an American bank is involved in a transaction and if the prices for instance are being settled in dollars, so there would be an American involvement because the dollar is a currency. It's an American currency. Therefore, you would finally transaction would have to enter the U.S. somewhere. Under the Foreign Control Prevention Act, the U.S. basically says any contract denominated dollars is under legal jurisdiction of the United States. If any American bank has been used, it's under legal jurisdiction of the American of the United States. Even if the people who are receiving, transferring the money have nothing to do with the United States. Just because a dollar transaction has been there, therefore they are involved. So the fact is dollar was de facto the global currency. Therefore, any transactions of this kind between two countries or two companies, two international companies would take place in dollars. That's the way it was being done. So this brought the entire global financial structure officially under the legal eye of the United States. And this was an extra-legal, extra-territorial reach of the United States far beyond anything else. Alstom had one of its chief officials, very senior official, who was in jail in the United States for almost five years in and out of prison because he also didn't get bail and so on. But he spent almost five years in the United States on this. And finally, Alstom, which was being pursued by GE, was sold to GE. Of course, whether it was a good sale, bad sale is a different issue. But everybody who studied the case, and of course the Alstom official who wrote a book on this, all of them agree that it does seem very shady that the case was settled when it was settled. It basically got settled two weeks after GE bought Alstom, that division of Alstom. So this whole issue of extra-territorial reach of the US law was a part, it appears, of also US trying to force trade deals. And this is exactly the pattern you now see with Trump, that you sell TikTok to an American company, wholesale, then you will not come under sanctions. So what was done to Alstom using a different law is now being done by using a national security law that this is why you have to sell your companies to us. So essentially, this is the third element of the current scenario, that if you want to today function as a country, if your companies within the country want to function internationally, then how do you keep out yourself out of the extra-legal power that US has assumed? And how do you really work on that basis? As you can see, Canada has accepted that yes, US laws should operate on Chinese citizens, a Chinese company, and as long as they're in Canada, they can be arrested under US direction. So if this principle is accepted, and of course, the US reverse is not true, you cannot accept a US that isn't anywhere else for acts that they have done in the United States. So this reverse principle will not operate. But why should you be surprised? After all, they're Noriega, other corrupt, you might be. He was the president of Panama and the US landed there, took him prisoner, and he was tried in US courts, and US courts had no problems with that. They said, yes, our laws are run in any part of the world. So this whole principle of law is actually, well, whatever the US says goes, kind of understanding of law is companies, the financial overreach, the fact that dollar is the de facto currency, and of course, the fact that it backs up, therefore, the US claims that the entire financial transactions in the world, if they're carried out in dollar, effectively, the US, the US has legal jurisdiction over it. I think this is the overarching picture that is there. And we haven't commented about the Alstom case and its links to the Huawei, but the Chinese have, they have talked about it. And it's worthwhile to go through what Perucchi, I think he was the official who was arrested and spend a lot of time in US jails. It's worthwhile to see what he's saying, because though he might be no saint, but after all, you know, all of these companies have involved themselves in third world countries giving bribes and bending those national laws. But the fact is he was not tried under Indonesian law. He was not tried under French law. He was tried under the American law, with absolutely no jurisdiction, otherwise between a French company and an Indonesian entity. And the fact that the US comes in is only because of the financial structure of the globe, that dollar is essentially the currency in which global trade, global deans are struck. So I think all of this is now up a grabs that if you fracture at one level, can all of these then survive is a question that I think you should start thinking. Thank you so much for being for talking to us. We'll continue looking at this topic in the coming weeks as well. That's all we have time for today. Keep watching.