Trump leaves stage but tune still reverberates

Despite the defeat of Trump at the 2020 presidential election, Trump's call to make America great again highlights a major problem facing the international economy - how the US commitment to liberal economic and political aspirations since the Second World War will be complicated by the rise of an authoritarian nation (China) in both economic and political terms.

While Trump's economic response was driven by an understanding that the US is finding it increasingly harder to maintain large trade deficits, a reality only maintained by a reliance upon much greater debt to fuel international economic activity, the Chinese Communist Party (CCP) has exploited the situation to increase China's wealth and influence around the world through its growing economic prowess and substantial military spending.

Quite simply, given the importance of the balance of power dimension within international relations, in a world where a commitment to certain political ideas should indeed matter, no powerful liberal democracy can allow the rise of authoritarian China at its own expense, whether other liberal democracies like it not.

While the western world accepts the inevitability of China becoming the world's largest economy, and observes how the Chinese economy was one of the few in the world that still grew in 2020 during the international covid-19 crisis, the central concern remains about how the CCP uses its growing economic might to influence trading nations and various international institutions.

We see the CCP's lack of democratic tolerance to Hong Kong, its threats to absorb Taiwan back into China through force, and its concerted effort to create markets abroad for Chinese goods and materials to help offset lower rates of domestic economic growth.

We know how the Belt and Road Initiative increases the public debt burden of some recipient countries with an International Monetary Fund study showing that China's contribution to the public debt of heavily indebted poor countries doubled from 6.2% to 11.6% from 2013 to 2016 with China obtaining some strategic assets and political influence within many recipient nations.

We are aware of the CCP violent repression of the ethnic Uighur minority, and the CCP's total disregard for freedom of speech at odds with its own messaging. A 2020 Safeguard Defenders report titled "Rampant Repression" alleges that up to 30,000 people have disappeared in China's 'Residential Surveillance at a Designated Location' system since 2013 with an estimated 20 people disappearing per day during 2020.

We observe the CCP's recent disregard for international borders that go beyond the South China Sea. During June 2020, a clash on the Himalayan border between Chinese and Indian troops occurred after China seized control of about 23 square miles of Indian territory during the previous two months, thus leading to greater Indian sentiment to become a democratic, economic and military counterbalance to China after a decade of the CCP courting India's neighbours (Nepal, Pakistan, and Sri Lanka).

And we recognise how the CCP increasingly threatens liberal democracies with economic retaliation, as observed by Australia losing valuable export markets to China during 2020 on a range of products because of the Australian government's tougher response to CCP influence and strong alliance with the US as a like-minded supporter of liberalism.

But it remains to be seen to what extent each liberal democracy will act to counter the CCP, despite the Western liberal democracies still collectively holding the balance of power in terms of economic resources and cultural appeal, and the Biden camp indicating in January 2021 that the US would consult its allies with regard to applying multilateral pressure upon China given the CCP's strategy of offering individual countries preferential access to its vast market.

While some liberal democracies will express a greater degree of commitment to political and economic liberalism, others may prove more willing to consider any economic option to create short-term wealth or reduces the burden of debt through China's economic opportunities at a time when government debt for the advanced economies is projected to reach 124% of GDP in 2020 (around 30% during early 1970s).

Of course, US leadership will prove crucial to any attempt to curtail the influence of the CCP, but even the US needs to address its own national interest, a reality made evident by ongoing support for Trump's nationalist agenda.

Thus far, the Trump approach has hardly worked. As reported in November 2020, US tariffs may have reduced Chinese imports, yet Chinese exports to developing countries increased with China becoming the biggest trading partner of Association of Southeast Asian Nations while the US dropped to 3^rd behind the European Union.

While higher Chinese domestic costs have seen jobs lost to developing nations, China's share of world exports continues to rise as it moves into the middle of many value chains by producing machinery and medium-tech components which are then often exported to other countries for final assembly.

With the US dollar serving as a safe haven since 2008 (which makes its exports more expensive), there has been little return of manufacturing to the US with a recent survey of American manufacturers in China finding that virtually none are considering relocating back to the US while about one-seventh were considering shifting some production to other low-wage countries.

Despite both US imports and exports experiencing a dramatic decline in 2020 due to covid-19, it is estimated that the US trade deficit in 2020 (goods and services) was still $US678.7 billion ($US310.8 billion with China), higher than the 2019 figure of $576.9 billion (deficit record $763.5 billion in 2006).

Most importantly, US consumers continue to gravitate towards cheaper product choices, often Chinese made, which comprise the biggest component of the US trade deficit at $915.8 billion during 2020 (the highest goods deficit on record).

With most liberal democracies having decent social welfare systems, as democratic policy outcomes are influenced by many legitimate players (political parties and interest groups), their ability to compete with China is swamped by the CCP possessing absolute control to organise its society for the purpose of economic gain however it sees fit.

The CCP's quest to dominate the global economy includes immense subsidies to support for Chinese companies to produce and invest in foreign companies; discriminatory treatment of foreign investment; forced technology transfer where foreign companies In China must enter joint ventures with Chinese firms; the blurring of civilian and military technologies, including facial-recognition software; and the overproduction and the dumping of cheap products on to the global market to gain or increase market share.

But, in a world where resources matter, albeit one where ideas should also matter regarding how the world should best operate amongst competing nations, it will indeed take considerable fortitude for any liberal democracy to support US leadership to take on the CCP given there is a real risk of considerable economic decline in the short-term.

For Australia, as one of the foremost defenders of liberalism, its increasingly open criticism of the CCP has led to one extreme estimate of a potential 6% decline in GDP if an all-out trade war shut down Australia-China trade by 95%, while noting that China accounts for more than a third of Australia's export dollars which pushes up the Australian dollar and makes imported goods much cheaper.

It is also argued that a move towards greater industry and export diversification is necessary to "allow time for capital flows and production and employment to readjust and assume that monetary policy and fiscal balances remain unaltered throughout the world", or else the loss of Chinese exports would reduce "the rate of return on investment in Australia, forcing financial markets to reallocate finance to other parts of the world".

Other liberal democracies are less supportive of the US aggressive approach, as seen by Germany which enjoys one of the largest trade surpluses in the world. During September 2020, while the German Foreign Minister Heiko Maas indicated that Europe would not countenance threats, "no matter what direction", he reaffirmed Germany's position that economic considerations would continue to guide the Sino-German relationship as "a decoupling of the relationship between the EU and China is not in our interest".

As Germany is one of the main contributors to the US trade deficit, albeit that a spokeswoman for Germany's Federal Ministry of the Economy insisted that Berlin's goal to lower the surplus by strengthening consumer demand, Trump during 2018 and 2019 threatened to slap tariffs on foreign automobiles into the US, Germany's most important export item.

With German exports of goods to the United States in 2019 hitting an all-time high in 2019, with Germany benefiting from the US trade war with China as German exports became cheaper and benefited from the US massive deficit spending and tax cuts, the US remained Germany's biggest export market with China third (growing by 3.2%).

The situation is also complicated in poorer democracies who must try to balance economic and security needs. For example, during January 2021, the governor of the involved Philippine province cancelled a $10.2 billion development of the existing Manila airport, which was led by the China Communications Construction Company, within four months of the chief of the Philippines Navy noting that the required relocation of the Sangley Point naval station would leave the Philippine capital exposed to attack as it faced the disputed South China Sea.

To conclude, it remains to be seen how each advanced and developing democracy responds to the growing influence of the CCP.

We may well be living at a time when the golden age of liberal democracy is being eroded in terms of the influence of various international institutions, as many nations are now influenced by the duality of two powerful national examples representing democracy (the US) and authoritarianism (China).

It may also be that China (under the CCP) will continue to prosper and infiltrate the policy decisions of many recipient countries who choose to become increasingly dependent upon China, and any social dissent in such countries may be crushed by corrupt regimes eager to temper any domestic sentiment for a more democratic alternative.

But, with Trump rightfully giving the China issue much greater attention, the rise of the CCP is a no brainer. It is a danger to the world, and no liberal democracy of any worth should tolerate or accept it.