US economic leadership remains paramount

With China’s lending focusing on infrastructure projects that are built by Chinese companies in countries where repayment terms can include natural resource exports or geopolitical favours, recent research found that 165 countries owed debt of $385 billion to China for ”belt and road initiative” projects, including 42 with debt exposure to China that exceeds 10 per cent of their GDP given China’s demand for higher interest rates and shorter repayment periods.

Despite an argument that “unilateral sanctions are rarely effective” as they “tend to impose greater costs on American firms than on the target, which can usually find substitute sources of supply and financing”, President Joe Biden has retained Trump's tough position on China to address China's unfair trade practices, unfair import and export subsidies, and illicit use of American intellectual property.

Have such measures worked? 

With the Trump administration in January 2020 coming to an agreement with China to purchase an additional $US200 billion in American products over 2017 levels in four sectors (manufactured goods, services, agricultural products, and energy) in exchange for lower tariffs against certain Chinese products from 15 per cent to 7.5 per cent, the Biden Administration during October 2021 confirmed that most tariffs would remain on more than $US350 billion worth of Chinese good with the possibility of more duties or other trade restrictions to come.

This was because China was behind in terms of meeting the purchase obligations for US farm goods, had blocked specific imports such as the sale of Boeing planes to Chinese airlines, and had continued to pour billions of dollars into government targeted industries such as steel and solar energy.   

China is hardly accepting WTO rulings, with the US disputing China’s claim that it had implemented the WTO 2019 recommendations with regard to its use of import controls for rice, wheat and corn, this resulted in the WTO deciding to review the matter after the US argued that it was entitled to take “countermeasures” against Beijing.  

During September 2021, the WTO also dismissed all four of China’s claims that a US tariff hike on solar panels breached global trade rules after the US imposed a system of tariffs and a quota in 2018 because US producers complained that imports of certain crystalline silicon photovoltaic cells had caused serious harm to the US domestic industry.

With China seeking economic influence around the world, the Biden Administration during June 2021 also revived the Trump-era plan to encourage other G7 nations to set up a Western alternative (Build Back Better World) to China’s belt and road initiative to raise hundreds of billions in public and private money to help close a $40 trillion infrastructure gap in needy countries by 2035.

At the same time, with the US remaining the largest donor to the United Nations with $US11 billion in 2019, just under one-fifth of the UN’s collective budget intended to meet the needs of poor and developing nations, a 2020 article expressed concern at China’s attempts to make the UN a tool for achieving its hegemonic ambition, which could end up destroying the body from within.

Notwithstanding legitimate concerns about China, and bipartisan support for stimulus packages to revive the US economy in response to the 2007-2008 global financial crisis (GFC) and the more recent covid-19 disaster, there are many Americans who believe that such deficit expenditure cannot go on forever as the ratio of US public debt to GDP has exploded from 62 per cent in 2007 to well over 100 per cent in 2020.

As of October 2021, the threat of a government shutdown and debt default was a real possibility as the US Congress (with a Democrat majority in both houses) had not given Treasury additional borrowing authority to raise the debt ceiling beyond the current statutory limit of $US28.4 trillion.

While the Congress and President Biden avoided a government shutdown by voting to continue funding the government through December 3, division was evident amongst Democrats with progressive members wanting a $3.5 trillion social spending package to go along with the $US1 trillion infrastructure plan, while moderates want a smaller package of about $US1.5 trillion.