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Research Last Updated: Jun 30, 2018 - 12:08:33 PM

To see why Trump’s tariffs have hit a Chinese nerve, read history
By Rana Mitter, SCMP, 24 Jun 2018
Jun 29, 2018 - 11:20:33 AM

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From foreigners running the country’s lucrative customs service, to Mao’s ‘self-reliance’, to finally joining the WTO; terms of trade have long shaped China’s relationship with the West

Donald Trump’s tariff war against China (and other parts of the globe) is not the first time the terms of trade have shaped China’s relationship with the West. In 1894, a cartoon appeared in the English magazine Vanity Fair, showing a bearded Briton dressed in green silk robes with a caption reading “Chinese customs”. It was a caricature of one of the most powerful figures of late 19th century China: the Inspector-General of the Maritime Customs Service, Sir Robert Hart.

While Hart is a legendary figure in China, the organisation he ran has rather faded in historical memory. For a century, between 1854 and 1951, much of China’s customs revenue came through an organisation headed by a Briton, not a Chinese. And that fact is a reminder of why the sometimes arcane-seeming issue of tariffs can ignite such passion in China.

The struggle for independence has marked the trajectory of numerous nations over the centuries. That struggle tends to be remembered through its most powerful symbols: Gandhi’s non-violent struggle for India’s freedom, or conflicts such as the American war of independence. But in the case of China, freedom of trade (and the lack of it) has been a recurring theme.

It was a trading issue, the British desire to smuggle opium into China, that was at the heart of the first major confrontation between China and the West in the 1840s. Following the opium wars, under British pressure, the Chinese government created a new agency, the Imperial Maritime Customs Service, which collected taxes and tariffs that were, essentially, run and regulated by foreigners to provide income for the Chinese government.


As US and EU square up on trade, one country stands to benefit: China

This led to a love-hate relationship between the customs service, usually headed by a Briton, and China’s rulers. Hart, the object of that Victorian cartoon, stayed in charge of the entity for nearly half a century, longer than most emperors. After the fall of the Qing dynasty in 1912, and during the “warlord” period of the 1920s, control of Beijing also meant control of the customs service, a valuable prize indeed as it was one of the very few reliable sources of income for any government. But by the time the Nationalist (Kuomintang) government came to power in 1927, the new goal was “tariff autonomy”, the idea that China should set its own taxes on imported goods, a goal achieved in 1930.

The Nationalists did not have long to enjoy it. When their government fell to the Communists, China was cut out of major global trading networks and instead, for a decade it became part of a new socialist trading bloc with the USSR. But after the split with the Soviets in the early 1960s, even that link became weaker. By the time of the Cultural Revolution, China was producing few goods to export to willing allies, and Mao Zedong instead stressed the idea of “self-reliance”.

That period makes the ensuing 1980s even more remarkable. During that era, Deng Xiaoping reversed policy, turning China into an export powerhouse that started to take advantage of trade barriers coming down around the world – such as the integration of the European Common Market into what became the Single Market.

Over the past four decades, the international trade system has finally worked for China. The most symbolic moment was China’s entry into the World Trade Organisation in 2001, a status that was lobbied for on bumper stickers and T-shirts every bit as enthusiastically as for the Olympics. No wonder Xi Jinping’s speech at Davos in 2017 came down so strongly against protectionism and stressed the virtues of free trade.

[A Chinese steel worker in a factory in Huaibei. Donald Trump’s tariff war against China - on steel and aluminium - is not the first time the terms of trade have shaped China’s relationship with the West. Photo: AFP] A Chinese steel worker in a factory in Huaibei. Donald Trump’s tariff war against China - on steel and aluminium - is not the first time the terms of trade have shaped China’s relationship with the West. Photo: AFP

Yet Xi’s words describe an aspiration rather than a reality. Despite Trump’s threats, the US still remains one of the most open markets in the world. China, despite Xi’s language, is not. Whether it is the capture of foreign intellectual property by Chinese joint venture partners, or the heavy restrictions on the import of services, China’s markets are still hard to penetrate by international standards. Pressure on China to open its markets is necessary and justifiable.

Xi's take on communism offers alternative to decline of the West

Yet China’s history shows Trump’s “trade war” could be far more than just rhetorical. The opium war was a trade war. China imposes tariffs unfairly on a whole range of goods, but it was only within the last couple of generations that it regained the right to impose any tariffs at all. The world of free trade has been good to China in the last few decades, but they followed a period when the term seemed to equate to a violent exposure to an international system run for the benefit of others. Having struggled into the WTO, Beijing is hardly likely to sit quietly while another Western leader targets China and seeks to rewrite the rules of global trade for one country’s benefit.

Source:Ocnus.net 2018

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