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Mushtaq Khan
A SERIES of articles in the New York Times (NYT) seems to justify protectionism. One article lists the mind-boggling statistics of China’s trade balance on goods and services: adjusted for inflation, China’s trade surplus in 2024 far exceeded any country in the past century — its trade surplus last year was $990 billion.
It doesn’t stop there. The value of China’s manufacturing output is one-third of global production and exceeds the combined production of the US, Japan, Germany, South Korea, and Britain. ‘Made in China 2025’ entails import tariffs to encourage buying Chinese products, while domestic production is incentivised by lending to expand factory capacity, subsidised export financing, and targeted grants to complement the massive state investment in physical infrastructure, basic research, and specialised education.
As a result, Chinese factories are overproducing, and since the real estate crisis has dampened domestic demand, the surplus is exported. However, this is not limited to cheap consumer goods; the Chinese government has specifically targeted sectors that will dominate the 21st century.
Another article lists the goods and related investments. From a net auto importer in 2019, China became a net exporter of 2.2 million automobiles in 2022. In the process, China is now the largest producer of EVs in the world and also has a monopoly on producing solar panels. Furthermore, it has become a global leader in commercial drones, lithium-ion batteries, industrial and interactive robots, nuclear power plants, LCD monitors/ screens, smartphones, telecom equipment, semiconductors, and has become the global supplier of rare earth minerals. China’s state-owned aircraft manufacturer specialises in single-aisle passenger aircraft, which have the highest commercial value. As they have done with autos, China will likely outcompete Boeing and Airbus in the next few years.
On the flip side, you have the US, which has been deindustrialising since the 1970s. It started exporting blue-collar jobs when its trade surplus shifted to deficits in 1971, and is now dependent on imports for most consumer goods. The US auto sector, steel, consumer durables, and electronics have collapsed in our lifetime.
When one thinks of the typical MAGA supporter, his/ her mindset is deeply rooted in America’s deindustrialisation. Donald Trump’s nationalist agenda — ‘America First’ — is an attractive solution for their worsening plight. I will not be surprised if Trump uses his inauguration speech to promote import tariffs with a slogan like ‘Be American, Buy America’. In some ways, this is the same message as ‘Made in China 2025’.
However, import tariffs alone will not do the trick. Tariffs may protect some US industries and bring back some blue-collar jobs, but the US will not be able to retain or regain its global leadership as China already has the edge in the above-mentioned sectors. In yet another NYT article, a compelling argument was made that US government funding/ contracts to improve aircraft and missile design (after World War II) gave American companies global leadership in aircraft production and armaments — an edge they still maintain. The argument was that the funding required for basic research and experimentation, which has a small probability of commercial success, would not be undertaken by purely commercial enterprises.
This creates an interesting possibility for US tech giants specialising in AI, microprocessors, self-driving vehicles, quantum computing, and robotics. Elon Musk and other tech billionaires have already cosied up to Trump, sensing that the US can only compete with China if the US adopts the Chinese model of economic development. The free-market model suited the US after World War II when most of the world’s manufacturing infrastructure was destroyed; post-war planners thought unhindered trade and American investment would fortify US dominance.
However, the Asian miracles witnessed in South Korea, Southeast Asia, Singapore, Vietnam, and China can no longer be ignored.
Policies like import substitution, protective tariffs, subsidised export finance, government grants for R&D, performance-based subsidies, and development banks should no longer be frowned upon. If xenophobia and nationalism are cultural themes of the 21st century, the entire neoliberal model of economic development will have to be discarded.
The real issue is whether the Washington Consensus — the World Bank, the IMF, and the World Trade Organisation, which have championed neoliberal ideology for decades — will survive or be forced to adapt to a completely different world order.
The writer runs an advisory.
mushtaq@doctoredpapers.com
Published in Dawn, January 18th, 2025
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Editorial
THIS was, perhaps, the only case in which there seemed to be ostensible malfeasance involved. Alas, the way the Al Qadir Trust case was conducted, and the delays in pronouncing the verdict have cast a shadow over it, and one wonders whether the matter is as closed as the PTI’s critics would have one believe.
It may be recalled that a substantial sum of money, originally seized by the UK’s National Crime Agency on suspicion that it was “derived from bribery and corruption in a foreign country”, was repatriated to Pakistan in 2019 under a settlement between the NCA and property tycoon Malik Riaz. Instead of being put directly to public use, this money was diverted by the PTI government to settle payments owed by Mr Riaz’s Bahria Town to the Supreme Court.
The most obvious question that arose was how could money seized from an individual on suspicion that it was dirty be used to benefit that same individual in a different case.
Following this settlement, Mr Riaz donated a sizable tract of land for the creation of Al Qadir University, to be run by a trust overseen by Imran Khan and Bushra Bibi. Many observers found another reason to believe there was quid pro quo involved in Mr Khan’s decision, as prime minister, to divert the NCA’s repatriated funds to the Supreme Court’s accounts and Mr Riaz’s contemporaneous decision to fund a major project thought to be close to the PM’s wife.
The accountability court, which heard the case since last February, has now sentenced Mr Khan and his wife to 14 and seven years, respectively, for corruption.
Mr Khan and his supporters have asked how the two could be convicted if they did not and could not derive any material benefit from the Al Qadir Trust.
However, this seems to deflect from the fact that the former PM knowingly got himself involved with an individual accused of shady business dealings and walked away with something, no matter how intangible, for himself and his wife.
Despite the accountability court judge’s decision to convict the former PM and his spouse, there are many questions that remain unanswered, such as what agreement the then government entered into with the UK’s NCA regarding the funds it was to receive.
It is said the details of this arrangement are only known to Mirza Shahzad Akbar, former special assistant to the PM on accountability, who has remained absconding from the case.
Without it, the finding of guilt may be on shaky grounds. With the announcement of the verdict, the PTI legal team now has recourse to the high courts and will seek to challenge the decision.
For now, the former PM’s battles continue, both within the legal system and without.
Published in Dawn, January 18th, 2025
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MOSCOW: Russia and Iran signed a treaty on Friday underpinning their economic and military cooperation, in what both sides cast as a major milestone in their relations.
Moscow has looked to Tehran as a strategic ally since sending troops into Ukraine in Feb 2022, worrying Western officials who see both as malign actors on the world stage.
The two sides agreed to help each other counter common “security threats”, with a 20-year pact, according to a copy of the text published by the Kremlin. But they stopped short of a mutual defence pact like the one signed between Russia and North Korea last year.
They also agreed that if either side was subjected to aggression, the other would not provide “assistance to the aggressor”.
Russian President Vladimir Putin and his Iranian counterpart Masoud Pezeshkian, who signed the agreement together at a ceremony in the Kremlin, both hailed the accord as a new chapter in their ties.
“This true breakthrough document is aimed at creating the necessary conditions for the stable and sustainable development of Russia and Iran and our entire Eurasian region,” Putin said.
Pezeshkian said the pact would “open a new chapter in relations between Iran and Russia in all fields, especially in the field of economic cooperation”.
Military training
The two sides agreed to “support trade and economic cooperation in all areas”, a key point as both sides ramp up trade in the face of heavy Western sanctions on their energy industry.
They also agreed to cooperate on training military personnel, as well as to formalise the docking of warships and vessels at each other’s ports.
The agreement did not explicitly refer to the exchange of weapons, an area of cooperation that the West has slapped with sanctions.
Iran has already supplied Russia with self-detonating Shahed drones that Moscow fires on Ukraine in nightly barrages, according to Ukrainian and Western officials.
Sitting next to Putin in the Kremlin after signing the treaty, Pezeshkian called for a political settlement to end the nearly three-year conflict.
“I would like to remind that war is not a suitable solution to solve problems and we welcome negotiations and achieving peace between the two countries of Russia and Ukraine,” he said.
Moscow and Tehran had been working on a new treaty for years. Their previous relationship was governed by a 2001 document they have renewed periodically.
They share a complicated history. Iran and Russia fought wars in the 18th and 19th centuries over land in the Caucasus, and the Soviet Union and Britain launched a joint invasion of Iran during World War II.
‘Global hegemony’
Russian President Vladimir Putin has made building ties with Iran, China and North Korea a cornerstone of his foreign policy as he seeks to challenge a US-led “global hegemony” and amid his Ukraine offensive.
Tehran has also sought closer ties with Moscow, after suffering a series of foreign policy setbacks last year.
An offensive overthrew Russian and Iranian-backed Syrian leader Bashar Al Assad last month, and in Lebanon Tehran-ally Hezbollah was substantially weakened in the confrontation with Israel.
Speaking ahead of a fragile truce between Israel and the Iran-backed Hamas that was due to come into force, Pezeshkian said he hoped a “permanent ceasefire will be established in Gaza and the aggressions on this land will end”.
Putin also expressed hope for a “long-term stabilisation” in Gaza and called for the world not to “weaken efforts for a comprehensive settlement of the Palestinian-Israeli conflict on the basis of international law”.
Pezeshkian’s visit to Russia also comes just days before Iran-hawk Donald Trump returns to the White House.
The US president-elect, who is seeking a rapid end to the conflicts in Ukraine and the Middle East, has made repeated military threats against Tehran.
During his first term, the Republican pulled out of a multinational deal that provided Iran sanctions relief in exchange for restrictions on its nuclear programme.
In 2020, Iranian Revolutionary Guards commander Qasem Soleimani was assassinated in a US drone strike in Iraq on Trump’s orders, prompting a wave of fury in Iran.
Trump last year warned the US would “wipe (Iran) off the face of the Earth” if a recent alleged Iranian plot to kill him had been succesful.
Published in Dawn, January 18th, 2025
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WASHINGTON: US President-elect Donald Trump and Chinese President Xi Jinping discussed issues including TikTok, trade and Taiwan in a phone call on Friday, just days before the former takes office again, promising tariffs that could ratchet up tensions between the world’s two biggest economies.
Both leaders were upbeat about the call, with Trump calling it “a very good one” and Xi saying he and Trump both hoped for a positive start to US-China relations, according to Chinese state broadcaster CCTV.
This was the first known phone call between the pair after Trump’s election in November.
The call came shortly before the US Supreme Court on Friday announced a ruling upholding a law that mandates TikTok owner ByteDance divest TikTok’s US assets by Sunday to a non-Chinese buyer, or be banned on national security concerns.
Both countries are embroiled in an array of diplomatic and economic disagreements, including an accelerating technological and military rivalry and bitter trade disputes. Marco Rubio, Trump’s nominee to be his secretary of state, has defined China as the gravest threat facing the US and warned about the risks of possible military conflict between the two countries.
“The call was a very good one for both China and the U.S.A. It is my expectation that we will solve many problems together, and starting immediately. We discussed balancing Trade, Fentanyl, TikTok, and many other subjects,” Trump wrote on his social media platform.
“President Xi and I will do everything possible to make the World more peaceful and safe!” Xi raised China’s concerns about Taiwan, which Beijing maintains is part of its territory, and said he hoped the U.S. would treat the matter with great care.
“The Taiwan issue concerns China’s national sovereignty and territorial integrity, and he hopes the U.S. side will handle it with caution,” he said according to Chinese state television.
Xi said the United States and China can have their differences but must respect each other’s core interests, and that trade relations can be mutually beneficial without confrontation and conflict, comments similar to those he made during Trump’s first term.
The Chinese readout of the call said the two leaders agreed to set up a “channel of strategic communication to keep in regular touch on major issues of shared interest.” Trump offered strong support to Taiwan, including regularizing arms sales, in his first term. But during the campaign last year, he said Taiwan should pay the US to be defended.
Breaking with tradition, Trump had invited Xi and other foreign leaders to his Jan. 20 inauguration, but China is sending Vice President Han Zheng, a move signaling Beijing’s desire to step up communication with the incoming administration.
This week Beijing slammed comments by Marco Rubio, Trump’s nominee for secretary of state, as “unwarranted attacks,” after Rubio called China “the most... dangerous near-peer adversary” the United States had ever faced.
Rubio said that China cheated its way to superpower status, and he vowed to ramp up defenses of Taiwan, the self-governing democratic island claimed by Beijing, to prevent a “cataclysmic military intervention.” Xi said on the call that “the Taiwan question concerns China’s national sovereignty and territorial integrity.
Published in Dawn, January 18th, 2025
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