Trade War

[This is an opinion piece. While all statements are factual, the conclusions are the author’s opinion.]

I was recently asked for my thoughts on the trade war with China as if it were a recent development. The only recent development is that we (the US) finally realize there is a war with China. The war itself has been going since 1979.

Yes, that’s right – 1979 – when Carter and Deng Xiaoping began Diplomatic relations between the two countries and the trade doors opened with a flood of activity. Yes, the promise of access to ~1.4 billion people was just too appetizing not to pursue. However, that was a false advertisement of epic proportions – even today, approximately fifty percent of the Chinese population live in abject poverty.

But the allure was too powerful, and we made concessions like never before (and hopefully never again), all in the name of accessing a hyper-inflated market. We gave away technology, in either mandatory technology transfers or required joint ventures (for reference, Tesla is the first and only foreign car manufacturer not in a Chinese JV). Banking as well required JV’s and other industries were (are still) simply not accessible, Telecommunications for example –ask Apple about introducing the iPhone to China¹.

Though China knew precisely what they were doing, and they were banking on the West (not just the US) to display our typical short memories. We completely forgot about a significant portion of World History – the part where China was far and away the most dominant country in the World, for thousands of years. Not only did we forget about “The Middle Kingdom,” but we even ignored one of the greatest military strategy books ever published – Sun Tzu’s The Art of War. The strategy China was following was clear –‘do not attack your enemies until they are already defeated.’

For at least the past two decades, administration after administration² promised to get ‘tough’ with China – but as with so many other political promises, nothing happened. It wasn’t until the current administration that our President dared to keep his promise. Unfortunately, since things have been out of control for so long, the solution is far more drastic than it needed to be, had it been addressed earlier.

Mind you; this isn’t just a trade or economic war; it is for much more than that. The trade war with China is a cultural war – one we don’t want to lose. Why is it that American culture influences cultures from around the world? We are looked up to, in part, due to our economic dominance – that will all change once China becomes the #1 economy in the world. Even with the current war, it is a question of when, not if. Call me an arrogant American, but I don’t want to bow down to anyone, and certainly don’t want to bow down to a country with the Humanitarian record of current-day China.

The worst part of all of this is that it is 100% our fault. No business was ever forced to give away trade secrets and technology – we fell for a sales pitch so hard that we chose not to even negotiate. I hope this is a lesson that America and Americans will not soon forget. Perhaps we should make The Art of War mandatory reading for all college freshmen.

What is my point with all of this? Well, I’m hopeful all American businesses receive the following messages:

1. Don’t ever compromise solid business principles, no matter how alluring the opportunity seems to be.
2. How the numbers are derived is just as important as the numbers themselves. Remember who all your stakeholders are.
3. While this is true for all businesses, it is especially crucial for small businesses that can neither afford the cost nor time of a market-based mistake. Know your target prospect before engaging with them.
4. Regardless of your political leanings, do not blame the current administration for starting a trade war with China. Instead, embrace the fact that we are finally engaging in a war we can’t afford to lose.
5. Let’s try to remember our history and learn from our mistakes as well.

¹ When Apple first introduced the iPhone, their strategy was to sell themselves as a competitive advantage to partner on favorable terms with one carrier in each market they entered. However, in China, there are only two mobile carriers, both of which are State-Owned. It took two years after the iPhone was introduced in America before gaining access to the world’s largest mobile phone market.

² Regardless of the author’s political views, this is written to be bipartisan in nature. Administrations from both parties are equally guilty in not addressing the issue.

Note about the author: Rick Struzynski lived and worked in China for approximately 11 years and has a unique perspective few Americans hold. Rick is also a free-trader (the current tariffs in place are counter to his belief). However, he also acknowledges that for free-trade to work, it has to be paired with fair-trade.