With near daily talk of a burgeoning cold war between the United States and China and escalating tensions from the ongoing trade war, the private sector, not just government, has a key role to play in mitigating the increasingly belligerent relationship between Washington and Beijing.
Current trade tensions and a potential future conflict that could cut the two largest economies in the world off from each other would have devastating effects for business on both sides of the Pacific. From lost supply chains to rising consumer prices, the trade war is already hurting industries ranging from farming in the Midwest to high tech development in Silicon Valley.
The consequences of these tensions leave the private sector well positioned and with strong motivation to further avoid conflict.
Such leadership has as strong historical precedent in modern U.S.-China relations. When China first joined the World Trade Organization, it found a staunch ally supporting its membership in the U.S. Chamber of Commerce. For U.S. companies, greater access to China, despite its flaws, was well worth fighting for.
Today, that is still true. China remains a key investor abroad, a key market for U.S. goods and a key site of production for favorite products.
The pain of a trade war and new barriers to the free flow of goods across the Pacific is already beginning to hit home from companies and consumers across the country. Numbers from third quarter earnings showed U.S. companies hit hard by tariffs including Ford, Caterpillar, United Technologies, 3M and many others.
Of course, it’s true that China’s policies have not always been fair to U.S. companies. But that was true when China joined the WTO, too. Along the way, the U.S. has pushed Beijing toward the reforms it committed to when it joined the organization.
China is still rightfully the subject of criticism from both politicians and the private sector for its trade policies which include forced technology transfer, a lack of respect of intellectual property rights, and an emphasis on state-owned enterprises. But despite these issues, China remains far more valuable as a partner in commerce than as a political foe.
To avoid conflict, the United States and China must foster understanding or risk the devastating outcome of a stalemate or even war. And the private sector, not politicians, will likely lead the way in doing so.
The problem with applying the cold war analogy to the current U.S.-China relationship is that it makes the outcome of conflict seem inevitable. It’s not.