A Trade War of The Dragon and The Eagle

The New Year has arrived early in the land of China. They are fondly calling it as the “Year of the Dragon”. The Chinese dragon is looking beyond east to start its conquest. With America going back to its boundaries, Britain breaking away from the European Union and Russia looking to change the status quo, China believes the time is now ripe to take up the mantle. That is not the only reason behind the dragon’s ambitions. China is facing stiff challenges in the South China Sea from the major powers around the globe. With one third of the shipping trade passing through the South China Sea, it is of extreme importance to China.

In case of any hostility China could be choked out of supplies by global powers that operate in the contested region. No wonder the dragon doesn’t want a confrontation with the superpowers! China is looking out for alternative routes. Trade routes would reduce the current trade distance from 12000 km to almost 3000 km. It would be an added brownie point if the trade routes can serve as strategic for its expansion in the geographical landscape. Finally the dragon has found a way to spread its wings all the way till Africa,travelling via Central Asia and Middle East. OBOR (One Belt One Road) is the pet project of the Chinese president, which is deemed to be the 21st Century equivalent of old Silk Road. It serves as a trade route running all the way to Middle East via Central Asia. 40 billion dollars have been set aside as the Silk Road fund which would build infrastructure projects as part of OBOR. The most important part of OBOR is CPEC. China Pakistan Economic Corridor is series of infrastructure projects, railways, power plants, airports leading all the way to Gawadar port. CPEC runs through the entire stretch of Pakistan, via Pakistan Occupied Kashmir (POK) and the southern state of Balochistan. This corridor provides China an alternate way to the “Strait of Malacca” route which houses most of China’s trade.

With Gawadar port under its gambit, China could gain a strategic advantage in the Indian Ocean, all the while enjoying the benefits brought in by the shorter trade route. Pakistan is on board, so are many other dozen countries for OBOR initiative. Finally the dragon can begin its march. However, the story is not as happy as it seems. Not everyone is happy with China’s rising ambitions. Especially the super powers sitting on the north side of the Pacific Ocean and the second fastest growing economy sitting south of the Himalayas. “In a globalised world there are many belts and many roads, no one nation should put itself into a position of dictating ‘One Belt One Road’”. Through this statement Defence secretary James Mattis has made the stance of USA very clear. The eagle is not going to sit idle while the dragon flies around to the top. USA extended support to India’s claim of intrusion of its sovereignty as OBOR passes through the contested lands of Pakistan – occupied – Kashmir. USA is currently on the border line of insecurity and has thus revived two major infrastructure projects in the South East Asia worth 20 billion dollars pet named “The new Silk route” as an alternative to China’s OBOR. USA along with Japan, Australia and India are in talks to establish a joint regional infrastructure scheme as an alternative Beijing’s spreading influence.

The plan of the four regional partners is still in its nascent stage and not ripe enough to be formally declared.USA also pulled off a major diplomatic coup with North Korea right under China’s nose, leaving China bereft of an ally in the Korean peninsula. Notwithstanding with this move, USA wants to hurt China where it hurts the most – China’s Export Trade. On 6th July, USA under its new president has virtually triggered a trade war with the dragon by imposing heavy tariffs of 25 percent on $34 billion worth of Chinese goods. Not willing to step back China reiterated with tariffs of its own. For the second round the USA released a list of goods worth 200$ billion annual trade value to be subjected to 10 percent tariffs. The president also threatened to ban Chinese companies to carry out businesses in the country.

The world is gaping in disbelief at the unfolding of the decade’s biggest economic war which might offshoot into full blown destruction. India stands to gain a lot in the short run since it is gloating over the fact that somebody has the potential to replace the trade capacity of China. This would also allow the developing economies to come out of the lurking shadows of the super-powers and grow on their own might. But in the long run, potential disruption in the U.S markets would set off the dominos breaking up the world economy bringing back the horrors of 2008 crisis on a larger scale- a nightmare which nobody can afford. But then again, neither the eagle nor the dragon is going sit silent watching the other one walk away with everything.