Morning Consult - Marc A. Ross OpEd: Sure, China Is a Competitor, but It’s Also a Market

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April 5, 2018

Much of the press coverage on the current state of U.S.-China commercial relations is focused on competition, and not enough on the market for American goods and services.

China as a competitor has been dominating press headlines for years. Candidates seeking high office in the United States have been informing voters that China plays unfair, doing business there makes little sense and the only solution is tough action. Numerous political columnists use China to score easy points and advance one-sided protectionist remedies.

Years of one-sided opinion is having a negative impact on U.S.-China commercial relations and is fostering a tit-for-tat retaliatory tariff environment.

In the United States, Pew Research reports negative views of China have increased by 26 percentage points between 2006 and 2016. And American negativity towards China has been higher than Chinese negativity toward the United States in every year since 2014.

A January 2017 Pew Research survey of Americans found that 65 percent of respondents said China is either an adversary (22 percent) or a serious problem (43 percent), while only about a third (31 percent) said China is not an issue.

And in a separate Spring 2016 survey by Pew Research, a majority (55 percent) of Americans held an unfavorable opinion of what more and more Americans see as our most significant Asian rival.

This hostile environment is the public affairs reality that American business is facing right now.

Many Americans now see China, one of our most significant and most promising markets, as a loser for US business. Unfortunately, this belief is fertile ground for politicians supporting protectionist policies and trade halting tariffs. Actions that if successfully passed would force Beijing to respond with retaliatory trade tactics including increased limits stifling full access to the growing Chinese consumer marketplace for American goods and services.

It is time for those that care about a productive and engaged US-China commercial relationship to take these polls seriously and engage Americans in Main Street coffee shops and at picnic tables during backyard BBQs.

For far too long American business has relied on a model dependent on high-level government relationships with support from the White House and corresponding federal agencies to manage the U.S.-China relationship.

This model is exhausted and broken.

The Congressional Research Service reports total U.S.-China merchandise trade rose from $2 billion in 1979 (when China’s economic reforms began) to $636 billion in 2017. China is currently the United States’ largest merchandise trading partner and our third-largest export market behind Canada and Mexico, our neighbors and NAFTA partners.

According to the U.S. State Department, American companies exported $135 billion in goods to China in 2017. Exports sourced, developed and packaged from across the nation.

Thirty states experienced at least triple-digit goods export growth to China since 2006, and four states saw an increase of more than 500 percent over the same period: Alabama, Montana, North Dakota, and South Carolina per the U.S.-China Business Council’s State Export Report. USCBS concludes every U.S. state has experienced triple-digit services export growth to China since 2006, with 16 states enjoying the export growth of more than 400 percent.

At a grassroots level, it is critical to remind Americans that U.S. goods and services exported to China come from a wide range of industries. Goods such as transportation equipment, agriculture products, computers and electronics, and chemicals. These exports also sustain logistics jobs in America’s ports and warehouses throughout the country.  Also, U.S. services exports come from the travel, education, and transportation sectors as well as professional business and financial services.

Leaders of American business need to play a more decisive role in reversing this trend and ensuring American goods and services reach the ever-expanding Chinese marketplace. Sitting on the sidelines will be too detrimental for America’s economic security.

Marc A. Ross is the founder of Caracal Global and specializes in global communications and thought leader management at the intersection of politics, policy, and profits. Working with boardrooms and C-Suite executives from multinational corporations, trade associations, and disruptive startups, Marc helps business leaders navigate globalization, disruption, and American politics.

Cellphone Spying, Industrial Goods, Trade War, Shopping Malls, Mark Zuckerberg

Marc Ross Daily.png

Cellphone Spying, Industrial Goods, Trade War, Shopping Malls, Mark Zuckerberg

Marc Ross Daily
April 4, 2018
Curation and commentary from Marc A. Ross

Reporting from Alexandria, Virginia

Marc Ross Daily  = Global Business News at the Intersection of Politics + Policy + Profits

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TOP FIVE

✔️ US suspects cellphone spying devices in DC

✔️ Trump lays out tariff plans for Chinese industrial goods

✔️ China strikes at US farming as soybeans enter trade war

✔️ Zuckerberg will speak to the House on April 11

✔️ Shopping malls moving more toward overall experience

GEOECONOMICS

US suspects cellphone spying devices in DC: AP reports, for the first time, the US government has publicly acknowledged the existence in Washington of what appear to be rogue devices that foreign spies and criminals could be using to track individual cellphones and intercept calls and messages. The use of what are known as cellphone-site simulators by foreign powers has long been a concern, but American intelligence and law enforcement agencies — which use such eavesdropping equipment themselves — have been silent on the issue until now. The devices work by tricking mobile devices into locking onto them instead of legitimate cell towers, revealing the exact location of a particular cellphone. More sophisticated versions can eavesdrop on calls by forcing phones to step down to older, unencrypted 2G wireless technology. Some attempt to plant malware.

McMaster denounces Putin and his “pernicious form of aggression.”

India is rushing to complete its ambitious infrastructure plan before the next elections, and is spending a record $18 billion this year to build highways and improve roads across the nation.

62: For the first time since gaining independence in 1947, India now spends more on defense than its former colonial power in the UK. 

Italy: Sergio Mattarella, Italy’s president, will today start talks aimed at giving his country a government. An election last month bequeathed it a hung parliament. Perhaps the least unnatural solution would be an all-populist coalition between the biggest party, the Five Star Movement and the hard-right League. 

US market futures are in the red amid escalating trade tensions between the US and China.

Trump lays out tariff plans for Chinese industrial goods: FT reports, the Trump administration revealed plans for a 25 percent tariff on 1,333 Chinese products ranging from industrial robots to locomotives in retaliation for what it said had been decades of state-backed intellectual property theft by Beijing. The list released on Tuesday covers imports worth some $50bn last year and represents the most aggressive US trade response to China’s actions since President Richard Nixon normalized diplomatic relations in the 1970s.

LAT: Trump administration ramps up trade war with China by releasing list of new tariffs

AP:
US proposes tariffs on $50 billion in Chinese imports

Pro-tip: These are "proposed tariffs"

China strikes at US farming as soybeans enter trade war: Bloomberg reports, soybeans have finally entered the US-China trade war. China’s Ministry of Commerce on Wednesday said it plans to impose 25 percent duties on imports of the commodity in addition to other U.S. agricultural produce including wheat, corn, cotton, sorghum, tobacco and beef. They’re among 106 products ranging from aircraft to chemicals targeted by Beijing in retaliation against proposed American duties on its high-tech goods.

The US exported almost $14 billion of soybeans to China last year, over a tenth of total exports to the Asian country. 

WP: China fires back at Trump, vows to impose tariffs on more US products, including soybeans

SCMP: China slaps extra 25 percent tariffs on 106 US imports as trade war nears


FT: Trade wars of 2018 have just begun

Question for the White House - where are we going with all this? The US is trying to stop China's well-laid economic growth plans, which it almost certainly won't be able to do. And what happens if China dumps US stocks, or stops buying US debt? What happens when Chinese stop buying iPhones, Buicks, and Nikes. 

AMERICAN POLITICS

Special Counsel Robert Mueller informed Trump’s attorneys last month that he is continuing to investigate the president but does not consider him a criminal target at this point, according to three people familiar with the discussions. 

Politico: The most powerful lobbyist in Trump’s Washington. Hint: It’s not Corey Lewandowski. https://politi.co/2q1jbNJ

Since Gary Cohn quit and Trump announced his plan to institute a new round of tariffs, the S&P 500 is down roughly 5%. This number to the downside will grow today.

Trump’s tariffs are hurting American factories after prices skyrocket: Bloomberg reports, Here’s one way to assess Trump’s tariffs on imported steel and aluminum: America’s factories already aren’t feeling so great. The tariff announcement helped send a measure of raw-material prices paid to an almost seven-year high in March, the Institute for Supply Management’s manufacturing survey showed Monday. About 32 percent of the respondents’ comments related to the threat of duties, ranging from the potential for higher costs to concern about limited availability around production schedules, according to Timothy Fiore, chairman of the group’s factory survey committee.

China finds California wine pairs well with a trade war: NYT reports, retaliatory tariffs are a blow to exporters increasingly catering to young, newly wealthy Chinese looking for bottles with cachet. https://nyti.ms/2GRjpAM

@JoshuaGreen: New Chinese tariffs this morning could have bigeffect on US midterms. Per Bloomberg data, biggest soybean producers include Ohio, Iowa, Missouri, Indiana.

CA-GOV: 27 different candidates are slated to appear on California’s gubernatorial primary ballot on June 5. The top two vote-getters, regardless of party, will proceed to the general election this fall. The two top contenders are Democrats Gavin Newsom and Antonio Villaraigosa.

ENTERPRISE

WSJ: Fox says Disney could buy UK's Sky News

Amber Baldet, who was heading up JPMorgan Chase's Quorum blockchain team, is setting up her own business. 

BOF: Calvin Klein, Ralph Lauren betting on denim revival

North Face is committing to having an equal number of men and women in all its advertising moving forward.

Shopping malls moving more toward overall experience and designers will probably try to squeeze more profits out of a smaller amount of retail space with more emphasis on mixed-use.

Martin Sorrell is being investigated for alleged improper use of company funds. The long-standing chief executive, under whose leadership WPP became the world’s largest advertising agency, denied wrongdoing but said the board was right to investigate.

Spotify stock closed its first day of trading at $149.01 giving the music streaming giant a market cap of around $26.6 billion.

Apple has snapped up John Giannandrea, Google's outgoing search and artificial intelligence engineering chief, to head up its own AI strategy. 

Western payments groups play long game in China: FT reports, mobile payments market is 50 times bigger than what the US offers.

Russian trolls: Facebook is banning 270 Facebook and Instagram accounts run by Russia's Internet Research Agency.

Mark Zuckerberg will speak to the House Energy and Commerce Committee on April 11. 

TRENDS

Recode: What this Silicon Valley VC learned on the ‘Rust Belt Safari’: There are plenty of ways for tech to play in the “comeback cities” of the heartland. http://bit.ly/2Efi3uc

I loathe the term Rust Belt.

20 percent: Percentage of renters who have no interest in owning a home, according to the latest from a semiannual Freddie Mac survey. 

CULTURE

NYT: Disgraced by scandal, Mario Batali is eyeing his second act

Mountain bike excursions, cheaper WiFi, and better food: Welcome to cruise 2.0 https://wapo.st/2pGhAwF

MLK: Fifty years ago today, the Martin Luther King Jr. was shot and killed as he was standing on the balcony of the Lorraine Motel in Memphis.

SOTD

U2 - Pride ( In The Name Of Love) http://bit.ly/2H98gsR

SPORT

Sebastian Steudtner big wave surfing at Nazare, Portugal: Watch this http://bit.ly/2H8niyI

Philadelphia: It's the first time that the Super Bowl Champions and the NCAA Basketball Champion are from the same city.

March Madness: Ratings for Turner's coverage of the NCAA men's basketball national championship game sunk to a new low, down 28 percent from CBS' broadcast of last year's game. Carrying the game on cable was always going to mean fewer viewers than on broadcast, and the blowout didn't help.

Sure, China is a competitor, but it's also a marketplace

XiTrump.jpg

Much of the press coverage on the current state of US-China commercial relations is focused on competition, and not enough on the market for American goods and services.

China as a competitor has been dominating press headlines for years. Candidates seeking high office in the United States have been informing voters that China is a competitor and the only solution is tough action. Political columnists use China to score easy points and advance one-sided protectionist remedies.

Years of one-sided opinion is having a negative impact on US-China commercial relations and is fostering a tit-for-tat retaliatory tariff environment.

In the United States, negative views of China have increased by 26 percentage points between 2006 and 2016. And American negativity towards China has been higher than Chinese negativity toward the United States in every year since 2014.

A January 2017 Pew Research survey of Americans found that 65 percent of respondents said China is either an adversary (22 percent) or a serious problem (43 percent), while only about a third (31 percent) said China is not an issue.

And in a separate Spring 2016 survey by Pew Research, a majority (55 percent) of Americans held an unfavorable opinion of what more and more Americans see as their largest Asian rival.

This hostile environment is the public affairs reality that American business is facing right now.

Many now see China, one of America's most significant and most promising markets, as a loser for US business. Unfortunately, this belief is fertile ground for politicians supporting protectionist policies and trade halting tariffs. Actions that if successfully passed would force Beijing to respond with retaliatory trade tactics including increased limits stifling full access to the growing Chinese consumer marketplace for American goods and services.

It is time for those that care about a productive and engaged US-China commercial relationship to take these polls seriously and engage Americans in Main Street coffee shops and at picnic tables for backyard BBQs.

For far too long American business has overly relied on a model dependent on high-level government relationships and support from the White House and corresponding federal agencies to manage the US-China relationship.

This model to manage the US-China relationship is exhausted and broken.

US companies exported $135 billion in goods to China in 2017, and it is still the third-largest US goods export market behind Canada and Mexico, our neighbors and NAFTA partners.

Thirty states experienced at least triple-digit goods export growth to China since 2006, and four states saw growth of more than 500 percent over the same period: Alabama, Montana, North Dakota, and South Carolina. Every US state had triple-digit services export growth to China since 2006, 16 states had export growth of more than 400 percent.

At a grassroots level, it is critical to remind Americans US goods and services exported to China come from a wide range of industries. Goods such as transportation equipment, agriculture products, computers and electronics, and chemicals. These exports also sustain logistics jobs in America’s ports and warehouses throughout the country.  Also, US services exports come from the travel, education, and transportation sectors as well as professional business and financial services.

Leaders of American business needs to play a decisive role in reversing this trend and ensuring American goods and services reach the ever-expanding Chinese marketplace. Sitting on the sidelines will be too detrimental for America's economic security. 

-Marc A. Ross

Marc A. Ross is the founder of Caracal Global and specializes in global communications and thought leader management at the intersection of politics, policy, and profits. Working with boardrooms and C-Suite executives from multinational corporations, trade associations, and disruptive startups, Marc helps leaders create compelling communications, focused content, and winning commerce.