Boycott China and avoid a trade war

Trump: Has alternative to trade war

The US and China are locked in negotiations both sides say they hope will avert a painful trade war.

The Trump administration has threatened to impose a series of tariffs unless China agrees to limit what he calls “its illicit trade practices.” The Chinese government, for its part, appears unwilling to accede to his demands and has offered some retaliatory trade sanctions of its own.

The ostensible reason President Donald Trump is willing to risk a trade war is because he argues – justifiably – that U.S. companies have been taken advantage of by their Chinese counterparts for decades, required to hand over lucrative intellectual property in exchange for access to China’s growing middle class.

Tariffs, however, aren’t the answer to that problem, as my research in international economics and the design of international environmental agreements shows. Rather, if Trump really wants to achieve his stated aims, he should put American businesses on the front lines of his strategy and call for a boycott of China.

Doing business in China
If that sounds preposterous, consider the origins of this escalating conflict.

Its seeds can be traced back to the opening up of the Chinese economy as a result of reforms introduced by Deng Xiaoping in 1978 and the zeal of American – and more generally Western – companies in taking full advantage of new business opportunities in this gigantic market.

However, in many instances in the past four decades, the presence of mandatory technology transfer policies and foreign ownership restrictions have meant that market access has been granted only to Western firms willing to play ball. In addition, there is now considerable evidence that Chinese businesses, often with the participation of government officials, have been conducting cyberattacks on American companies to steal their intellectual property.

The Trump administration estimated that this theft of American intellectual property costs US$225 billion to $600 billion annually.

And since companies are already on the front lines of this fight, with the most to lose, it makes sense that they’re the ones to lead the counter attack.

A boycott by firms
So how would a boycott work? Importantly, the U.S. couldn’t do it alone.

American companies, like everyone else, want to make money in the one billion person market that is China and hence it would not make sense for them to unilaterally withdraw. By doing so, they would be giving up valuable market share to their rivals. For example, if a top U.S. luxury car seller such as Cadillac were to unilaterally boycott the Chinese market, then it would be giving up valuable market share to other rivals.

The key point is that many of those rivals are in Europe and have also been used and abused by Chinese companies and hence have a similar interest in finding a way to prevent them from stealing any more of their intellectual property.

If all Western luxury car makers jointly boycotted China, then this would be equivalent to acting as if a Chinese market didn’t exist. Clearly, profits would take a hit in the short run, but the long-term objective of ensuring that Western companies do business on a level playing field would be met.

Cars and chips
Also, a boycott wouldn’t have to involve more than a few industries to be effective. Specifically, the focus would need to be on industries that China, through its Made in China 2025 scheme, would like to dominate. Two strong examples are cars and computer chips.

China has been trying to develop a domestic automobile industry since the early 1980s, an effort that has largely failed. But now, under the Made in China initiative, it is seeking to become a leader in electric vehicles.

However, it needs Western automakers to continue to operate in China and conduct research on battery technology and on electric vehicles in order to achieve this goal.

Thus if Western car companies and particularly those actively conducting research in battery technology jointly agreed to stop competing in China, that would send a strong message to Beijing. Either China could try to go it alone with no Western collaboration or it’ll have to realize that systematically strong-arming companies will not help it attain its goals.

A second example of an industry in which a Western boycott would be effective is microprocessor chips. This is because China is still significantly dependent on imports despite operating a few notable supercomputers that use solely home-made chips. Almost 90 percent of chips used in China are either imported or produced domestically by foreign companies, so a boycott would force the government to sit up and take notice.

For a boycott of this sort to work, it is important that American officials not attempt to go it alone, making it seem like a purely China versus U.S. spat. Successful boycotts follow a “strength in numbers” logic.

And this is where the Trump administration enters the fray. It could use its diplomatic muscle to enlist the governments of like-minded allies – particularly the European Union – to get their companies in key industries to join the American-led boycott. This could be part of a wider effort to credibly and collaboratively communicate to China that it needs to play fairly. As New York Times columnist Thomas Friedman recently noted, the “last thing Beijing wants is a U.S.-E.U. united front demanding it play fair.”

Not only would this selective boycott make it harder for the Chinese government to achieve its Made in China 2025 dreams, it would also anger consumers, who are increasingly hungry for Western goods – something the leadership is well aware of.

And in contrast to tariffs, such a campaign would likely have no adverse impact on American consumers.

One important caveat: This course of action, like imposing tariffs, would probably do little to reduce the threat of intellectual property theft by Chinese hackers.


The Chinese government is hoping to make more high-tech products in China by 2025.

Would a boycott work?
When we think of a boycott, we usually imagine consumers avoiding a particular product. Such boycotts have had varying levels of success.

A corporate boycott of a nation is much less common. To the best of my knowledge, a corporate boycott of a nation along the lines suggested here has not been attempted before. Historically, boycotts against a nation have typically been designed to persuade consumers to not purchase products from a nation, such as the anti-apartheid movement or the more controversial boycott of Israel.

What I am proposing is a country boycott by companies located in multiple nations and hence it is not possible to directly gauge the likelihood of success based on past actions

That being said, vigorous diplomacy by like-minded nations sharing a common objective has yielded positive outcomes in as diverse and difficult cases as the 1987 Montreal protocol to reduce ozone-depleting substances and the 2015 Iran nuclear deal. Similarly, the Organization of Petroleum Exporting Countries cartel has demonstrated how businesses across nations can take joint action to achieve a common objective, with mixed success.

Might China retaliate? Perhaps, but the costs would be high if the U.S. were to successfully organize a boycott involving companies in several dozen countries. More likely, it would find accommodation a much more palatable option in the face of a united front.

The ConversationThe recent tariffs aside, Western businesses and nations need to stop treating China with kid gloves, which I believe they have been doing for years. A boycott would be a good start – and wouldn’t risk a trade war.

Amitrajeet Batabyal is the Arthur J. Gosnell Professor of Economics at the Rochester Institute of Technology

This article was originally published on The Conversation


10 · Got a question about this story? Leave it in Comments & Questions below.

This article is tagged with the following keywords. Find out more about MyNBR Tags

Post Comment

10 Comments & Questions

Commenter icon key: Subscriber Verified

It is far too late for most of these suggestions.
Serious damage has been done all over the world by China and it must be stopped.
There are two separate problems here.
As China has developed its markets it has also spend vast amounts on its war machine even to the extend of creating massive islands to act as war support.
2. they have taken valued employment and independence away from individual countries to the point they now rely on China for most supplies and without it their own countries sink with no manufacturing and no employment.
China controls the tap and turns it on and off to suit its own ends.
Of course there should trade with China but get it into balance before it is far too late.
From that point of view Trump is on to it.

Reply
Share
  • 0
  • 0

Wow! What you have just written sounds like US in its superpower formation years!

So it’s ok for the US to do that but not ok for other countries to follow a similar strategy?

Don’t forget that the US used its military might to kill babies and innocent civilians in Vietnam (eg. My Lai) so the moral imperative is not with the West to be preaching to anyone.

Reply
Share
  • 0
  • 0

Chairman Mao and China murdered and starved more innocent people than the US ever has, or will.

China & Mao also backed & funded the communists in Vietnam that murdered babies and innocent civilians, so the East are in no position to point the finger at the West - China helped start the Vietnam and Korean wars.

Reply
Share
  • 0
  • 0

Wow! You mean like the Western powers enslaving millions of blacks, slaughtering many millions in the colonies when they rose up to claim their independence and the US dropping more bombs in Vietnam than the whole of WW2?

Reply
Share
  • 0
  • 0

Chairman Mao - biggest mass murderer in history.

The Chinese under Mao were a whole nation enslaved, just like their proteges the Vietnamese, Cambodians, and North Koreans - entire countries.

Now Mr. Chin Dynasty, if you despise the West so much why don't you go back to China and make disparaging remarks about their govt and system - see how you get on. You'll obviously be much more at home, and you might even get over the commies losing the cold war one day.

Reply
Share
  • 0
  • 0

Therein lies the difference, my dear Mr 'Go Back To The Country You Crawl Out Of "Magoo.

The Chinese people recognise Mao for the mass murderer and despot that he was. They acknowledge however that China will not be what it is in the last 20 years without Mao unifying the country and allowing the Chinese people to stand tall - hardship or no hardship.

China has already won the trade war - the West is in retreat on all fronts. Now in typical fashion, the West wants China to go back and be the 'sick' man of Asia.

Well, Mr Magoo - suggest you take a deep breath and suck it up!

Reply
Share
  • 0
  • 0

China is what Japan was in the 80's and will become what Japan is now. As a country's wealth rises so do demands for higher wages & higher standards of living, and China will have to remove subsidies on it's electricity at some stage as well. There are plenty of basket case countries paying slave wages capable of undercutting China's manufacturing workforce, e.g. India, Africa, Vietnam, North Korea, Venezuela, etc.

Why do you think Chinese people such as my wife emigrate to western countries such as NZ? Higher wages. China's current financial boom won't last forever just like Japan's didn't. The slave labour manufacturing foundation that their economy is based on will at some stage just be cheaper elsewhere, and China isn't resource rich so they don't have much else to offer.

Reply
Share
  • 0
  • 0

Why are 650,000 New Zealanders (15% of NZ's population) living in Australia? Like the China Chinese you mention or the Irish in their time, they are/were looking for a better life. To search for greener pastures, better opportunities and better salaries is a basic human trait.

China stands tall today and while there are many missteps along the way, it is one of the great achievements of all time for the leadership of China (post Mao's death) to lift 650 million Chinese out of grinding poverty, and in the process provide the world with affordable and plentiful consumer goods.

Will China repeat the Japanese mistakes? I think not. I was there when the West pressured Japan to appreciate the yen by a staggering 100% in the 1980s. The rest as they say, is history.

The West, especially the US, thinks it must rank supreme at all time. History shows that when the West reigned supreme, having stolen and copied from the other Great civilisations before them, the West practiced particularly cruel and dehumanizing policies against other races and other countries.

Let's be careful - lest we forget.

Reply
Share
  • 0
  • 0

Stop this bull.... and return to the project at hand.
All your comments thus far could also be leveled at Germany and a host of other countries who thought they had the power and the skill.
With the exception of China so far, they have all failed.
So put your attention on where we are right now and decide if we have learnt anything.

Reply
Share
  • 0
  • 0

China finds itself in this position i.e., being so far behind the 8-ball with respect to the West that it isn't even funny, that it now has to steal and cheat in a desperate effort to try and catch up.

China put itself in this backward position from the very serious errors in judgment and thinking it did from the 1940s through to the end of the 1970s. Namely, it's adoption of communism and the profound failings of its hero and great helmsmen, Mao. No one made China do this. This was entirely of its own choosing and it can't fall back on specious excuse for trying to put the blame on the West and its century of humiliation as it so often does to try and cover its shortcomings and to shift blame. Oh no.

My concern is that under the present leadership China is once again falling into these serious missteps and errors in thinking that has done it so much harm in the past. For me the question is simple. Is the new China built on a foundation of solid rock or have they once again built their house on the shifting unstable sands?

Reply
Share
  • 1
  • 0

Post New comment or question

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
CAPTCHA
This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.