What does it Mean a Fair-Trade Deal?

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In order to meet the demand of fair trade from the US, National People’s Congress of China ended last Friday with a ceremonial endorsement of a law that addresses specific issues the foreign business community has long complained about, such as intellectual property protection. However, critics from the US said that such act was correctly heading towards the right direction, but it is still too far from what US wanted.  US wants China to create a business environment where foreign businesses have their ability to compete fairly with Chinese companies.

The Zest of the Demand

This demand is simple, logical and easily understood. But if it is fully given in, there will be a profound impact to China business model. Foreign companies have asserted for a long time that Chinese government has been protecting local business enterprises, that foreign companies felt like it is impossible to compete business in a common level ground.  

Foreign businesses represented by US negotiators currently, want China to open their market freely so that they to come in to China to do business just like the way US allowed foreign companies to run their businesses in the US. This demand looks logical and fair enough since China has grown to be the second largest global economy. China should be mature enough to allow individual China company to handle their own businesses without intervention or support from the mighty government resources.

No matter how logical and fair as it might seem, this expectation could be a major negligence of a cultural and social-economical structural difference between the two nations. From the social-economical perspective, it is a struggle between capitalist and socialist economic system.  

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For the US or Western country, free market means Capitalism

Culturally, just like any other Asian countries, China is basically oriental where people’s value is strongly based on relationship than anything else. When doing any businesses, it is the knowing “who” is in charge matters more than what the law said. Business can never be separated easily from the personal relationship. Giving gift is part of the lifestyle in building relationship for oriental culture. This is the very reason why corruption can never be eradicated efficiently in Asian countries.

Western Culture

On the other hand, Western culture such as the US can be vastly different. Businesses can be officially differentiated from personhood. And the rule of law can govern businesses effectively. It is more rationally than personal for Westerners. Whereas for the Chinese, it is exactly the opposite.

In order to please Western countries such as the US, China has recently started to utter the beautiful slogan of the supremacy of the rule of law. But the implementation is still highly suspected. And everyone in China knows it. It is just a beautiful new social slogan for the ears only.  China can enact a lot of laws favoring foreign businesses, but it can be brushed aside when the time comes for its need to implement. This is exactly what Trump concerned about. It is the implementation, not the signing of fair-trade agreement.   

In fulfilling US demand to open market freely for foreign company, China will be highly in doubt. With such a highly sophisticated society with over 1 billion people jam-packed limited space, China needs to monitor its people activities closely, particularly business dealing.

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Chinese authority takes autocratic ruling style in order to control over its vast number of people.

China does not respect or prioritize personal privacy in order to avoid grass root insurgency to over thrown the communist government. As a sign of highly insecurity, leadership takes strong autocratic ruling style in order to control over its vast number of people including all aspect of their lives.  Protecting and interfering its own business enterprises through various means becomes the primary objective of the government in achieving social stability and security concern.

China Strong Protecting Measures

By demanding China to let go the protective measure for its local business enterprises will be similarly like asking a restructuring of China social economical structure from a Socialist system which China takes pride so much so to export such social system to third world countries, to become a Capitalist system. It is felt by the Chinese leadership like an attempt to strangle China’s economic future to death. Understandably, China accuses US for internal governmental policy interference for that matter of fact.

Though negotiators from both sides have been releasing positive news to the world saying they are making good, positive and satisfying progresses, but they have never released any detail of their talk and direction of their progresses. However, Trump has recently said he still needs three to four weeks’ time to see whether there will be possible trade deal.

At this juncture, whoever knows the complexity and the amount of differences between these two countries, realization of a good fair-trade deal settlement will never be done easily. If ever a resolution is reached after an extended period, there must be some compromises from either side. There can never be an equal compromise from both sides. Because right at the start, US was and is having an upper hand favor in the negotiation table.  

If US compromises, China will emerge to be global economic super power taking over from the US sooner than expected.  If China compromises, US will remain global economic super power longer, until unless China able to depart its economic reliance from the US and found its own way of economic wealth successfully from its ambitious Belt and Road Initiatives program. 

It will still take some more time for negotiators to come to the table. Trump also mentioned that he is not in a hurry to sign the deal. But time is not on his favor neither though as global business sentiment has been largely affected by their trade disputes. 

When the time comes, if there is no deal, we would understand the reason behind and should gladly accept as it is and face the global economic struggle together. When there is a deal, we will see for the detail and access which side has compromised. And we will know by then how the world economic will evolve around from then on. 

Anyhow, for whatever it might be, we will still have time to wait and see. So keep yourself healthy and happy for as long as you shall live.

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The view and opinion expressed are personal views of the author and are subject to change based on market and other conditions.  This write up does not constitute sole advice for investment decision. Investors are advised to do further reading and research to conclude individual decision.

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