Sub-national Ties Strong Despite China-US Trade Tensions
Photo Credit: AP
By Tridivesh Singh Maini

Sub-national Ties Strong Despite China-US Trade Tensions

Nov. 30, 2018  |     |  0 comments

In spite of the trade war between China and the US, there was a significant presence of US business houses at the China International Import Expo (CIIE) held at Shanghai from November 5-10, 2018. This clearly highlights the complexity and multi-layered relationship between China and the US. Significantly, big US business houses have repeatedly spoken about the serious implications of the trade war between Washington and Beijing for the United States.

Recently for instance, while speaking at Airshow China held in the city of Zhuhai (Southern China), the president of Boeing China, John Bruns expressed the hope that better sense would prevail and dialogue between US and China would revive. While US President Donald Trump and Chinese President Xi Jinping shall be meeting at Argentina between November 30 and December 1, US Treasury Secretary Steve Mnuchin and Chinese Vice Premier Liu He are supposed to have held a telephone conversation on November 9 where they sought to revive the dialogue between both countries. Interestingly in the midst of this trade war between the two countries, US President Donald Trump’s daughter, Ivanka Trump, also his advisor, managed to get preliminary approval from the Chinese government for 16 trademarks (Ivanka received the approvals in October 2018, while she had applied for the same in 2016).

One of the important dimensions of the China-US relationship are the sub-national linkages between Chinese provinces and US states. Links between Chinese and US cities, and Chinese provinces as well as US states, have been an integral component in promoting not just people-to-people ties, but have played a role in giving a fillip to economic relations between both countries. Even during the trade war, sub-national linkages have been important in the context of reducing tensions between both countries. Today there are a large number of sister city and sister province arrangements between US and China. The first sister city arrangements date back to the late 1970s, when such ties were formed between Nanjing and St. Louis, and between Shanghai and San Francisco.

Xi also established close ties with Terry Branstad, who is now the US Ambassador to China and was the Governor of Iowa in 1985. At that time, Xi Jinping was a Communist Party functionary in Hebei Province and happened to lead a delegation to Iowa, a sister state to Hebei. Xi during his visit to the US in 2012 met with Branstad who happened to be the Governor of Iowa. One of the reasons why Branstad was handpicked for the position of US Ambassador to China was his personal rapport with Xi.

In 2011, a China-US Governors-level forum was also begun for the promotion of economic dialogue as well as enhancing people-to-people relations between China and the US. While speaking at the fourth forum held in May 2018 at Chengdu, Branstad underscored the importance of sub-national linkages between both countries: “Local partnerships are the cornerstone of bilateral relations, and we are paving the way for more development in China-US ties.”

US States and their Differences with Trump


Interestingly, in recent times a number of US states have also expressed their differences with some of Trump’s policies. When Trump pulled out of the Paris Climate agreement, the governor of California, Jerry Brown, who was on a visit to China, spoke out against Trump’s decision. Brown, who had signed green energy agreements with Chengdu and Nanjing, stated that this was a “temporary setback” and other stakeholders, including US states, would fill in the void. Also, with regard to the imposition of tariffs, a number of US states have unequivocally criticized Trump’s approach, saying it will have a detrimental impact on US economy. Many of these states have benefitted immensely from their economic ties with China.

US states, including Republican strongholds, which initially may have supported Trump’s imposition of trade tariffs, are beginning to feel the heat.

In October, a delegation from Utah whose biggest trade partner is China, and which politically is a stronghold of the Republicans visited China, and members of the delegation spoke out against the imposition of tariffs. Speaker of Utah’s house Greg Hughes, a Republican, while commenting on links between Utah and China stated: “Despite the trade disagreements between our two governments on a national level, at the subnational level, it is more important than ever to strengthen links between Utah and China.”

In September, an Iowa University report estimated that Iowa farmers would lose over USD 2 billion as a result of the trade war. The biggest losers according to the report would be pork producers, soy bean growers and corn growers.

State Level Delegations at CIIE


As mentioned earlier, at the CIIE there were a number of representatives from US states and cities. What was interesting was that there was significant representation from states which are considered Republican strongholds. This included the Governor of Kentucky, Matt Bevin. Kentucky Fried Chicken is a household name in China, like in many parts of the world. The parent company of KFC, Yum China an American-Chinese fast food restaurant company is headquartered in Shanghai. The company is expanding in China, seeking to capitalize on the expanding middle class not just in big Chinese towns.

There was a large delegation from Washington state home to Microsoft’s head office and the largest facility of Boeing which included officials as well as businessmen. The state of Washington has high stakes in a harmonious economic relationship with China. Exports from Washington to China are estimated at a little less than USD 18 billion, and shipments to China account for over a fifth of the state’s total exports. Representatives from Washington state referred not only to trade linkages between Washington state and China but also to the fact that in a number of counties in the state, a substantial percentage of jobs were linked, directly or indirectly, to trade. A county level official from Washington state aptly summed up the prevailing sentiment: “While at the highest level of government there may be disagreements and tensions now on trade, that doesn’t mean we shouldn’t have dialogue and relationships with our Chinese partners.”

A number of representatives from the US also expressed the sentiment that US businesses were keen to explore opportunities with smaller cities and Chinese provinces which were relatively untapped.

Impact of Tariffs on Chinese Provinces


It is not just US states but also Chinese provinces which have been hit by US tariffs. In Guangdong province, exports have dropped by over 2 percent, and jobs at industrial firms in China’s economic powerhouse were down over 4 percent for the period of January-July 2018 from the previous year. In the city of Zhongshan located in Guangdong province, exports dropped over 20 percent. Zhongshan is a base for manufacturing lighting products. On September 18, the Trump Administration introduced tariffs worth USD 200 billion, and LED products were included in the list.

It remains to be seen whether US states and Chinese provinces can play a role in reducing tensions between both countries. What is clearly evident, is that US states, including Republican strongholds, which initially may have supported Trump’s imposition of trade tariffs, are beginning to feel the heat. It is also interesting to see that in spite of tensions between both countries, US states do not shy away from criticizing the Federal Government. This is unthinkable in the case of bilateral relationships between other countries which share strained ties.

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