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Will the US-China Trade War Change Anything?

July 23, 2019

Will the US-China Trade War Change Anything?

ThunderTalk Panel of Experts on China Trade and Development Agree that China is Playing a Long Game

U.S.-China trade talks may have resumed, but a panel of China business experts brought together for this month’s ThunderTalk sponsored by Global Chamber were far from enthusiastic about any imminent progress. 

The three-member panel of experts on China trade and business growth spoke at Thunderbird as part of the ASU ThunderTalk Summer Series. 

An animated hour-long discussion includedthe importance of cultural understanding, tips on keeping in mind the short and long-term game while working with China; the value of language in truly understanding negotiations, and strategies for growth in Asia vis a vis sending expat managers or hiring local teams. And, of course, they tackled the current U.S.-China Trade Wars. 

Dr. Jonas Gamso, assistant professor of international trade and global studies at Arizona State University's Thunderbird School of Global Management, seemed to sum up a consensus in the room when he said, “My take on this is …  Dig in ‘cause its going to keep being like this for a while.” 

“ ‘My take on China Trade Wars …  Dig in ‘cause its going to keep being like this for a while.’ ~ Dr. Jonas Gamso”– Click to tweet

Who’s Who on the Panel

An enthusiastic audience gathered for the discussion, which was also broadcast to dozens of Tbird students and alumni and Global Chamber members. Global Chamber is a networking community of CEOs, executives and leaders in 525 metro regions around the world.

The panel included:  

  • Doug Bruhnke, CEO/founder of Global Chamber and an international marketer, cross-border growth expert, consultant, speaker, collaborator and connector. Doug is a two-time expat with Dupont in Tokyo and Singapore.
  • Dr. Jonas Gamso, associate professor and a senior sustainability scholar in the Julie Ann Wrigley Global Institute of Sustainability.  Dr. Gamso teaches and conducts research on issues of global political economy, international development, and quantitative methods. His primary research focus is on trade between developing countries.
  • Todd Cornell,founder and managing director of Cultur668, a cross-cultural consulting and training firm focused on business, culture and etiquette in China. Over a period of 20 years living, working, and studying in China, Todd achieved a profound understanding of Chinese culture in a way that helps U.S. businesses succeed there. He speaks native-fluent Mandarin Chinese. 

  • Anne Dellos,a business launch and business expansion professional with extensive strategic marketing, partnership development and lead generation expertise. Anne has consulted for companies launching or expanding their business in Asia since 2007, first from her 19-year base in Singapore, and now from Phoenix.  Annehas a Global MBA from Thunderbird/ASU.

Identifying Winners and Losers

Dr. Gamso explained that he doesn’t expect improvement in the trade talks soon because strategies employed by the two countries are dependent on this fact: The U.S. doesn’t depend on trade with China as much as China depends on trade with the U.S. As a result, trade patterns are changing and new countries are coming into play.

To some degree, China is fighting back by shifting its buying patterns. The U.S. is able to use a broad stroke in levying tariffs on Chinese goods. But China has had to be more strategic, putting tariffs on sectors where U.S. companies are reliant on China – like agriculture. “China used to buy a lot of soybeans from the United States. Now it’s increasingly getting them from Brazil and Argentina,” Dr. Gamso said.

“ ‘It’s possible to move manufacturing to another country, but a company will run into different challenges than the challenges in China right now.’ ~ Todd Cornell”– Click to tweet

Manufacturers are moving out of China where possible, providing opportunities in other Asian countries at least in the short term. Dr. Gamso said, “Vietnam’s exports to the United States increased 30 percent since November 2018. Foreign investment to Vietnam increased 50 percent over that same period.”

Yet, Todd Cornell pointed out that manufacturing capabilities in new locations may not be as sophisticated as in China. “A lot of American companies that were doing manufacturing in China are looking to take their manufacturing outside of China to Vietnam, Malaysia, or the Philippines. These other countries don’t have the infrastructure, ability, or trained workforce to be able to get the jobs done.”

Cornell said it’s possible to move manufacturing to another country, but a company will run into different challenges than the challenges in China right now. “Either way there’s going to be challenges.” 

Turning Opportunities Into Long-term Relationships

Other areas in Asia may be opening up, but the Chinese market will continue to be a very good market for small companies and technology companies, Anne Dellos said. There are ways to create a positive business environment, to develop joint ventures with Chinese companies, but you can’t do it by yourself as an American company. 

Cornell agreed. “So much of this for me goes back to culture. American’s are like little puppy dogs. We go somewhere and we’re wagging our tail and we want to lick everybody. We are very open to possibilities but also to problems.” 

“The Chinese are extremely vigilant,” Cornell said. The Chinese believe that you should not make yourself available to be taken advantage of but you should also not take advantage of others. “That goes back to yin yang. There’s the positive and there’s the negative,” he said. “There are respectable people and there are scoundrels. How do Americans figure that out? That’s the challenge.” 

“ ‘Americans are like little puppy dogs. We go somewhere and we’re wagging our tail and we want to lick everybody. We are very open to possibilities but also to problems.’ ~ Todd Cornell”– Click to tweet

The Chinese play a long game. We need to learn how to do that, he said. 

“Going back to the trade war situation,” Cornell said, “the Chinese can wait. The Chinese will say, ‘If I can’t get revenge, I’ll have my grandchildren do it for me.’ It’s a whole different world. And if we’re approaching it with our basic, simple mindset, then we’re opening ourselves up for all sorts of potential problems.” 

Dellos stressed that these cultural differences are exactly why it’s important to find the right people to help introduce American companies to China and Southeast Asia. She urges companies not to shy away because of trade disputes. “From a business potential picture, the tariffs and trade restrictions won’t change strategies and in fact they may provide opportunities.”  

An Audience of Experts

Many members of the audience also had impressive global trade credentials. They included Melissa Sanderson, Vice President, International Affairs Freeport McMoRan Inc.; Eduardo González Díaz de León, from the Phoenix office of ProMexico, the Arizona Commerce Authority’s Mexican counterpart; and Barry Wong, a Tbird grad and executive director of Arizona Governor’s Office of Equal Opportunity. 

In fact, a question about the impact of restrictions on China’s telecom giant Huaweidrew an answer from audience memberMary B. Teagarden, Thunderbird professor of global strategy and associate dean of faculty and administration.

“I think Huawei is going to be successful with its strategy,” Dr. Teagarden said. “It’s ‘capture the villages to take the cities’ strategy. They are going to be highly successful throughout the emerging economy – Africa, Latin America, Southeast Asia. There’s been an animosity created about Huawei that’s just really fake.” 

Summing Up: Who Blinks First

Before the session wrapped up, Dr. Gamso again summed up the feelings of the panel. Tariffs, he said, don’t work in terms of increasing U.S. economic growth, but in theory they could work by putting pressure on the Chinese government.

“This might all be good for China in the long run,” he pointed out. “People in China look at the U.S. as bullying China right now. The trade war might actually increase support for the Chinese government. And it might force them to change policies in a way that makes the economy less dependent on trade, less dependent on exporting and economic engagement with the U.S.”

“So in the long run,” Dr. Gamso said, “not only might the tariffs not work (for the U.S.), but they might be totally counterproductive.” 

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