Protectionist racket: trade-war rhetoric

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Hello and welcome to the Intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. This weekend, the world's airline executives meet in South Korea. The biggest topic, the complete grounding of Boeing's 737 Max planes, which have been involved in two fatal crashes. The aerospace giant may well recover, but the tragedies could force a reshuffle in how air safety is regulated. And we pay a visit to Venice's Biennale. The exhibition engulfs the city every two years and is a particularly pointed reflection of what artists make of the world. No surprise, then, that notions of immigration and climate change figure in strongly this. But first, Tomorrow, retaliatory tariffs imposed by China on $60 billion worth of American goods will take effect. The latest set of American tariffs imposed three weeks ago will start to bite, too, as ships carrying Chinese goods arrive in America's ports. Meanwhile, President Donald Trump has opened up a new theater of trade war, this time on the southern border. Last night, he tweeted that America would start ratcheting up tariffs on Mexican goods from 5% to as high as 25% until what he calls the illegal immigration problem is remedied. China's Communist Party leaders and its people have already faced a year's worth of tariff ups and downs, and the effects of that are starting to become visible.

Well, the current state of play is that talks are at an impasse. Things are not looking great. If anything, they're looking worse by the week.

Simon Rabinovich is our Asia Economics editor, based in Shanghai.

China will be implementing the next round of tariffs starting tomorrow. And in the meantime, both sides look to be escalating the different kinds of weapons they're using in the trade war. America is going hard against Chinese tech champions, especially Huawei. China's talking about restricting certain kinds of exports to America. And rhetoric from both sides, especially from the Chinese side, I'd say, has really been hardening in recent days.

So in what way have attitudes hardened? How has that changed?

In the past few weeks, we've seen an increasingly concerted effort by the state media propaganda authorities to start to build up much more national support for China as it goes through the trade war. Every evening on the mainstay broadcaster, they've started playing movies about the Korean War, the war where Chinese troops fought against Americans in the 1950s, which China sees as a great victory, although it really wasn't. State media has been running editorials about the trade trade war day in, day out. Xi Jinping has been talking about the idea that this is the beginning of a new long march for the population. And you've seen the beginning of sort of popular outpouring of nationalism as well. Some people wrote a song about the trade war that went viral, And lots and lots of comments on social media media about, you know, how America is trying to hold China back. And this is all stuff that's really come to the surface just in the last three weeks since the. Since the talks broke down. So although the trade war has, you know, being fought on and off for the past year, it's really only in the last three weeks that all this has come, has come forward.

And so there's clearly a lot of interest then, you know, for instance, online to see that kind of part of the trade war play out. What's the general mood among. Amongst the Chinese public?

It's very difficult to generalize. About 1.4 billion people. Depending on where you are and who you speak to, you get very different views. Despite the fact that you've had the Korean War movies, you have that steady drumbeat of editorials and state media. It's not rabid nationalism, far from it. There have been episodes in the last two decades where China has been in diplomatic disputes with other countries, including America, where you've had protests in the streets or outside of embassies. So far, there's not been anything like that. That although there's murmurings about the. The possibility of consumer boycotts, Starbucks, McDonald's, Microsoft, Apple, they've not yet been targeted. So it's still restrained. And I think that's partly because it's all come quite suddenly. It's really, you know, for. For the past year, the belief was that things were kind of moving in the right direction. It's only in the last few weeks that it's clear that they aren't in terms of the trade talks with America. And then also the government has a big hand in massaging the kind of message that gets con to the population and controlling how people react to it. And so far, they've on the one hand, been beginning to fire up the nationalism, but on the other hand, trying to contain it and not letting it burn into a true wild rage.

So why haven't things gotten to that level yet? Why haven't there been these boycotts and protests?

I think the party is in a tricky position because clearly people are now aware that America has been driving a very hard bargain and asking for things that the Chinese media themselves have said are unacceptable. So they have to be looking to push back. But at the same time, they don't want to get to a point where you actually have a rupture of the relationship with America. They want to be able to have pathways to get back into talks and hopefully at some point, actually have a resolution to the trade war. They're really, really reluctant to push the nationalism beyond the breaking point, if you.

Will, from your reading there. How does all of this compare with the economic nationalism and the rhetoric coming from the American side?

I think the positions of the two countries are fundamentally different in that the trade war, you can see from the American perspective, has been basically proactive in the sense that they have a wide variety of concerns about China, about its economic actions, about its security posture, its trajectory. And so lots of different parts of the American establishment are wanting to prosecute the trade war because they see this as an important part of their strategy. For China, it's been much more reactive. They'd rather not have the trade war, and it's been thrust upon them. And so they've really got themselves into much more of a defensive crouch. But the one caveat to that is that it's, you know, in terms of it being the American strategy to make things difficult for China. It's not looking as coherent as. As a lot of people in America might want it to be, and that a lot of people would like it to be a fight between China and America. But instead, you now have President Trump, who of course, has on and off been picking fights with other allies and close trading partners, you know, once again yesterday, talking about putting tariffs on Mexican imports. And so the. The American side is actually getting a little bit messy in all this. And, and for China, that welcome news for them, because if it was a concentrated, coherent, coordinated American effort, all directed against China, then they'd really be in a difficult spot. But when you see Trump broadening the attacks, taking on simultaneously Mexico and potentially Canada and the European Union as well, that might actually spell some relief for China.

So, Simon what's your read on how all of this plays into where the trade war is going with hardening rhetoric and greater threats and more tariffs? All the. Is there any light at the end of the tunnel here?

Well, it still looks like a pretty long and gloomy tunnel. You know, if anything, I think we're going to begin to see not just the rhetoric, you know, escalating, but also the economic costs from the trade war going up. This is the moment when the tariffs that America announced three weeks ago are really going to begin to hit. And so costs in America of China imported goods are going to rise. That's something that consumers will notice more and more the more that goods are affected by tariffs. China is beginning to see see, you know, what economists are describing as a double dip, another economic slowdown which has clearly been something which is a result of the renewal, the escalation of the trade war. So all that is looking pretty bad. And there's no date for the resumption of talks. They really are at an impasse right now. The one maybe tiny flicker of light at the end of this tunnel is that at the end of June, there'll be a meeting of the G20 in Japan. And there's been talk that Donald Trump and Xi Jinping, the China president, might meet at the G20, maybe on the sidelines, and that might be the catalyst for getting the trade talks back started again. That said, there's also speculation from people that I'm speaking to in China that given the mercurial nature of Donald Trump and his unpredictability, that the Chinese side won't want to go ahead with a meeting unless they get something solid, a commitment in writing in advance before it takes place. So I think as we get closer to the G20, the speculation won't be is the trade war coming to an end? But simply are we at a point where talks are going to be able to resume again? So it still seems like it's a long and bumpy road ahead of us.

Simon, thank you very much for joining us.

Thank you, Jason.

The world's largest aerospace company, Boeing, is still struggling in the aftermath of two crashes that killed more than 300 people all over the world. Boeing's 737 Max planes are still grounded as investigations continue into the cause of the accidents. Tomorrow, global airline executives are meeting in Seoul at a gathering of the International Air Transport association, or iata. A key concern for the group is uncertainty around when regulators will allow the 737 Max to fly again.

Boeing is hoping that it will be ungrounded relatively soon.

Charles Reade writes about transport for the Economist.

Earlier this month, it said that it completed testing an update to the software, which is thought to have contributed to both crashes. And earlier this month, there was a meeting of international regulators in Dallas assessing Boeing's application to unground the planes. But there's lots of doubt whether that deadline will be met.

But it's not just what American regulators do or want to do. It's a matter also of what other international regulators do.

Exactly. So America's regulator for the aviation and aerospace industries has lost a lot of credibility since it was basically the last international regulator in the world to ground these planes when it became clear after the second crash that there might be something wrong with it as a result. Europeans and Canadians have said that they want to do their own tests before they allow this plane to fly again. And that does a lot to damage the reputation of the faa. It used to be that these other regulators around the world would say, if the FAA says it's safe to fly, we'll say it's safe to fly under reciprocal arrangements, which have been in place for decades and decades and decades. But this time is now different. Certainly in Europe and Canada, they want to do the test themselves. They don't want to accept the FAA's word on this anymore.

Do you think that change has sort of long term effects on how these things happen and how other planes might be grounded in future responses to future accidents?

Well, Europe and Canada have said that they now want to do more of their own tests themselves on aircraft made and built in America. The FAA itself is very keen on maintaining the existing reciprocal arrangements where other countries just accept the FAA's word for it that their planes are safe. And therefore this is likely to see a period of the FAA becoming tougher in its own tests in America in order to prove its competence as a safety regulator to other countries and regions of the world.

And what about Boeing themselves? What have they been doing since the crashes?

Well, they've been busy producing this update and testing this update, hundreds on hundreds and hundreds of test flights. However, their response to this crisis has been regarded by many analysts and commentators as rather ham fisted. In the weeks after the crash, they only put out a few very tightly worded, very short press statements. Initially, they didn't give a full apology. They got accused of forgetting to mention in many of their press statements about the software called mcas, which is possibly linked to both the recent crashes. However, in the last week, they have begun to change their tone on this Boeing's chief executive, Delis Muhlenberg, offered a personal apology this week. He said, I do personally apologise to the families. And he mentioned the software which is linked to the crashes. However, whether that is enough for consumers to forgive Boeing, whether that's enough for airlines to forgive Boeing, we'll have to see.

Well, what about the families of the dead and their forgiveness?

Well, one of the reasons why Boeing was probably type lipped about the two crashes is that it's almost inevitable in the American legal system that it will be sued by most, if not virtually all of the families of the 346 people who died. And American law on this is very punitive and therefore Boeing was probably quite careful to not admit full liability because of the risk of meaning it's less easy to defend its position in these legal cases.

And I suspect that there has been a large knock on effect to the industry more generally when the IATA meets. This will be, I imagine, quite a big topic of conversation.

Indeed it is a big topic of conversation. And things are not necessarily looking that good around the world for the aviation industry. And these planes being grounded is adding further pressure, particularly because airlines are having to lease other planes in order to do the flights that their 737 Max fleets would otherwise do.

And what about the sort of the long term fortunes of Boeing? I mean, it's functionally a duopoly with Airbus. Is this bad news, you think, in the long run for Boeing?

Well, Boeing is in quite a protected position. It only has one major competitor, Airbus. The only other aerospace company which has got anywhere near producing a rival to its smaller jets is Sukhoi. Yet Sukhoi's reputation has been severely damaged by a crash earlier this month in Moscow airport of its relatively new superjet aircraft. However, this doesn't mean that this is going to be entirely pain free for Boeing because of overcapacity. Around the world, because growth in the aviation industry is slowing down, many airlines and air leasing companies are thinking about trimming their orders. And it is notable that in the past consumers wouldn't care whatsoever about what sort of planes they fly. Now many consumers want to avoid flying on 737 maximum. And one flight booking website called Kayak has even added a function where you can tick a box to say that you want to avoid any flights on 737 Maxs. So I don't think this will go away. But the one saving grace Boeing does have is the company's just too big to fail in America. It's one of the American military's biggest contractors. And the US government needs this company to keep going in order to produce planes and other equipment to defend itself and to fight wars abroad. So this is by no means the end of Boeing, but it does do the company a lot of reputational damage.

Charles, thanks very much for your time.

Thank you.

Venice is always a crowded city, but every two years it gets even more busy as artists and art lovers flock in to see the Biennale.

So the Venice Biennale is the biggest art exhibition of the season.

Fiama Tarocco is the Economist's culture correspondent.

It brings together hundreds of artists, hundreds of curators, and thousand upon thousands of visitors. It's where people go to find what artists think about where the world is today. And the things that artists are really concerned about are climate change, inevitably, economic inequality, of course, racial inequality, but also a general sort of wish to upend the order in which we see things. That was what was so interesting about it.

And was there anything that sort of took on those questions quite directly or more completely?

Well, one of the most interesting projects, I think, was by the British ceramicist and artist Edmond Duval. He built a library made of porcelain. It was first covered in gold leaf, and then it's covered with porcelain slip, which is a sort of slurry cover. And just before it dries, he writes with a stick, in his own handwriting, the names of the libraries that through history, have been destroyed. And it's really about crossing boundaries, about translation, about dialogue, about libraries and books that are destroyed, but then find a new life of their own.

And what do you think motivated him to create it?

So I went to the opening, which was in the Ateneo Veneto, which is a great sort of debating hall with a painted ceiling. And he was very eloquent about why he had made this piece.

So when I was thinking about what I want to do, you know, particularly at this moment, which is so desperate, so painful, about putting up barriers, policing.

Frontiers.

I wanted to make a new library. There's never a bad time to make a new library, but now's a blood to make a new library.

Edmund Wald's great grandparents were Jewish. They lived in Vienna before the Second World War. And in 1938, his great grandfather's library was invaded by the Nazis and carted away. It has never been retrieved.

So at the heart of.

My family.

History was a lost life.

So this for him is a life's work. It's something that he's incredibly passionate about. It's an incredibly important marker of people all over the world. Who have suffered to make their writing come alive, to make their writing available for future generations.

Any library is this strange, beautiful tension between being completely alone and being surrounded by voices. So this is going to be a place where you can sit and read, but also you can pick up all kinds of people and voices and be surrounded by conversation.

And what about other art at the Biennale that responds to an increasingly challenging world?

So the Biennale is really divided into two main things. There are national pavilions, but there's also a special international exhibition which this year was called May you live in interesting times. It's curated by one person this time, a curator called Ralph Rugoff, who's the director of the Haywood Gallery in London. And he really went about it in a very interesting way. He had much fewer artists than usual, and he was looking for people who wouldn't just note the interesting times that we live in, but would force you to think about how to living in interesting times. So here's an Indian artist called Shilpa Gupta who done a huge sound installation of the poems of writers who have been imprisoned for their words. And you enter this room and there are all these microphones that have been remade into speakers, and out of them, when you lean in very, very close, you hear these different poems being whispered. It was incredibly affecting. He had a very, very powerful political piece by two Chinese artists, Sanyuan and Peng Yu, which is an enormous sort of mechanical arm with a kind of windscreen wiper cleaner thing on the end of it, and it stretches out and then it goes down and it cleans the floor, and it stretches out again and it goes down and it cleans the floor. And then you look down and you see what it's cleaning is. Blood. Enormous quantities of blood. It was absolutely terrifying.

And you keep using the word affecting. I mean, if the goal here is to take up these difficult topics, to challenge, to upend the status quo, does it work?

Well, you know, James Baldwin always said artists are here to disturb the peace, and that's what these artists are doing. I mean, the work that they produce isn't just intellectually stimulating. It has enormous emotional impact. That's when art really works, and it affects the heart as much as the mind.

Fimeta, thank you very much for your time.

Thank you, Jason.

That's all for this episode of the Intelligence. If you like us, give us a rating on Apple Podcasts and you can subscribe to the economist@exterator.com radio offer 12 issues for $12 or 12 pounds. See you back here on Monday.