By Clay Chandler
May 26, 2018

It’s on! It’s off! It’s on again! Press reports about Donald Trump’s relationship with North Korean dictator Kim Jong-un are starting to resemble tabloid coverage of Justin Bieber and Selena Gomez. All the drama—plus nuclear weapons!

In the latest twist, Trump now says his June 12 summit with Kim in Singapore, which he canceled abruptly via petulant letter, might happen after all. One sign that the dialogue with North Korea is back on track: Kim held an unexpected meeting with South Korean president Moon Jae-in on the north side of the Demilitarized Zone today.

The U.S. president continues to suggest that he doesn’t think he can get a denuclearization agreement from Kim without the cooperation of Chinese president Xi Jinping. So for now, the fact that a North Korea deal remains in play means that Trump’s trade war with China remains “on hold” and Trump remains committed to his promise to Xi to undo Commerce Department sanctions that would put Chinese telecommunications manufacturer ZTE Corp. out of business.

For Trump, the stakes are high. Throughout his presidency he has disregarded traditional distinctions between commerce, diplomatic principle and national security, and suggested that he’ll do whatever it takes to “make America great again.” In his dealings with other nations, everything is negotiable. If that approach proves successful with North Korea, Trump may well collect that Nobel Peace Prize he’s suggested he deserves. The risk is that, in declaring that he’ll “go easy” on China on trade issues in exchange for Xi’s support for a nuclear pact with Kim, he may come away empty-handed on both fronts. Indeed, a flurry of articles and analyses this week argue that Trump has been “played” by Xi and Kim. (Sample some of the premature pontifications here, here, here, here and here.)

Meanwhile Commerce Secretary Wilbur Ross is headed back to Beijing on June 2-4 for further trade talks. Much of the discussion is expected to focus on China’s plans to reduce its trade surplus with the U.S. by ramping up purchases of American agriculture and energy products. But Ross has stressed that he’ll also focus on Chinese industrial policies the U.S. considers to be unfair. Among the most contentious of those policies is Xi’s Made in China 2025 initiative, which doles out state subsidies for semiconductors, robotics, artificial intelligence and other key technologies China deems critical to the continued development of its economy.

Zheng Yongnian, director of the East Asia Institute at the National University of Singapore, argues in an essay published in the Washington Post this week that the White House is foolish to demand modifications to Made in China 2025 because Xi will never accept them. He faults U.S. officials for making the program out to be part of some larger Chinese bid for world domination. But he also criticizes Xi for techno-nationalism—trying wrap the flag around a collection of mundane initiatives aimed at upgrading China’s domestic economy.

Lorand Laskai, a research fellow at the Council on Foreign Relations, suggests Zheng’s take on Made in China downplays Beijing’s true ambitions. Laskai argues the aim of the program “is not so much to join the ranks of hi-tech economies like Germany, the United States, South Korea, and Japan, as much as replace them altogether. Made in China 2025 calls for achieving ‘self-sufficiency’ through technology substitution while becoming a ‘manufacturing superpower’ that dominates the global market in critical high-tech industries. That could be a problem for countries that rely on exporting high-tech products or the global supply chain for high-tech components.”

Implicit in most of the analyses I’ve seen about Made in China—whether by U.S. officials demanding that it is unfair and must be dismantled or Chinese analysts insisting that the program is vital to China’s future and therefore non-negotiable—is the shared assumption that the programs will perform as advertised. I’m not convinced.

I started my journalism career in Tokyo back in the days when many Americans were gripped with fear that industrial policies crafted by technocrats in Japan’s trade and finance ministries would enable the Japanese economy to overtake the United States. We all know how that movie ended. The claim that governments can raise overall productivity over the long run through investments in infrastructure, higher education and basic research makes perfect sense to me. The notion that in advanced sectors like AI and semiconductors, China can magically leapfrog the United States through protectionism, state subsidies, and granting monopolies to state-owned enterprises? Not so much.

Will Trump and Kim really meet in Singapore? Will the U.S.-China trade truce hold? And how stridently will Secretary Ross object to Made in China on his visit to Beijing? As President Trump likes to say: “We’ll see what happens.”

CEO Daily takes a break on Monday in honor of Memorial Day. Enjoy your weekend!

Clay Chandler
@claychandler
clay.chandler@timeinc.com

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