Merkel and Clinton Go To China: One Makes Deals, The Other Gets Snubbed

Wolf Richter

Bring home the bacon, or the speck, as it were, was the guiding principle for German Chancellor Angela Merkel when she frolicked in China last week. But her pleas to get the Chinese to buy the crappy bonds of debt-sinner countries in the Eurozone fell on deaf ears. This week, US Secretary of State Hillary Clinton was hobnobbing with the Chinese elite. It turned into a clash fest, and instead of bringing home the bacon, she argued with the Chinese over everything and the South China Sea.

Merkel was accompanied by seven ministers and a delegation of executives from EADS, subsidiaries Airbus and Eurocopter, Volkswagen (which sells nearly a third of its cars in China), Siemens, Thyssen-Krupp, SAP.... Three planes stuffed with Germany’s political and corporate elite. It wasn’t about human rights or Syria or the South China Sea, but about trade.

Days before her visit, it seeped out that Airbus was hoping for a mega contract of 100 planes. The official occasion was Airbus’s joint venture in Tianjin where they celebrated with Premier Wen Jiabao the assembly of the 100th plane—of the 114 planes Airbus sold in China in 2011, 36 had been assembled there. During the ten years Wen has been Premier, German exports to China have quintupled, and Chinese exports to Germany have quadrupled.

Hopes of mega contracts can turn into disappointments. In early 2011, before the Chinese delegation came to Berlin, Airbus was hoping for an order of 150 planes. Then an advance agreement called for 100 planes. But in June that year, when the Chinese arrived in Berlin, they only ordered 88 planes. Punishment: the EU had included aviation in the EU Emissions Trading Scheme (ETS) to deal with “climate change,” a policy China, along with the US and other countries, considered a harebrained idea.

This time, Merkel “secured” an order for only 50 planes. Tough times, even in China. Contracts were signed in the presence of Merkel and Wen. According to “informed circles,” numerous other deals were signed as well.

Smiles and friendly gestures abounded. Merkel and Wen strolled through the Imperial Palace together. There was talk on the German side of a “special relationship,” and on the Chinese side of “friendship.” Wen hinted that China would continue to “invest in the European Union”—but rather than buying bonds of Eurozone debt-sinner countries, which Merkel had been begging him to do, China has gone on a corporate shopping spree in Germany ... where it’s least needed. As an aside, the discussions also touched upon Syria and “questions of human rights.”

Germany’s interest is of mercantile nature. China’s focus is on strategy, part of which is to realign the world away from the hegemony of the US. It sees Germany as the leader of the Eurozone in a multi-polar world. And China needs friends. Its relationship with the US is thorny, with Japan on knife’s edge, and with countries around the South China See, which China claims as its own, it’s outright confrontational. Even in Africa, where China is investing heavily in resources, such as oil, tensions are growing [read.... The New Cold War, by Marin Katusa].

No such problems exist with Germany. But Germans have valuable technologies that China is appropriating bit by bit. It’s all about trade, and its murky give and take. A language both countries speak well. Not that there aren’t a host of tricky issues. But Merkel is flexible; she’d try to intervene, she said, with the EU Commission to scale down a trade war in solar panels which the Chinese are accused of dumping on European soil.

By contrast, Clinton’s visit to China, after a barrage of hostile articles in the Chinese press, turned into a fiasco. She argued with the Chinese over a laundry list of intractable issues. No compromise appeared possible; China simply refused to go along with US positions and initiatives. There was Syria: China supports the regime of President Bashar al-Assad, has vetoed three UN Security Council resolutions to stop the violence, and isn’t about to change its mind. There were other flashpoints, such as Iran, North Korea, and the territorial disputes in the South China Sea.

And instead of selling Boeings, software, and nuclear power plants, Clinton argued with hardened Chinese positions. They didn’t even try to put lipstick on their differences. It was so pointless that Vice President Xi Jinping, possibly the next leader of China, cancelled his meeting with her.

The visits by Merkel and Clinton are symptomatic of two different approaches. American concerns are valid, and should be high on the priority list. But so should be the economy, and it would benefit from more exports to China—just as millions of people are asking, “what can the next administration do to help me get a job?” So, Mrs. Clinton, where is the bacon?

Trade wars aren’t just with China: Argentina’s government goes through great lengths to use self-destructive policies to keep the country glued together a while longer. Read.... Argentina: When Life Gives You Lemons, Cry To The WTO, by stilettos-on-the-ground economist Bianca Fernet.