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"Zero-Sum Games" In U.S.-China Trade

July 20, 2018

A few months ago, China's President Xi said:

 

"We must refrain from seeking dominance and reject the zero-sum game, we must refrain from 'beggar thy neighbor' and reject power politics or hegemony while the strong bully the weak."

 

The Zero-Sum Game he's talking about is in trade. China and the U.S. have placed or threatened tariffs on each other's goods. Some are calling that a "trade war."

 

As noted before, trade is a Positive-Sum Game. Both sides are better off from trade, or it doesn't happen. No one is forcing the other side to trade. 

 

But embedded in trade is a Zero-Sum Game over who gets what from the trade. That Zero-Sum game can be over prices. It can be over quantity. Or, at the international level, the Zero-Sum Game can be over the rules of the game. 

 

It's what we call a "Boss Game" in A Spy's Guide To Strategy. Because the "boss" of any Positive-Sum Game is the one who makes the rules.

 

Here's how it looks: 

Peter Navarro told CNBC that the rules of the game have benefited China since they entered the WTO in 2001. Now, Navarro says it's time to renegotiate the rules. Which means the beginning of a Zero-Sum Game. 

 

Watch him on CNBC: 

CNBC quotes Navarro saying:

 

"Unfortunately, it's a zero-sum game now between China and the rest of the world, and what we need to do as a country is to work with the rest of the world" to ensure prosperity and high stock markets, he said.

 

Navarro goes on to point to other Zero-Sum Games with China: China is already taking American technology and resources, sometimes by legal means such as company purchases, and sometimes by illegal means. Navarro sounds like he's ready to push China further.

 

Some are worried about pushing a "trade war" too far, because it could end up in a real war. The Zero-Sum Game of negotiating could become the Zero-Sum Game of global conflict.

 

But that's several steps away. The good thing about trade wars is that they're the most peaceful of all "wars." The worst result is one side walks away. The worst result is that trade doesn't happen. 

 

If a trade war goes badly, real wars are still a couple steps away. 

 

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For more about motivations and strategies in real wars, read A Spy's Guide To Strategy.

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