Economy

The US-China trade war is ‘a game of threats’

K. Giriprakash Bengaluru | Updated on October 09, 2019 Published on October 09, 2019

A Coimbatore-native, the Padmabhushan awardee Dr Arogyaswami J Paulraj (75) is a winner of the technology Nobel, the Marconi Prize (other recipients include Google co-founder Larry Page and cell phone inventor, Martin Cooper) and the Alexander Graham Bell Award. Credited with inventing the MIMO (Multiple Input Multiple Output) technology, the key to all modern wireless networks, he was appointed by the Centre to head the 5G Steering Committee. Paulraj is also the recipient of China’s highest award for foreign citizens, the Friendship Award. An Emeritus Professor at Stanford University, Dr Paulraj shares his views about the trade war between the US and China and how India can benefit from it.

What are the contours of the US-China trade war?

There is a deep undercurrent to China’s technological development. The US is afraid that China’s technology is rising very fast.

So, I think this is the fundamental core of this dispute, the actual aspect of the trade war and how it is conducted in business terms.

With regard to trade deficits, most people in the US — including the Republicans or the economic establishment — don’t think that is a huge problem and in general, you know, it is part of globalisation. The Chinese are holding American paper and they can only spend that paper in the United States.

The fact is, in the US, we get things pretty cheap and it is all thanks to Chinese labour. The US has benefited by the trade imbalance.

In this face-off, which country do you think will get hurt most?

The US President Donald Trump has a mind of his own. One thing that you can predict about Trump is that he is unpredictable. Today it is Huawei, tomorrow it could be something else. It is the technology that matters. We have been having committee after committee worrying about this problem. So what I am saying is that it doesn’t hurt United States that badly.

In fact, it could be hurting China more. So, this is my interpretation. It is more a game of threats. Nothing much will come out of it. That is one of the reasons why negotiations are not going far.

But I also feel the long game with China is to keep Trump in the office. Christmas is coming now. So I feel they may make some deals now in order to help Trump’s support base which is primarily the White majority non-high school or college electorate.

How will the trade war affect China?

The Chinese are hurt pretty badly because their manufacturing is being hurt. China has one-third share of Asia’s total electronic manufacturing.

Hong Kong’s share is also pretty large. Singapore, Taiwan, Japan, South Korea, all add up to the rest. Guess what is India’s share? 0.15 per cent.

Because of the pressure wielded by the US, some of the supply chain is moving out of China and a lot of it is going to Thailand and Vietnam.

So, I think the US government is looking at some of these things. It is also putting pressure on Apple. For a phone which costs $650, about $300 goes for the components including the chips, memory and things like that. About $325 goes into the actual manufacturing line. Only about $25 goes into the brand. So even if we bring a lot of the work home, the gains are marginal.

Where does India figure in all this?

During the mid-2000, there was a lot of news about how well India is doing. But at Stanford University, we never heard about it at all.

We (India) have disappeared from sight. It is all about China now. But the problem is that China is now pretty good in technology and we have not created any technology in our country. And when I say technology, I mean mass-market technologies. Nobody is interested in nuclear weapons or moon rockets. That is all old stuff now. We need innovations in information technology.

Nothing disruptive is really coming out of India still.

So, according to you, what should India do to start making a mark?

India has failed to tap into its extraordinary potential, blessed as it is with superior human resources. Foreign companies are reaping the benefits of the cerebral capital which they hire in hubs like Bengaluru for pittance.

Apart from employment and marginal economic gains, nothing gets added to India’s technological prowess or Intellectual Property (IP).

I think India should start putting some real effort into helping the poor move up the ladder. China has done that really well. I think in India only the top 15 per cent has done extremely well.

We have been focusing only on one thing and that is basically designing core information technology chips and systems. But this is only 1 per cent of the global market. So we are invisible. China, the US, Europe, Taiwan, Singapore, are all there, but not India.

You are a recipient of China’s highest award for foreign citizens. What exactly do you think is the reason behind China’s success in the world market?

There is a fierce competition among Chinese companies when they make a bid for an international contract. Indians place a lot of importance on a person’s salary and pension.

But this has a negative effect in pursuit of success. It has actually robbed them of the entrepreneurial spirit. Nobody doubts our potential. But the Chinese tend to think long term.

In terms of technology, I strongly believe that all the success comes only from do-or-die companies. You have to get into the cauldron and work very hard. It is the threat of dying that brings success. China now has 40 people in the top 200 technology people in the world.

The fundamental tech patents come out of universities. The budget of Stanford University alone is about ₹50,000 crore per year, while that of some of the top Indian educational institutions is not even one-tenth of it. We need world class universities. Those are not easy to build. They require long time efforts. We need to do core research. We need big budgets to build such universities.

Published on October 09, 2019
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