By Cheng Cheng and Otavio Costa Miranda Source:Global Times Published: 2017-11-9
In his visit to Asia, US President Donald Trump is set to put America first, possibly through increased energy exports. Juggling great tensions in the State Department, lack of enthusiasm for traditional high diplomacy, and a reckless need for quick results, Trump is leading what may be the most powerful US trade delegation to ever come to China.
He must reduce the trade deficit, create jobs, increase investment and promote exports, all while balancing a complex web of diplomatic relations with regional allies and facing fierce commercial competition.
Energy is apparently the keyword for Trump`s mission, and the moment couldn`t be better. The US liquefied natural gas (LNG) industry is on the rise as a safe alternative to traditional sources of energy, just as demand from China and Japan is bound to increase. The Chinese economy is pushing toward a greener matrix, as emphasized by Xi Jinping, General Secretary of the Communist Party of China Central Committee, during the 19th Party Congress last month. Meanwhile, Japan needs post-nuclear energy alternatives.
Trump is prepared for it, as shown by the corporate executives joining his tour. With an unprecedented line-up of companies that are involved in the production, transportation, distribution, and funding of an integrated LNG chain, Trump might be showcasing for the first time what could be called "shale diplomacy" with national champions on the shale chain constituting a quasi-state policy for the US.
The presence of leading agriculture, energy and aircraft executives, along with US trade officials and high-level Chinese authorities, may help Trump in his quest to rebalance trade. His active promotion of strong export-led and job-creating industries, as well as energy and infrastructure investments in impoverished areas of the country, will certainly play a decisive role on the Chinese side of the trade imbalance equation championed by his administration, as major contracts are expected to be closed during the visit.
The White House`s trade-oriented diplomacy is on the right track to create jobs and pave the way for the US to become a global gas superpower, but as much as putting America first creates winners, it also creates losers.
Economically speaking, the White House`s obsession with reducing trade deficits is an almost "medieval" concept. Despite holding the biggest trade imbalances with China, the US deficits are not a bilateral issue but a multilateral one, since the world economy now functions as a series of value chains rather than merely bilateral trade deals.
Over the past few decades, using their resource endowments, improved infrastructure and appropriate industrial policies, East and Southeast Asia have formed the most powerful production value chain for global tradable goods, especially electronics, machinery, chemicals and vehicles, with China as the world`s assembly center.
The US has been dealing with trade deficits for 40 years straight, and this was the case even when China`s surpluses were insignificant. Besides, leveraging pressing issues to guarantee major government purchases might also undermine allegedly free markets. For example guaranteeing the purchase of Boeing aircraft might artificially depress Airbus` participation in the global market, undermining European interests.
But when the key subject is energy, geopolitical anxieties are frequently underpinned.
The presence of Alaska Governor Bill Walker highlights the US outreach to Asian energy markets. Walker has actively promoted his state`s LNG plans throughout Asia. The pipelines and broader LNG projects to be discussed in China these days might reduce the gas price per unit for the region in the near future, but that LNG will also compete with exports from Qatar, Australia, Turkmenistan and Russia.
Whether they are characterized as China`s current main energy providers, important US allies or big players for global stability, these countries are all excessively reliant on energy exports as a result of highly concentrated economies. An assertive US participation in the region`s energy affairs might affect on a greater scale their economies on multiple levels.
The 19th Party Congress set ambitious targets for China`s development in various areas for the coming years, and fostering a green economy will unequivocally boost the Chinese demand for cleaner energy. In the age of the Shale Revolution, natural gas is the undoubted champion and fuel of the major transitions to be made in China and other major energy consumers in East Asia. LNG is set to shake the foundations of the global energy markets, which major powers are reliant on.
It`s a scenario that deserves attention, and China has all the leverage as the most promising market. It might be the beginning of The New Geopolitics of Natural Gas, according to the title of a book by Agnia Grigas, and Trump is set to, once again, defy the current structures by making a deal in Beijing.
Cheng Cheng is an associate research fellow of the Chongyang Institute for Financial Studies, Renmin University of China. Otavio Costa Miranda is a research intern of the Chongyang Institute for Financial Studies, Renmin University of China.