During the cold war, the US and the Soviet Union had the potential to obliterate each other with their nuclear arsenals. Both sides knew a conflict was unwinnable, and that explained why the missiles remained in their silos. It was known as mutually assured destruction.
The closest the world came to MAD was the Cuban missile crisis in 1962, which ended with the Kremlin backing down over its decision to base nuclear weapons 90 miles from the Florida coast.
More than half a century later, memories of the cold war have come flooding back as the US and China lock horns over trade. Financial markets have gyrated as Washington and Beijing display their protectionist hardware. The rhetoric has become increasingly bellicose. Khrushchev and Kennedy were playing for much higher stakes, but the principle is the same: the missile-laden ships are getting ever closer to the shore.
Serious trade trouble between the US and China has been in the offing ever since Donald Trump won the presidential election in 2016. In that year, America ran a trade deficit of about $30bn a month with China, but Trump said it was only that big because Beijing was playing dirty.
Unlike previous presidents who talked tougher than they acted, Trump has kept the promises he made about China while running for president. With strong backing from corporate America, he launched an investigation into China’s alleged theft of US intellectual property.
Last Tuesday, US trade representative Robert Lighthizer announced that, as a result of that probe, the US would release a list of some 1,300 products that could be targeted with a 25% tariff – worth a total of $50bn – unless China changes its ways.
The following day, Beijing announced that it would fight fire with fire. China published a list of US imports, again worth $50bn, on which it would levy a 25% tariff. China’s hit list was smaller but carefully targeted to hurt sensitive US sectors, such as soya bean farming and the aerospace industries.
Beijing demands to be treated as an equal, not as a developing country that has to do Washington’s bidding
Larry Kudlow, Trump’s chief economic adviser, tried to calm things down by insisting that the US and China would be able to sort out their problems without a trade war. The conciliatory atmosphere did not last, however, because late on Thursday Trump said he had asked Lighthizer to consider imposing tariffs on another $100bn of Chinese imports. Beijing responded by saying it would fight the US “at any cost”.
For now, this is still a cold trade war. Neither side has yet imposed its threatened tariffs, and there is plenty of time for a negotiated settlement. What ought to happen is simple. China should recognise that there is some merit in Trump’s argument. US firms have essentially been forced to cede intellectual property rights to gain access to the big and growing Chinese market. If Beijing announced an end to that practice, Trump could remove his threat of tariffs and both sides could then disarm.
But the White House needs to create the conditions under which Beijing can do this. China is the world’s second biggest economy and an emerging superpower. It demands to be treated as an equal rather than as a developing country that has no option but to do Washington’s bidding.
In a tit-for-tat tariff war, the Chinese would come off worse – because they export more to the US than they import. But Beijing has other weapons, including its massive holding of US Treasury bills. Any move to dump these government bonds would be mutually assured destruction with a vengeance. But that’s the danger with cold wars: in the wrong hands, they can turn hot.
Murdochs could still have influence
On the face of it, the prospect of Disney buying Sky News to help Fox break the regulatory blockade against its Sky bid suggests Rupert Murdoch might finally win the day.
Concerns that the Murdochs taking over Sky – which would see them control Sky News, the Times and the Sun – would give them too much influence over UK news media has proved the thorn in the side of the deal.
The Murdochs ( and Sky) have pointed out that shutting Sky News would at a stroke resolve media plurality concerns, but have so far gone the route of offering a range of independence and financial guarantees instead to try to get clearance.
Disney’s $66bn offer for most of Fox includes it ultimately taking control of Sky News anyway, so guaranteeing it to regulators now seems an elegant solution.
But Disney, which has said it will buy Sky News even if its deal to buy Fox were to collapse, has not made the offer out of a burning desire to get into the UK news business.
Comcast, the owner of NBC Universal, is preparing to gatecrash the party with a £22bn bid for Sky. This is well above the £19bn that Fox’s bid values Sky at. The City believes Sky is now worth much more – it is performing strongly and has just scored a significant goal in the latest Premier League TV rights auction– potentially more than £16 a share. Disney knows it has a bargain and does not want to see Fox blocked from buying Sky, thwarting its deal and opening the door to a bidding war with Comcast. As Sky News’s potential saviour, Disney appears to be a good one, with proven success as a broadcaster – it owns ESPN and the ABC network in the US – and a clean track record.
But how long would it be committed to Sky News once it has got what it really wants – Fox? And does this really solve the issue of the Murdoch’s influence?
Following the Disney deal, Fox shareholders, which include the Murdochs, will get a 25% stake in the enlarged company. The Murdoch family trust will become Disney’s second-biggest single shareholder (mutual fund giant Vanguard is the biggest, but it is a “passive” investor) and is likely to be actively involved.
Bob Iger, the Disney chief executive, has refused to rule out a top job for Fox chief James Murdoch after the deal goes through. If Disney wins the day, the Murdochs could continue to wield significant influence over the very asset they sold to defuse plurality concerns.
Should Facebook mark its own homework?
It is amazing how an upcoming appearance in front of Washington legislators can encourage even the shyest of technology billionaires to start talking. Mark Zuckerberg, boss of Facebook, warmed up for his first trip to Capitol Hill next week by doing a round of media interviews in which, in light of the Cambridge Analytica scandal, he confessed to making mistakes but promised to do better in future. US congressmen need to pin him down. First, on hard details. Second, on the nature of his company’s business model.
Why did it take so long for Facebook to reveal the scale of the data breach? The company knew that information had been harvested by a third party in late 2015. Why didn’t it alert users at the time? And will it commit to doing so if its new tighter controls over apps and developers fail?
Zuckerberg has made big claims about Facebook’s new ability to protect the integrity of elections, specifically its powers to detect Russian bots. He said Facebook had not been “on top” of the problem during the US presidential election in 2016. But thanks to the use of artificial intelligence tools, Zuckerberg said, he was “much happier” with its performance during last year’s elections in France.
Why, given past failures, should Facebook be trusted to mark its own homework? And what does Zuckerberg mean why he says some regulation might be appropriate? How does he think such a system could work? And why does Facebook accept political advertising at all? Isn’t it always at risk of being out-smarted by state-sponsored disinformation and fake news attacks?
Would Facebook accept its platform can only be properly cleaned up if the business model is radically revised? Why not allow users to opt-out of data-sharing? Or could users elect to see only the types of adverts they choose? Facebook would be massively less profitable, but wouldn’t such an approach be truer to the spirit of “community” that Zuckerberg always proclaims?