Isaac Stone Fish is an international affairs journalist and senior fellow at the Asia Society’s Center on U.S.-China Relations.
What should give Starbucks executive chairman Howard Schultz nightmares? Imagine this: A Chinese netizen posts that, because of unfair American trade practices, it is patriotic to boycott Starbucks. State-run media outlets circulate the claim, and it ricochets around the Chinese Internet. Soon others heed the call.
The coffee behemoth has more than 3,000 stores across China, pledged to open 2,000 more by 2021 and recently opened its largest store in Shanghai. (I’m writing this article from a Starbucks in a mall in a quiet part of Shanghai; there is another Starbucks several hundred feet away.) Imagine that on May 1, China’s Labor Day, consumers stage a national walkout of Starbucks and pledge to instead patronize local coffee brands. Instead of representing sophisticated urbanism, Starbucks in China starts to seem like an avatar of American overreach and imperialism. When Schultz complains to Chinese leaders, they offer their condolences but say it’s the “will of the people.” So as Starbucks shares begin to drop, Schultz and other concerned U.S. food and beverage chief executives use their considerable lobbying presence to try to persuade the Trump administration to yield to Chinese demands.
Today, Starbucks is one of the most desirable and welcome Western brands in China, and the company considers the Chinese market a “key growth engine.” What if Schultz wakes up one day and finds that, because of U.S. trade policies, that is no longer true?
In 2017, the United States exported $131 billion in goods to China, while importing $506 billion. President Trump has long bemoaned the U.S. trade deficit and, with the obsession of a paleo diet fanatic, believes rebalancing it will cure American economic woes. Beijing has threatened to respond to Trump’s threats of tariffs on $153 billion in Chinese goods. But the problem for Chinese President Xi Jinping is that his country doesn’t import much from the United States. And that means China needs a different strategy to respond in kind.
Most worrying to U.S. businesses and policymakers shouldn’t be the fear of China dumping its massive holdings of U.S. Treasury bonds, because that would arguably hurt Beijing more. Nor should businesses lose sleep over China taxing U.S. products sold there but not classified as imports, such as iPhones, because that would hurt Chinese consumers.
The nightmare scenario for U.S. companies is a boycott of U.S. goods and services — perhaps targeting an individual company, such as Starbucks in the hypothetical example above, or U.S. products in general. Perhaps Beijing would link this with a tax-evasion charge for a U.S. business, or a health-code violation, closing stores and subtly but effectively persuading customers to boycott Starbucks. Regardless of how it unfolded, it would scald.
Why is this such a big worry? Although it doesn’t seem that way from the news coverage, U.S. companies benefit greatly from the goodwill the Chinese feel toward Americans. With the caveats that there are no good public opinion surveys in China about sensitive subjects like the perceptions of Americans, and that generalizing about the views of 1.4 billion people is fraught, many Chinese appreciate both American products and American people — unlike, say, the Japanese, whom many Chinese resent for invading the mainland during World War II. The congeniality improves U.S. companies’ bottom lines. A boycott — even for a short time — could tarnish the views of U.S. goods and services in some Chinese consumers’ minds.
Unlike, say, dumping Treasurys, a boycott also gives Beijing deniability. In trade talks with Americans, Chinese officials would likely claim that a boycott was unrelated to them — even while stoking it behind the scenes (an AstroTurf protest, not a grass-roots one). And the fact that a boycott can’t be fully controlled from above makes it a more potent weapon. In response to U.S. tariffs, Beijing threatened a tariff on U.S. soybeans — a targeted response to hurt voters in Trump-leaning 2018 midterm election battleground states. Even if Beijing slaps tariffs on U.S. soybean farmers, it can remove them quickly for minimal damage done. But even once a trade war is over, Chinese customers may decide to continue boycotting Starbucks.
And there is precedent in China over the past decade. Lots of it. The French hypermarket chain Carrefour. South Korea’s massive Lotte Group . Norwegian salmon. Philippine bananas. And so, so many Japanese products. It has even happened to Starbucks. In 2007, after the celebrity TV anchor Rui Chenggang said Starbucks had “trampled over Chinese culture” because it ran a store in the Forbidden City, the imperial palace in the center of Beijing; Chinese netizens called for a Starbucks boycott.
Perhaps the biggest worry about a Chinese boycott is how it would further incentivize U.S. firms to advocate Chinese interests. Starbucks expects China to eventually be its largest market. To end the 2007 controversy, all Starbucks had to do was politely shutter a single store. How hard would Starbucks have to lobby in Beijing and Washington to end this 2018 nightmare?
The writer is an international affairs journalist and senior fellow at the Asia Society’s Center on U.S.-China Relations.
Read more here: