Sino-US relations have been a marriage of mutual economic convenience that worked rather well for both countries for several decades. What is commonly referred to as “Chimerica” — where China produces products and purchases American treasury bonds, and the US purchases Chinese products and derives fiscal stability as a result of Beijing’s purchase of a large percentage of those bonds — has resulted in shared prosperity and strength.
The two countries did not create the world’s most important economic relationship easily or quickly. It was the result of painstaking diplomacy over many decades, a decision to proceed on the basis of mutual trust and a willingness to take a chance on each other.
At issue is a blurring of the lines between commercial and national interest, subsidies and protectionism, dual-use technologies, foreign policy, deal-making, political ideology, morality, and either disdain for, or an embrace of, the international rules-based order. The outcome of this pivot point in the two countries’ relationship will set the stage for which of them will dominate parts of the global economic and political landscape in the decades to come.
A Gift to China
In some ways, Donald
Trump’s election in the US was a gift to the Chinese. Consider that by
withdrawing America from the Trans-Pacific Partnership (TPP) in 2017, Trump
opened the door for China to expand its trade relationship with the remaining
TPP members — which it did. Similarly, the imposition of trade tariffs
forced China to modify its supply chains and consumption patterns, find
alternative markets for some of its goods, modify some of its own tariffs being
applied to other countries, and reevaluate its trading relationships more
generally. From a long-term perspective, that was a good thing for Beijing.
The truth is that the US has winked and nodded as China gradually stepped onto the world stage, pausing occasionally as distasteful events have blown over, such as Tiananmen Square in 1989, the Taiwan Strait crisis of 1996 and the spy plane standoff in 2001. Yet in doing so, America has been complicit in nurturing China’s rise and only has itself to blame for waiting until 2018 to say “enough.”
America vs. China: An Ideological Choice
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The trade war is
the best thing that could have happened to China. In essence, it got away with
its intellectual property theft, cyber intrusions and grossly unbalanced
trading relationship with the US and a great many other countries for a couple
of decades. It had enough time to build itself into an economic powerhouse and
give most of its citizens time to graduate to middle-class status so that it
could transition from being a poor nation that copied other countries’
technologies to a wealthier nation that is quickly becoming capable of beating
much of the rest of the world at its own game.
While the US is busy focusing on the next quarter for business, the next year from an accounting or tax perspective, the next two years in anticipation of the coming state or national election, or the next four years for a presidential election, China is busy thinking about the next five, 10 or even 30 years down the road. Its Made in China 2025 strategy was created in 2015, its New Generation Artificial Intelligence Development Plan, targeting 2030, was launched in 2017, and President Xi Jinping’s plan to make China a superpower by 2050 was announced the same year. To China’s credit, it has had a forward-looking orientation for many decades, and it has paid off.
Positions of Strength
What the US is
seeking via the imposition of such sweeping trade tariffs is fair and equal
treatment — no more and no less. That should include access to the Chinese market
more generally. Plenty of US companies — technology companies in particular — have
either been barred or severely constrained from operating in China. America
should apply the same restrictions to Chinese firms. Wherever restrictions have
been placed on American firms, reciprocal treatment should be applied to
Chinese firms in America.
To out-think Beijing, the US will need to adopt the same type of long-term, forward-leaning, visionary planning that the Communist Party conducts on a routine basis. To out-maneuver and out-partner Beijing, Washington will need to strengthen, and in some cases rebuild, its alliances (presumably after Trump leaves office). As it continues to strengthen and modernize its military, the US will need to revisit the extent to which it is willing to, and can actually deliver on, its security guarantees around the world.
To out-partner
Beijing, the US will need to do a much better job at maintaining its existing
alliances and begin to reengage in cooperative action on a mass scale. And to
out-innovate Beijing, the US must determine a sensible, realistic policy
direction, identify what is required to achieve it and devote the resources
necessary to move swiftly.
While it may not generally be perceived
as a responsible stakeholder in the system, China has demonstrated a
willingness and ability to contribute meaningfully and responsibly to
international initiatives — whether global peacekeeping or rescue operations or
climate change diplomacy — where mutual interests converge. It is, if you will,
a form of competitive cooperation.
Sino-US relations
will remain the world’s most important bilateral relationship for many years to
come, with implications for the entire world. The people of both nations have
much more to gain by maintaining a friendly and cooperative relationship with
each other rather than the other way around. It will clearly take a great
degree of wisdom, an appreciation of history and a willingness by all sides to
compromise to maintain mutual peace and prosperity.
With China the
ascendant power and the US in gradual decline, Xi has little real incentive to
change the Chinese playbook on a wholesale basis. That means that the US should
reset its expectations about future Chinese behavior. The modern trading system
does not and cannot prevent China’s state-owned enterprises from blurring the
line between commercial interests and national interest. Chinese government
funds subsidize and protect Chinese companies as they purchase dual-use
technology or distort international markets.
To effectively
counter more of the same from China in the future, the US needs a strategy, not
merely tactics. When America competes with China as a guardian of a rules-based
order, it starts from a position of strength. That is the only way Beijing may
become incentivized to modify its behavior.
*[Daniel Wagner is CEO of Country Risk Solutions. This article is an excerpt from his new book, “The America-China Divide.”]
The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.
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