The change of guard in Washington following the just concluded US elections offers an opportunity of a life-time to do away with the destructive global trade war being fought between two groups, one led by the US and the other by China. Initiated unilaterally by President Trump this war was founded on his 'America First' aspirations. President-Elect Joe Biden can replace this war with an equilibrium international commerce for the equitable benefit of the consumers the world over.
A tall order? Yes. But it can be done as unlike the Cold War of attrition fought between two ideologies capitalism and communism the trade war is being fought for global primacy, a much easier challenge to confront.
Indeed, according to Andy Zelleke (What is the End-Game of US-China Competition? Published in The Diplomat on Nov. 3, 2020) an equilibrium state, sustainable for a period of years or even decades, could arise if Beijing and Washington each was to conclude that (i) it has no clear pathway to sustainable primacy over the other across all critical domains; (ii) the likely alternative to a negotiated equilibrium would be exhaustion and massive resource dissipation - essentially, a mammoth tax - accruing over years or decades of cold war, assuming a still more tragic hot war is avoided; (iii) the equilibrium's substantive terms are acceptable, if far from optimal; (iv) the resolution preserves mutual respect, and face/credibility with domestic audiences; and (v) it opens the door to collaboration on the pressing challenges of mutual and global concern - such as nuclear proliferation, climate change, and pandemics.
Each superpower would have additionally made this deal out of a sense of urgency specific to it: In the United States' case, concern that the trajectories of power - especially economic - could well favor Beijing; and in China's, a fear that an anxious Washington might opt for a kinetic confrontation sooner rather than later. The U.S. and China would essentially have committed to a long-term path of self-restraint, each in exchange for the self-restraint of the other.
What might be the terms of a plausible U.S.-China equilibrium state? What follows are a few key elements of a potential modus vivendi, incorporating the United States' likely insistence on territorial containment of China and the preservation of a favorable balance of power (military, geopolitical, economic, and technological) via coalition.
For Washington, this would almost certainly be a non-negotiable feature of any equilibrium. The United States presently has the benefit of a large number of capable allies and partners; and many of those relationships can be reinforced further in light of China's recent assertiveness. So long as the U.S. is committed to, and capable of, maintaining a high-caliber coalition of the "like-minded," Beijing would have little choice but to accept that the balance of power would likely persist for some time.
It will behoove President-elect Biden to repair transatlantic relations damaged by Trump, and capitalize on Europe's recently coming to view China as a "systemic rival." As noted, Biden should aim to form a coalition (including European powers) focused on defending common interests in the economic and technology domains. Within those parameters, though, the coalition should welcome China's continued economic progress, including its almost certain emergence as the world's biggest economy, perhaps by some margin.
Fundamental respect for China as a great civilization, sovereign nation, and superpower, and for its political system and political economy. Washington would fully acknowledge that China's system of government is up to China and its people. The same holds for its political economy, subject only to the explicit commitments Beijing has made, and may make going forward, as a means to attracting more economic engagement. Washington may well agree that it would confine its criticisms of China's human rights abuses (most notably, Xinjiang's Uyghurs) to private communications.
Reaching a broad settlement of the struggle for primacy would enable more attention to global threats and challenges. What presently crowds out meaningful collaboration in that domain is the priority each country reserves for the competition for primacy. Settling on the broad contours of a new modus vivendi could open the door to meaningful progress on these global challenges.
Beijing would undoubtedly view the equilibrium terms contemplated here as quite tough. But a capable, cohesive coalition would constitute facts on the ground to which Beijing would, in all likelihood, conclude it must adapt.
Measured by purchasing power parity, the United States' share of global GDP has decreased from 50 percent in 1950 to 14 percent in 2018, while China's has recently surpassed the United States' to 18 percent. Moreover, both China and Russia have capitalized on U.S. preoccupation with two decades of "endless wars" to narrow gaps in conventional military capabilities and to develop asymmetric tactical ones. They have employed technology to exploit open democratic societies, and they have weakened U.S. leadership by helping to drive wedges between the United States and its traditional allies.
Moreover, as a result of steps taken to mitigate the economic effects of COVID-19, U.S. government debt has expanded to levels previously thought unsustainable. By the end of this year, that debt as a share of the GDP will reach 110 percent.
President Bill Clinton's 1996 National Security Strategy articulated a policy of engagement and democratic enlargement that would improve "the prospects for political stability, peaceful conflict resolution, and greater dignity and hope for the people of the world."
This presumption of liberal convergence motivated the decision to allow China to join the World Trade Organization (WTO) in 2001. As Clinton said at the time, such an opening would have "a profound impact on human rights and political liberty." The rest of the world would get access to Chinese markets and cheap imports, and China would get the chance to bring prosperity to hundreds of millions-which, many in Washington believed, would improve the prospects for democratization. It was seemingly a win-win.
Officials in both the George W. Bush and the Obama administrations fundamentally remained convinced that the United States needed to engage with China to strengthen the rules-based international system and that China's economic liberalization would ultimately lead to political liberalization. Meanwhile, China has continued to take advantage of economic interdependence to grow its economy and enhance its military, thereby ensuring the long-term strength of the CCP.
Proponents of globalization claimed that in an economy lubricated by free trade, consumers would benefit from access to cheaper goods, lost manufacturing jobs would be replaced by better jobs in the growing service industry, foreign direct investment would flow to every sector, and companies everywhere would become more efficient and innovative. Organizations such as the WTO, meanwhile, would help manage this freer and more integrated world (never mind its 22,000 pages of regulations).
But the promise that globalization's rising tide would lift all boats went unfulfilled: some rose to extreme heights, some stagnated, and others simply sank. It turned out that liberal convergence was not a win-win: there were, in fact, winners and losers.
A populist backlash against this reality caught elites off-guard. This reaction intensified as malfeasance on the Wall Street and the U.S. Federal Reserve's misguided monetary policies helped bring about the 2008 global financial crisis. The generous bailouts that banks and financial firms received in its wake convinced many Americans that corporate and political elites were gaming the system-a theme that Trump seized on in his 2016 campaign. Years before Trump's victory, however, many ordinary Americans had already come to see that globalization was hurting them. Working people directly experienced how free trade could hollow out communities as jobs and capital investments fled overseas. Even the chief economist of the International Monetary Fund, Gita Gopinath, acknowledged in 2019 that international trade had been very costly for manufacturing workers in the United States. Between 2000 and 2016, the country lost some five million manufacturing jobs.
Biden will be keen to embrace opportunities for fruitful collaboration with Beijing on globally urgent issues like climate change, pandemics, and nuclear proliferation. But he will recognize that that policy domain can only complement - not substitute for - a robust policy response to China's drive for primacy in the economic, technological, and, ultimately, geopolitical and military realms. Accordingly, his version of containment (and the policy measures that underpin it) should preserve robustness in the military, economic, and technology domains. Containment should aim to preserve a favorable balance of power vis-à-vis China - in East Asia, in the Indo-Pacific more broadly, and globally - and to contain China's economic and technology-based power to levels with which the United States and coalition members are comfortable. This response is appropriate in light of China's scale, its accelerating power across domains, and its lofty aspirations.
Biden should aim to organize a coalition of like-minded economic powers willing to coordinate their commercial relations with China as needed, and to protect their common interests by acting collectively to ensure that its members aren't left excessively at risk from critical technologies, products, resources, or supply chains.
Copyright Business Recorder, 2020