< lang="EN-US">Australia is the latest country to suffer from China’s trade coercion. Canberra is unlikely to give in, but that misses the point. China’s purpose in using such tactics is about much more than getting Australia to bend to its will. It is sending a message to other countries about standing up to China’s aggression: if you oppose Beijing, you will suffer, and no one can or will help you. Australia will not be the last to suffer at China’s hand, unless other countries come together to form a defensive counter-coercion coalition that can act together to provide mutual support whenever China uses trade for political coercion. < lang="EN-US">China has also progressed to taking foreign citizens hostage< lang="EN-US">, a return to Cultural Revolution tactics.
< lang="EN-US">While trade disputes between countries are normal, what China is doing is fundamentally different because it is explicitly political. It is an effort to use its trade advantage—a consequence of the fact < lang="EN-US">that trade with China is much more important to the economic health of Australia< lang="EN-US"> than vice-versa. This is a condition that is similar to that of many other countries. < lang="EN-US">The list of 14 demands< lang="EN-US"> that China “unofficially” made to Australia, for example, is mostly outside of Australian economic or trade policies. It is a set of explicitly political demands, including asking Canberra to muzzle its academics and its free press, sections of which have been critical of Beijing’s policies on different issues. While these demands are unusually broad, the tactic itself is not new. China has engaged in such practices repeatedly over the last decade, but usually over a single issue.
< lang="EN-US">These have included < lang="EN-US">punishing Norway for the award of the Nobel Peace Prize to the Chinese dissident< lang="EN-US"> Liu Xiabo; pressuring South Korea against deploying the THAAD Air defense system; attempting to < lang="EN-US">force Canada to release Meng Wanzhou< lang="EN-US">, the daughter of Huawei’s founder and an executive of the company, by taking Canadian nationals as hostage; and many others similar actions against several countries. As in the case of Australia, none of these scenarios had anything to do with trade disagreements. They were political demands, leveraging the trade vulnerability of these countries vis-a-vis China and taking citizens as hostages. Many of these efforts failed but even when it fails, it sends a signal: opposing what China considers its interest carries costs. Such coercion carries negligible cost to China, which is one reason why China uses it repeatedly, and why its victims have such difficulty responding to it.
< lang="EN-US">Many countries, especially those that were part of the Western liberal trading system, are particularly vulnerable. For one, as in Australia, they have strong domestic business lobbies that put pressure on their governments to make concessions. The massive domestic fight that Australia is currently facing— pitting sections of the < lang="EN-US">business community< lang="EN-US"> as well as < lang="EN-US">others< lang="EN-US"> against the < lang="EN-US">government< lang="EN-US"> and much of the strategic community—is a good illustration. The latter tend to be much more < lang="EN-US">concerned< lang="EN-US"> about < lang="EN-US">China’s behaviour< lang="EN-US">.
< lang="EN-US">Another reason is that most of these countries have internalised the ‘liberal trade’ mantra that assumes an artificial separation between politics and economics. This was never true, obviously, but it was a nice fiction that allowed everyone to prosper as long as there were no political disagreements between these partners. But trade has always existed only with political support, not beyond it, and that support could be withdrawn when conditions change. Though this has happened many times, this is a lesson that apparently needs to re-learned repeatedly.
< lang="EN-US">Conversely, this is one reason why India has found it relatively easier to retaliate to China’s aggression in Ladakh by banning Chinese apps and restricting its investments. Though India mouths the liberal trade mantra, it is a recent and still reluctant convert, and its default position remains ‘managed’ trade. Those that bought into the notion of a politics-free liberal trading regime have greater difficulty in understanding and responding to Chinese tactics.
< lang="EN-US">Until now, every victim country has responded individually, as in a normal trade dispute between states. And even though there is growing support for Australia, this has been < lang="EN-US">moral support< lang="EN-US"> more than any practical measures that will provide any relief to Australia or other targeted countries. There have been some discussions of economic decoupling from China. As I have pointed out < lang="EN-US">elsewhere< lang="EN-US">, such decoupling is inevitable as a new Cold War develops, but this is unlikely to happen fast. Restructuring economies that have essentially a colonial-type relationship with China—exporting raw material and importing manufactured goods—will not be easy. A new, faster response is needed to deal with China’s use of trade for political coercion.
< lang="EN-US">One faster response is to bring together those who have suffered China’s trade coercion or are likely to be vulnerable to such coercion. Such a counter-coercion coalition may be relatively easier and faster to set up, for example, through discussions under new formats such as the Quadrilateral security dialogue. Such coalitions in support of larger normative principles are not new. For example, the nuclear non-proliferation regime was bolstered by a series of technology denial regimes of much smaller group of countries, such as the NSG (Nuclear Suppliers’ Group) and the MTCR (Missile Technology Control Regime). COCOM, a Western group of countries that worked to limit transfer of high technology to the Soviet Union during the Cold War, is another example.
< lang="EN-US">In principle, there is little reason why such relatively informal coalitions cannot be applied in other arenas, such as trade. The coalition can decide to act together whenever China threatens countries with trade coercion. They should support the victim with joint declarations that determines an action as political coercion through trade. But they should also support the victim in some material ways to compensate for the damage they suffer from China’s punishment. Most importantly, the coalition should take joint action to punish China, such as by imposing punitive retaliatory tariffs on Chinese exports or through other measures.
< lang="EN-US">Such a coalition will demonstrate to potential targets that they are not alone, that others will stand with them. It will also demonstrate to Beijing that they cannot pick off individual countries for punishment without any response from others. The combined effect would be to demonstrate to Beijing that such efforts will not succeed. Even more importantly, it will demonstrate to all that trade vulnerability will not lead to political pressures.
< lang="EN-US">Still, there are dangers that need to be avoided, mostly regarding temptations that should be avoided in employing such measures. First, it should be used only reactively, in response to specific Chinese coercive actions against other countries. Even if it is reactive action, it will impact China’s prospective actions because the expectation of joint reaction will enter China’s decision-making calculus. Equally, the prospect that they will not have to suffer alone will also change the calculus of others. Both are important objectives.
< lang="EN-US">Second, the coalition should be defensive. Such a coalition should not be used for normal trade disputes which various countries have with China, which would be considered an offensive action. For example, many countries have problems with market access in China. India has long complained about restrictions on Indian pharmaceuticals in Chinese markets. Others have complaints about aspects of China’s domestic regulation of foreign businesses, such as those that force foreign businesses to have a domestic Chinese partner. While these are problematic and objectionable practices, they are fundamentally different from China’s use of trade as a political tool to coerce other countries. It will be unwise and ultimately counter-productive to expand the coalition to deal with such problems because this will represent coercion rather than deterrence, always a more difficult objective.
< lang="EN-US">This especially applies to using such a group to address political problems. Members of such a coalition would be tempted to use such measures to address other concerns, such as Chinese human rights violations, or its threats against Taiwan, especially if such a coalition finds some early success. But it would be a mistake to give in to such temptation because that will go beyond the purposes of such a coalition. Moreover, there are other tools to deal with these aspects of Chinese behaviour that much of the civilised world finds abhorrent.
< lang="EN-US">The developing Cold War will inevitably lead to a significant decoupling of trade relations between China and much of the rest of the world. The process is being accelerated by Beijing’s short-sightedness and paranoia. Whatever China’s excuses, others have a right to defend themselves. The best way to do that under the current circumstances is together.
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Dr. Rajesh Rajagopalan is Professor of International Politics at Jawaharlal Nehru University New Delhi. His publications include three books: Nuclear South Asia: Keywords and Concepts ...
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