Against the backdrop of the on-going trade war between the United States (US) and People’s Republic of China, the US President Donald Trump and Chinese leader Xi Jinping’s decision to sign a preliminary deal came as a huge relief for experts. While many believe that these negotiations will ease tensions and gradually begin to re-stabilise the system, a closer perusal indicates that the very framework within which the US and China seek to resolve their differences, fails to comprehend the dynamics of the bilateral relationship. The core irritants in the US-China trade dynamic emerge from the need for China to pursue structural reforms in subsidising state-owned entities and forcing the transfer of technologies. The inability to address these adequately manifests a trade imbalance between the two nations. In fact, the Phase One deal merely aims to treat this trade imbalance and does little to address the fundamental differences. Furthermore, even when the deal focuses on the skewed trade scales, it fails to recognise the multipolar and interdependent nature of the current global system.
Consider the approach used to address the trade imbalances under Phase One. The import commitments of the US and China to each other require them to make some adjustments to their purchasing plans with other countries. These adjustments have the potential to distort global markets and offset higher deficits with other countries. Regardless of whether the powers carry forward with their current commitments or remain committed to their partnerships with other countries, the trade-offs come attached with high costs that have the ability to impact relationships across the global system. Under these circumstances, what could be the way forward?
The US and China must look for ways to bridge their differences and formulate a viable solution. This is perhaps only possible once they confront the fundamental philosophies embedded in their strategic considerations. As the harbinger of capitalism and liberal democracy in the twentieth century, the US’ victory in the Cold War led Washington to believe that the key to universal peace came through global triumph of democracy than from appeals for cooperation. Since China embodies and practices a political system that is fundamentally different from the US’, the US believes that perhaps the solution to fix the ‘dis-equilibrium’ in the international system ought to be linked to transforming the Communist state to a liberal democracy. It is what scholars call American messianism. However, China’s rising economic dexterity raises concerns that have added another dimension to the US-China rivalry. Given the amount that is at stake in terms of goods, services and money in the trade war and the impact it can create, recalibration of economic ties has taken precedence over changing socio-political reforms. Washington finds it important to first balance, if not counter, Beijing’s economic footprint than to remodel its authoritarian system and social norms. The way to address these challenges should not be embedded in the mentality to dominate and defeat. In fact, it has to be replaced by the willingness to cooperate, discuss mutual purpose and limits the impact of confrontations arising out of the Sino-US rivalry. Only if such an approach is adopted, can we strive for a sense of balance in the current order.
The inability of the Americans and Chinese to accept these differences have in turn triggered further discussions on the future of US-China relations. At the New Economic Forum in November last year, Dr. Henry Kissinger argued that Washington and Beijing were on the foothills of a Cold War.
In terms of capabilities and capacities, China is possibly the only nation capable of balancing US power at present. As a consequence, many scholars believe that the world is becoming a bipolar system, oddly similar to the one that characterised the Cold War between the US and Soviet Union. However, the Cold War paradigm cannot explain the nature, or rather the reality, of Sino-US relations and their impact on the world order today. Consider the following factors. First, the Cold War mentality was predicated on defeating the other side, of emerging as the undisputed superpower. Although the desire to become the most powerful tempts the US and China, they are also aware of the costs that come attached with moulding their rivalry to a zero-sum game. Given that their economies are inextricably linked, it has created a high degree of interdependencies between the superpowers and with the rest of the world. In 2018, on the global level, the US and China together constituted almost 40% of the global economic GDP, contributing $20.5 and $13.6 trillion respectively to the global economy. Bilaterally, the US' trade with China accounted for $737 billion, out of which exports and imports totaled $179.3 and $557.9 billion respectively. These large sums of exports and imports indicate a sense of reliance between the US and China, one that necessitates their position in the upper berth of the global order. Under these circumstances, given the impact that an alteration in the trade dynamics can unleash, it will not be in the interests of either Washington or Beijing to devastate the other.
Second, unlike the spheres of influence that the US and Soviet Union were adamant on maintaining, it is unlikely that the US and China can create these spheres today. Most nations are no longer as politically and economically vulnerable as they had been during the Cold War. Kissinger also recognised that most nations have ‘a long military tradition which would pose as a formidable obstacle if its territory or its ability to conduct an independent policy were threatened’. These nations prefer to reap benefits through involvement in overlapping spheres of political, economic, and cultural cooperation with both superpowers. Even as some relatively weaker nations succumb to the economic enticements of the US and China, the ability to entirely align these nations to American and Chinese interests are no longer as absolute as it had been during the Cold War. Thus, owing to their interactions with other nations and the dependencies it creates, even weaker states are not willing to completely override their national interests.
Third, although not as powerful as the US or China, there happen to be several nations that together constitute a considerable stake in the international system. Nations such as Russia, Germany, France, India and Japan have grown substantially over the years. In 2018, they accounted for 1.9%, 4.7%, 3.2%, 3.2%, 5.8% of the world GDP respectively. Together, they constitute almost 19% to the global economy, enough to play a part in American and Chinese strategic considerations. Further, global and certain regional challenges cannot be tackled without them. The future presents these nations with opportunities to grow further, and if the world were to be divided between the US and China, the space for such growth would be limited. So even when these nations derive benefits from cooperating with the superpowers, it is in their interest to maintain a system that is more multipolar than bipolar. Hence, with such nations also capable of wielding power, the current system cannot be compatible with a Cold War system.
Reiterating the factor of interdependencies, it is unlikely that the US and China would want to initiate a direct war. There are other considerations as well that outweigh the logic of a direct war. As the superpower that emerged triumphant at the end of the Cold War, the US was largely responsible for moulding the current international system. Owing to the benefits that China has reaped from the American-built system, it is unlikely that China would like to change it. Its rapid economic growth as a result of market-oriented reforms and its opening to the world economy led China to become an influential economic actor in the system. It was able to join international organisations, such as the World Trade Organisation, and extract several benefits from the development assistance that key institutions such as the World Bank and the International Monetary Fund could provide. Increasing economic clout has also helped China increase contributions to institutions such as the UN and its missions, and gain access to more voting rights. Confident in its economic power, and its status as a near peer competitor to the US, China also seeks to revise (not rebuild) the current order to meet contemporary challenges such as rising inequalities between and within countries. Furthermore, the US’ withdrawal from international treaties has allowed China to play a greater role in world affairs. China has created the Asian Infrastructure Investment Bank and heralded the ambitious Belt and Road Initiative to enhance connectivity, cooperation and prosperity across regions. Under such circumstances, Beijing would prefer to continue extracting benefits than create a new system - and bear the costs of upholding it. Furthermore, given that wars require the deployment of a substantial portion of resources, the challenges that the US and China face domestically, such as issues pertaining to their immigrant population and of rampant corruption will also refrain them from engaging in a direct war with one another.
Importantly, avoiding direct wars does not necessarily mean that the US or China would not like to benefit from curtailing the other’s primacy, after all, the motives of the Americans and Chinese are not entirely altruistic. For this reason, the improbability of a direct war cannot negate the probability of skirmishes and indirect and non-military confrontations. Such confrontations can heighten tensions, but will be equally capable of keeping the US and China on their toes. They will be perpetually mindful of the other, as evident through the on-going trade war and the dispute over the South China Sea.
In order to work together, the powers ought to find a mutual purpose. To this end, the US must move beyond its fixation of perceiving China’s political transformation as the only solution; China must address questions on its military capacities and capabilities with greater transparency to allay US’ fears and reduce skepticism. Given the interdependencies and costs involved, cooperation through mutual purpose, is a good step forward. Redressal of misunderstandings and misperceptions will help stabilise relations, and harbour a greater degree of peace.
'Kissinger Says U.S. and China in ‘Foothills of a Cold War’, Bloomberg News, November 2019.
Henry A. Kissinger, The Future of U.S.-Chinese Relations: Conflict Is a Choice, Not a Necessity, Foreign Affairs, vol. 91, no. 2, March/April 2012, pp. 44-55.
Published by Council on Foreign Relations.
Joseph Bosco, Henry Kissinger is Still Brilliant - and Still Wrong About China, The Hill, May 2019.
‘The Key Problem of Our Time’: A Conversation with Henry Kissinger on Sino-US Relations, Wilson Center, September 2018.
Branko Milanovic, ‘The Most Important Relationship’: Kissinger on China...and America, On China by Henry Kissinger , Global Policy, October 2018.
Clyde Prestowitz, Kissinger in China: Triumph or Disaster?, Foreign Policy, June 2011.
Aaron Friedberg, The Unrealistic Realist: On China by Henry Kissinger, The New Republic, July 2011.
U.S. Relations With China: 1949-2019, Council on Foreign Relations.
Hunter Marston, The U.S.-China Cold War Is a Myth, Foreign Policy, September 2019.
Melvyn P. Leffler, China Isn’t the Soviet Union. Confusing the Two Is Dangerous, The Atlantic. December 2019.
Thomas Fingar, China’s Vision of World Order: Chapter in Strategic Asia 2012-13, National Bureau of Asian Research, September 2012.
Suisheng Zhao, China as a Rising Power Versus the US-led World Order, Rising Powers Quarterly, vol. 1, issue 1, September 2016, pp. 13-21.
Yukon Huang, Jeremy Smith, Trump’s Phase One Deal With China Misunderstands Global Trade, Foreign Policy, January 2020.
Xueying Zhang & Yue (Hans) Zhu, China’s Challenge to a US-Led World Order, YaleGlobal Online, March 2019.
The People’s Republic of China, The Office of the United States Trade Representative, Executive Office of the President
The World’s $86 Trillion Economy Visualised in One Chart, howmuch.net, August 2019.
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.
PREV
