Rising Dragon, Wounded Eagle - Second-Largest Economies

  0 comments   |     by Munir Akram

WHEN China’s former vice premier, Qian Qichen, was asked 20 years ago about the future of Sino-US relations, he reportedly responded: “They [Sino-US relations] will never be as good as they should be; and never be as bad as they can be.” This prognosis holds true today for the world’s “most important bilateral relationship”.

The largest and second-largest economies are now deeply intertwined and interdependent through trade, supply chains and finance. But the fortunes of the Chinese dragon have been rising; the power of the American eagle has been dented by long wars and economic profligacy. The Greek historian, Thucydides, postulated that when an established power faces a rising one, a clash is almost inevitable.

In its final years, the Obama administration seemed to be rushing towards the Thucydides Trap. Obama’s ‘pivot to Asia’ consisted of: an effort to build a string of US alliances around China’s periphery — from Japan to India; the deployment of two-thirds of US naval power to the Pacific; a challenge to China’s maritime claims in the South China Sea; and China’s exclusion from the Trans Pacific (trade) Partnership.

Prospects for Sino-US relations worsened with Donald Trump’s campaign rhetoric against China and threats to slap punitive tariffs on its exports and declare it a “currency manipulator”. In justifying his unprecedented call with Taiwan’s leader, Trump threatened to discard the One China policy unless China agreed to trade concessions. Tensions were further heightened when the incoming US secretary of state asserted that the US could deny China access to its claims in the South China Sea.

The fortunes of the Chinese dragon have been rising; the power of the American eagle has been dented.

Since then, the Trump administration has walked back, slowly, from its most extreme positions. US Defence Secretary Mattis assured that the South China Sea disputes would have to be resolved through negotiations. In a carefully choreographed call with the Chinese president, Trump affirmed continued US adherence to the One China policy.

The recent Trump-Xi summit in Mar-a-Lago was expected to determine the direction of US-China relations. Although the summit was overshadowed by the US missile strikes against Syria, there was no acrimony, and agreement was reached on a high-level security dialogue and a 100-day plan to address trade.

However, uncertainty persists due to Trump’s unpredictability. He will not declare China a “currency manipulator”. But Trump has now linked the trade talks to China’s help on North Korea.

In his tweets, President Trump has repeatedly urged China to resolve the threat from North Korea “or the US will”. The US deployment of a US carrier group towards the Korean Peninsula has escalated tensions. But the US is unlikely to conduct a pre-emptive or punitive strike against North Korea (à la Syria) given Pyongyang’s capacity for a devastating response. And, the ‘window’ for such a strike is likely to close shortly if, as expected, the left-wing candidate wins the South Korean presidency and rules out the use of force.

China shares the US aim of denuclearising North Korea, and is deeply angered by Kim Jong-un’s provocative nuclear and missile tests and indifference to China’s wider interests. China is likely to support intensified Security Council sanctions against North Korea, including an embargo on oil sales, if it continues its tests. Yet, China is unlikely to intensify pressure to the extent of triggering the collapse of the North Korean economy or the Pyongyang regime. This could lead to war, massive refugee flows into China and possible absorption of North Korea by the South, bringing US troops to China’s border.

Under the circumstances, the best option may be a resumption of the five plus one (US, China, Russia, Japan and South Korea plus North Korea) dialogue; a de facto ‘acceptance’ of North Korea’s nuclear capabilities; and a freeze on its nuclear and missile development in exchange for economic aid and assurances of regime survival. Even this outcome will be difficult to negotiate.

Given the Korean crisis, it is fortunate that, at least so far, the US has not revived the provocative challenge to China in the South China Sea. Absent US intervention, China will probably display flexibility and offer economic cooperation to its Southeast Asian neighbours to resolve maritime disputes. The peaceful resolution of the South China Sea disputes would remove a major source of potential Sino-US friction and confrontation.

Apart from Korea, trade is the other headline issue for Trump in dealing with China. For its part, Beijing wants a more balanced trade relationship with the US, and a reduction of the $300 billion bilateral trade surplus, through trade expansion rather than restriction. To this end, it appears willing to facilitate US agricultural, services and other exports and to stimulate domestic demand in China. But it will also urge the US to lift the wide-ranging restrictions on the sale of advanced technological goods and services to China as one way of correcting the trade imbalance.

Xi’s economic trump card may be an offer of Chinese participation in Trump’s plan to restore and modernise America’s aging infrastructure. China has the finance, expertise and recent experience to make a significant contribution. If Trump’s plans for tax breaks are stalled, he may welcome China’s contribution.

Such cooperation on infrastructure may open the door to US participation in China’s path-breaking One Belt, One Road initiative which its media has dubbed as ‘Globalisation 2.0’. China has invited US participation in the project. It could be extremely lucrative for US corporations and industry.

A first step in this direction may be active US participation in the China-Pakistan Economic Corridor endeavour. The Asian Development Bank and the World Bank are already financing some CPEC-related projects in Pakistan. American companies are also involved as equipment suppliers for power plants and financial, technical and legal consultants in various projects.

Ever since it arranged Henry Kissinger’s clandestine trip to China in 1971, Pakistan has had a significant stake in the preservation of positive Sino-US relations. Today, if a great power consensus can be achieved on a strategy for stability in Afghanistan and counterterrorism, Pakistan can become the geographical locus for economic and strategic cooperation between the world’s two primary powers.

The writer is a former Pakistan ambassador to the UN.

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