Agreeing to Agree (and Disagree)

May 1, 2007 Regions: Asia Tags: DiplomacyIndustry

Agreeing to Agree (and Disagree)

Mini Teaser: China’s rise will inevitably increase Sino-American competition, but delineating common areas of agreement between Beijing and Washington could arrest tensions.

by Author(s): Robert J. Art

HISTORICALLY, THE rise of one great power at the expense of the dominant one has nearly always led to conflict between the two and, more often than not, eventually to a war between them that drags in other great powers. Is this violent history of rising and dominant great powers the future for U.S.-China relations?

Clearly, there will be political and economic conflicts and friction between the United States and People's Republic of China as the PRC's economic and military power in east Asia and its global economic and political reach continue to expand. There will also be some arms racing between China and the United States as each jockeys for an advantage over the other and as each is driven by its military necessities of intimidating and defending Taiwan, respectively. Historically, dominant powers have not readily given up their top position to rising challengers, and rising challengers have always demanded the fruits that they believe their growing power entitles them to. There is no reason to expect that things will be different in this regard with China and the United States; consequently, they will not be able to avoid a certain level of tension over the next several decades as China's influence continues to grow and as the United States seeks to deal with it. So, even if China's rise remains peaceful, Sino-American relations will not be harmonious.

Nonetheless, there are some significant shared interests between the United States and China (noted below), and hence some bases for cooperation in both the medium and longer term. Will the peace-inducing aspects of the U.S.-China relationship overshadow the conflict-producing ones? No one can say for certain. However, if we believe that there are distinct elements in the Sino-American relationship that differ from past rising-versus-dominant-power competitions, then the dismal history of these past competitions need not be the future for this one.

Stopping China's Rise?

WE CANNOT predict the exact nature of China's intentions and goals a few decades from now (nor can the Chinese), but we can, with high confidence, predict that China will want its "place in the sun", just as every other rising great power has. This does not mean that China will be an aggressive, warlike nation or, to the contrary, a strictly peaceful one. It means only that China will do what all great powers do-not simply react to its international environment, but instead act to shape that environment in ways that are conducive to its national interests.

Greater Chinese influence over east Asia and over the international system more generally, however, will not always coincide with America's national interests. If that is the case, is it within America's power to stop the rise of China?

Stopping China's rise means containing and constricting Chinese power. That, in turn, requires halting or drastically curtailing China's economic growth, upon which all else depends, and thwarting its rising influence regionally and globally. Stopping China's rise would be equivalent to what I have called "compound containment", which was applied against the Soviet Union during the Cold War. Compound containment involves two central ingredients: stalemating a power militarily and waging economic "denial" against it. The former is designed to prevent the state from gaining any political leverage from its military power; the latter, to weaken a state economically, either by actually reducing its gross domestic product (GDP) or by severely constricting its technological improvement and economic growth rate.

The most direct way for the United States to hurt China economically would be to block all of China's exports to the United States. In 2005 (the latest year for which figures are available), China-which includes mainland China, Hong Kong and Macau-exported $270 billion to the United States, or 26 percent of its total exports for that year. In 2005 China's GDP (in current prices) was $2.2 trillion. This means that in 2005, 12 percent of China's GDP was exported to the United States, an astoundingly high figure that appears to demonstratea huge Chinese dependency on access to the U.S. market. (The actual dependency is somewhat lower because China's exports are measured in terms of gross value, not value added in China, and because much of China's exports involve the processing of imports.)

The problem is that such a policy of economic warfare would be highly disruptive to the United States as well because China holds a powerful financial lever over Washington and could retaliate. As of December 2006, Chinapossessed $350 billion (7 percent) of the approximately $5 trillion of the total outstanding U.S. Treasury securities that are privately held. (Japan is the biggest holder at $644 billion, or 13 percent.) China could retaliate against an American embargo on China's exports by dumping its holdings of Treasury securities or by refusing to buy any more. This would hurt China by devaluing its U.S. Treasury holdings, but unless others stepped in to pick up the slack, it would hurt the United States too. U.S. interest rates would have to rise, probably significantly, and that would bring on a recession, or perhaps even something worse-a financial crisis.

More importantly, waging economic warfare through a ban on Chinese exports to the United States, a cessation of U.S. foreign direct investment in China, a ban on U.S. agricultural and high technology exports to China and the like will not work if only the United States imposed them. Historically, such policies have not worked well if only one country implements them, even if that country is as powerful as the United States. Absent a sufficiently strong Chinese provocation, however, other states, not only in Asia but also globally, are not going to join a coalition to wage economic warfare against China. The Chinese market is simply too important to too many states for them to cooperate with the United States in waging economic warfare against a state that is pursuing a peaceful-rise strategy, and the Chinese are too smart to take the actions that would create a hostile coalition against it. Thus, we are led to this perverse result: If China's low dependence on foreign economic activity made it a poor target for economic warfare during the Cold War, then China's high dependence on foreign economic activity today-a manifestation of its high level of involvement in the international economy-still makes it a poor target for economic warfare.

So, if the purpose of America's policy towards China is to produce as cooperative, benign and satiated a great power as possible by integrating it into the Western order, then an American policy of unprovoked economic warfare against a state cannily pursuing a policy of peaceful rise and reassurance is downright stupid. Short of preventive war, which is not a viable option against a nuclear-armed state, stopping China's growing economic and military power through unilaterally-imposed U.S. economic actions is not an option. Only self-defeating diplomacy abroad or gross political and economic malfeasance at home can thwart the PRC's rise. Thus, China's rise is China's to lose.

Security Threats and Shared Interests

IF THE United States can do little to thwart China's rise, what does that portend for the United States? The record of three clashes between rising and dominant powers-Germany versus Britain before World War I, Germany versus Britain before World War II and the Soviet Union versus the United States during the Cold War-is instructive.

China does not present the type of security threat to the United States that Germany did to Britain. In World Wars I and II, the German threat was clear: If it conquered the continent and harnessed its economic-industrial resources, then it could build a military machine to crush Britain. China cannot do that to the United States. It must first cross the Pacific to attack the United States, butAmerica's nuclear forces could swiftly "nuke" any invading Chinese armada, and China would commit national suicide if it dared to attack the United States with its strategic nuclear forces. Nuclear weapons alone protect the United States from a powerful China in a way that Britain could never be secure from German hegemony.

Moreover, China does not constitute the same type of geopolitical threat to the United States that the Soviet Union once did. The Soviet geopolitical (as opposed to the nuclear) threat was twofold: to conquer and dominate the economic-industrial resources of western Eurasia and to control the oil reserves of the Persian Gulf. Europe (including Britain) constituted one of the four industrial-military power centers of the world during the Cold War-Japan, the Soviet Union and the United States being the other three. The Persian Gulf contained the bulk of the world's proven oil reserves. If the Soviet Union had succeeded in dominating Europe and the Persian Gulf through either conquest or political-military intimidation, then it would have controlled two of the four power centers of the world and the largest proven oil reserves. That would have been a significant power shift.

If China ends up dominating the Korean peninsula and a significant part of continental Southeast Asia, so what? As long as Japan remains outside the Chinese sphere of influence and allied with the United States, and as long as the United States retains some naval footholds in Southeast Asia-such as in Singapore, the Philippines or Indonesia-China's domination of eastern Eurasia cannot present the same type of geopolitical threat to the United States that the Soviet Union did. As long as Europe, the Persian Gulf, Japan, India and Russia remain either independent power centers or within the U.S. sphere of influence, Chinese hegemony in eastern Eurasia will not tip the world balance of power. The vast size and central position of the Soviet Union in Eurasia constituted a geopolitical threat to American influence that China cannot hope to emulate.

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