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U.S., China and Thucydides

June 25, 2013 Topic: Global Governance Regions: ChinaUnited States

U.S., China and Thucydides

Mini Teaser: How can Washington and Beijing avoid typical patterns of distrust and fear?

by Author(s): Robert B. Zoellick

LAST YEAR, during his visit to the United States, Chinese president Xi Jinping introduced the idea of a “new type of great-power relationship.” In March of this year, in apparent response, President Obama’s national-security adviser, Tom Donilon, suggested an interest in building “a new model of relations between an existing power and an emerging one.” This June, the two presidents met in California to explore whether their strategic outlooks can be reconciled.

I suspect that President Xi’s concept reflects the senior leadership’s study of history. At last year’s meeting of the U.S.-China Strategic and Economic Dialogue, former president Hu Jintao stated, “We should prove that the traditional belief that big powers are bound to enter into conflict is wrong, and [instead] seek new ways of developing relations between major countries in the era of economic globalization.”

In the United States, professors Graham Allison and Joseph Nye at Harvard have referred to this challenge as “the Thucydides trap”: in explaining the cause of the great Peloponnesian War of the fifth century BC, Thucydides pointed to the rise of Athens and the fear it inspired in Sparta. In the centuries since, scholars have pondered how power shifts have led to competitive tensions, which sometimes have been managed and sometimes led to conflict.

This essay will pose a question: What might be the substance of a new type of great-power relationship between China and the United States?

Kevin Rudd, former prime minister and foreign minister of Australia, has also taken up this topic in a series of thoughtful speeches. His approach points to the need for reinforcing dialogues and cooperative efforts.

I will complement Rudd’s observations by suggesting specific policies that could forge this new type of relationship. I will focus particularly on economic and security issues, as well as on impediments that China and the United States need to address.

In 2005, I suggested that the United States should encourage China to become a “responsible stakeholder” in the international system that had provided a supportive context for China’s extraordinary modernization and economic rise. Deng Xiaoping had shrewdly recognized that China’s opening could capitalize on the existing international system of trade, investment, technology, growth and security. Through the hard work of China’s people, Deng was proven correct.

Yet the international system of the late twentieth century has to evolve with new times. Responsibilities for preserving and extending systemic interests—and adapting to new challenges—need to be considered as part of great powers’ national interests. The United States, China and others will not be able to adapt to an evolving system successfully, however, if they do not share a basic commitment to that international system.

Some observers believe that China has acted like a “reluctant stakeholder,” especially when it comes to translating common interests into complementary policies. In speculating why, they have asked: Is China still debating or adapting to its role? Or, as some voices in China suggest, does China want a new system? If so, what would it look like? Does China want to add different ideological content to international relations—which would represent a shift from past Chinese policy?

These uncertainties have prompted another important query: Have Chinese critics of the current international system considered the costs of, and others’ reactions to, new Chinese aims? Not surprisingly, these questions are arising most prominently in the Asia-Pacific region.

Therefore, in considering a possible new type of great-power relationship, we need a serious, in-depth exchange about whether China and the United States share common systemic interests—as well as about specific policies. Interdependence, by itself, will not overcome twenty-first-century problems and threats. We need to consider how economics and security interconnect in today’s foreign policy.

CHINA’S ASTOUNDING economic success—growing on average 10 percent a year for thirty years—has propelled it to become the second-largest economy in the world, the second-largest trader of goods and services, and the second-largest recipient of foreign direct investment.

But the United States still accounts for about 22 percent of global GDP. Although productivity gains are harder to achieve as advanced economies move to the technological frontier, recent American innovations in energy, software and business models reveal a developed economy that retains an unusual capability to adapt and revitalize itself. In contrast to most other advanced economies—and even many developing ones—the U.S. demographic outlook is modestly positive. U.S. integration with its North American partners also offers good prospects.

Yet a host of global structural shifts, in particular the rapid rise of developing economies, along with the stumbling global revival from the Great Recession, necessitate more changes for China, the United States and the world.

China’s developmental challenges are described well in last year’s “China 2030” report prepared by the Development Research Center of the State Council along with other Chinese ministries and an international team from the World Bank Group.

The researchers sought to address the basic problem of how China could avoid the so-called middle-income trap—the tendency for productivity and growth to slow after developing economies reach middle-income levels. Our Chinese colleagues wisely recognized that straight-line growth projections rarely come to pass.

Consider this problem in historical perspective: when the World Bank reviewed the performance of 101 economies that the Bank categorized as middle income in 1960, it discovered that by 2008—almost fifty years later—only thirteen had made it to high income. And one was Greece!

China has relied heavily on investment in fixed assets, principally by the government, and on export-led growth. China will need to adapt to global structural shifts: now that developing economies account for half of global output—and indeed about two-thirds of global growth over the past five years—China can no longer base its growth model principally on sales to developed economies.

China needs to change its growth model to rely on greater domestic demand and consumption—as well as on a greater role for the private sector. Investment in human capital will be of increasing importance, as will the encouragement of the innovative spirit of China’s talented people. This shift could also enable more Chinese to benefit from their decades of diligence; in doing so, increased consumption might ease social tensions as well.

The “China 2030” report outlined a pathway to a new growth model that would include: completing the transition to markets for land, labor, enterprises and financing; moving to an open innovation system, so as to enable China to move up the value chain; offering equal opportunity and basic social protections to all Chinese; restructuring fiscal systems to match accountability for revenues and expenditures at various levels of government; cleaning up the environment and pricing resources for scarcity; and considering the international implications of China’s structural shifts.

I do not expect China’s new leaders to act through any kind of “Big Bang” reform. I do think they—and provincial leaders—will pursue pragmatic experimentation. Prime Minister Li Keqiang has pointed to urbanization as the portal through which China can pursue connected change, combining issues of labor, land, enterprises, education and other services, consumption, living standards, new infrastructure, housing, sustainability, financing and governance.

Just recognizing the need for change represents a big step forward. In contrast, more than twenty years ago I watched Japan’s political and bureaucratic system resist the need for a new growth model. Prime Minister Shinzo Abe now must pursue bold steps to rectify Japan’s resistance to change.

Yet China’s next reform push will be difficult. The Chinese leadership will need to balance a near-term growth strategy, relying principally on the current economic structure, with the need to change that structure for future growth.

A NEW type of great-power relationship would anticipate the economic and even institutional changes that lie ahead. China and the United States should identify mutual interests in supporting structural reform and “rebalancing” in both countries.

Consider what a search for a new, cooperative economic approach might entail:

• For example, to boost productivity, create jobs, expand entrepreneurial opportunities and increase consumption, China needs to open competition in the services sector. The Chinese private sector should expand its role. In addition, U.S. and other foreign businesses and investors can bring know-how, technologies and global connections to support an expanded Chinese services sector. This cooperation can help alleviate trade imbalances and frictions while promoting mutual interests.

• China’s innovation agenda needs to combine education, technologies, venture capital, network effects, and better intellectual-property-rights protection and enforcement; again, U.S. participation could assist while benefiting the United States and others, too.

• Stronger but flexible social safety nets in China could draw from international experience with insurance, savings and delivery of service models. The United States, in turn, needs to address the costs, financing and incentives of its older and much more expensive safety nets.

• China’s food needs—and water conservation—could be assisted by U.S. and foreign products, technologies and systems, including those focused on stronger food safety and quality. More open markets should expand complementary trans-Pacific agribusiness efforts while also boosting living standards.

• There are mutual opportunities in the energy and environmental sectors—including lower-carbon sources, alternative technologies and systems, and experience for clean air, water, biodiversity and land use.

• All these adaptations need to be supported by deeper, more diverse and more liquid markets for savings, credit and investment—while ensuring safety, soundness and effective crisis management. China needs to shift from being a nation of savers with minimal returns to becoming a nation of investors who play a role in China’s private-sector development.

• Finally, China, the United States and others need better frameworks to encourage cross investment while managing national security and other sensitivities. 

In a sense, China’s twenty-first-century leaders can look to the logic of Deng Xiaoping and Zhu Rongji: employ the markets, rules, competition, opportunities and standards of the international economy to foster China’s structural reforms and advancement.

The United States also needs structural reforms—especially in pension and health-care systems, tax reform, public-private partnerships for infrastructure, and education connected to skills and jobs. U.S. entitlement programs now cost every man, woman and child in America $7,400 each year—more than China’s income per person.

China and the United States each have good, self-interested reasons to pursue structural reforms and global rebalancing. Yet cooperation can boost mutual prospects and the likelihood of success. Moreover, the effectiveness of Chinese and U.S. reforms will boost global economic conditions and enhance the likelihood of structural reforms elsewhere.

My sense is that the U.S.-Chinese economic dialogues—whether under the headings of “strategic,” joint commercial, G-20, APEC, WTO or other forums—have become too stilted, defensive and unimaginative.

China’s new growth agenda and America’s recovery offer an opportunity. Both parties need to explore win-win connections. Not all ideas will prove workable. But a new type of relationship could seek creative openings and solutions.

Moreover, as two major economic powers, developed and developing, the United States and China need to consider how their cooperation can catalyze improved regional and global systems.

For example, moves to open up China’s service sector—which are in China’s own interest—could be deployed to boost the service-sector liberalization negotiations in the World Trade Organization. The WTO Information Technology Agreement (ITA) in the 1990s proved to be a great boon to global sourcing, supply chains, logistics systems, innovation and consumers. WTO members are now discussing a second ITA to update the old product list and add services. China and the United States should be driving this effort. There are other opportunities, too, from trade-facilitation measures to rules for more open government procurement. Pressures will increase to clarify the rules of fair competition for state-owned enterprises. A few years ago, sovereign wealth funds demonstrated that steps toward increasing transparency and encouraging best practices could counter anxieties while improving performance.

The United States and China also need to be discussing the future international monetary system. That system has to adjust to both global shifts and the consequences of today’s extraordinary monetary policies. The world needs to be on watch for the risk of competitive currency devaluation. As China internationalizes the renminbi and moves toward an open capital account, a new era of great-power relations will require the major economies to manage the evolution toward a system of multiple reserve currencies.

China and the United States have experience and perspectives on development that could assist other countries—whether through natural-resource development, agriculture, expanded manufacturing and supply chains, service-sector development, infrastructure or investment. China and the United States should have common interests in inclusive growth, good governance, transparency and anticorruption, trade and avoiding boom-and-bust cycles. This new era could foster cooperation with multilateral institutions and private-sector networks.

Environmental topics need to be explored, too—from biodiversity and wildlife conservation to low-carbon development.

Indeed, if the United States and China are at odds on topics that require cooperation across national borders, the international system is unlikely to act effectively; conversely, if China and the United States can cooperate, even if just step by step, others are likely to join.

The economic agenda for a new type of great-power relationship could be extensive. Of course, there will be sensitivities and differences to manage, but the expanded network of economic ties—governmental, private, transnational and multilateral—can be a source of problem-solving ideas, creativity and even some cushion to absorb differences.

ON SECURITY issues, however, whether bilateral or multilateral, China and the United States do not have such a network. This gap can be traced in part to a structural difference. In China, the People’s Liberation Army (PLA) reports to the Central Military Commission, a party institution with only one or two civilians. Thus, China’s senior foreign-policy officials, up to the level of state councilor, usually aren’t able to intervene on security topics until after the PLA has acted and sometimes only after damage to China’s foreign relations has already occurred.

China does not have a national-security-council system to integrate security, foreign, defense, and even economic and political considerations. As a result, there is no institutional Chinese counterpart for what would elsewhere be described as “pol-mil” discussions (for political-military).

At times, China and the United States have had military-to-military exchanges, but these are not at the appropriate levels. And China turns the discussions off and on to register displeasure, inhibiting the in-depth exchanges and the trust that need to be forged. Moreover, a new type of great-power security relationship necessitates more than discussions among militaries.

Some Chinese officials and scholars recognize the need for a fuller integration of Chinese views on security and foreign-policy topics. The Chinese system might, for example, look to a member of the Politburo Standing Committee of the Chinese Communist Party (CCP) to pull together defense, foreign-policy, security and economic topics, drawing together the PLA, officials of the government and the Communist Party. Or the CCP leadership might rely on subcommittees.

However structured, a political-military discussion between China and the United States could supplement a renewed strategic dialogue. The current dialogue has taken up important topics, but too briefly, too infrequently and with limited engagement at the highest levels, where strategic decisions are likely to be made.

The most effective Sino-American strategic exchanges—Kissinger-Zhou, Brzezinski-Deng—have been small and involved many hours of conversation to develop a deeper understanding of worldviews, interests and conceptual frameworks.

A true high-level strategic discussion, including pol-mil dimensions, should foster a dialogue on historical perspectives, geographical considerations, economic dimensions, technological shifts, political constraints, perceptions of changing conditions, national interests and a search for mutual interests. It should also assist China and the United States to manage differences.

In such a dialogue, the United States should offer a clearer explanation why U.S. policies are not based on a “containment” strategy, as some Chinese seem to think. The United States should also explain its strategic concept of relations with China and why “hedging” policies by the United States and others are a reasonable reaction to worrisome Chinese behavior.

Importantly, the United States and China have mutual interests that they should at least understand and perhaps foster together.

For example, these interests might include:

• Freedom of the seas and maritime security, which are important for China’s international economic interests, regional stability and U.S. linkages, as a maritime and Pacific power, with Eurasia.

• Open skies and access to outer space, so as to facilitate movement of people, goods and information—which are important to our economies and security.

• Access to reasonably priced energy sources, including the development, transit and safe use of resources. This interest is served by security stability in the Persian Gulf, multiple energy sources and pipelines, sea-lane security, technological development and energy efficiency.

• Development of other resources, in conjunction with social and environmental safeguards, while managing disputes over territories and ownership.

• Establishing a sense of security for other partners in the Asia-Pacific region, so as to avoid destabilizing and potentially threatening military competition or miscalculation.

• Nonproliferation of weapons of mass destruction, especially to states or terrorists that will endanger regional and global peace and stability.

• Countering violent Islamic radical movements while encouraging Islamic leaders who seek peaceful development with respect for religious beliefs.

The identification of interests should be complemented by a sharing of assessments of threats to these interests and also perspectives on how to deal with the threats.

Yet these mutual interests—and even deep economic interdependence—could be overwhelmed by a failure to deal with differences in the Asia-Pacific region. The challenge for U.S. and Chinese leaders is to use global cooperation as an incentive to reduce regional friction, rather than to permit regional tensions to undermine global cooperation.

China has an interest in the security of its coastal approaches and in gaining influence in the western Pacific. The United States has a network of alliance and partner countries that value the stability and economic security provided by America’s presence. These alliance ties are important to America’s regional and global standing, which has reassured others. Therefore, China’s relations with some neighbors, including Japan, cannot be separated from U.S. relations with China or U.S. relations with its allies. At the same time, these U.S. partners—like the United States itself—value their economic, political and cultural ties to China.

TODAY, CHINA’S Asian allies are few, poor, unreliable and often isolated, while America’s allies are prosperous and expanding. If China’s assertion of influence is interpreted as a threat to others, China will inevitably evoke a counterreaction. To avoid creating its own encirclement, China has an interest in building ties with U.S. allies and friends, not in increasing their fears. The United States and China together have an interest in fostering regional integration, within a global system, without threats that weaken confidence or escalate tensions.

It seems that the countries of Southeast Asia recognize the mutual benefits of economic integration within a safe security framework. Yet the differences over resource development are spilling over into fears about maritime security. None of the parties has an interest in escalation of anxieties or conflict. They share an interest in negotiated, cooperative solutions.

Northeast Asia, however, poses serious dangers. North Korea, with a failed economy and uncertain leadership, has used threats and nuclear weapons to demand assistance while mobilizing an isolated garrison state. Its international trade in dangerous weapons and illegal activities create havoc elsewhere.

North Korea has rejected the 1953 armistice. It has used military force against South Korea twice in recent years, killing people and risking escalation that could slip out of control. North Korea has threatened preemptive strikes against South Korea and the United States, while endangering Japan and testing nuclear weapons and ballistic missiles that it could use to implement these threats.

China traditionally has believed North Korea offers a security “buffer.” But this is outdated logic. An invasion of China is not conceivable. But conflict precipitated by North Korea is increasingly conceivable, and it certainly wouldn’t be in China’s interest.

When Dai Bingguo, a longtime leading Chinese diplomat, and I had strategic discussions in 2005–2006, I suggested that the United States would be content if North Korea became like China. How, I asked, could China object to that? Moreover, I pointed out that if the Koreas ever united—however the process came about—China would then have an interest in the United States retaining a security alliance with Korea. This alliance would reassure Koreans, who throughout history have seen their peninsula serve as a route for the militaries of much bigger neighbors. If a unified Korea inherited a nuclear weapon, the U.S. alliance with Korea could be instrumental in persuading it to abandon that weapon. A nuclear Korea would leave Japan as the only Northeast Asian country without nuclear weapons, a situation that would worry the Japanese.

Moreover, I told Dai Bingguo that it was my expectation, contrary to Chinese speculation, that a U.S. alliance with a unified Korea would be backed by air and naval assets in the South, not large land forces, and certainly not troops on the Yalu. In contrast, if the U.S. alliance with Korea ended, Japan might eventually be concerned about being the sole Asian host to U.S. bases and forces.

That was years ago. Chinese and U.S. strategists need to be having these discussions about security in Northeast Asia now—to head off dangers today and prepare for a safer tomorrow.

I suspect, for example, that one reason behind China’s reluctance to press North Korea to end its hostile acts and begin reforms is a concern about being able to manage the process of change in North Korea. Perhaps South Korea and the United States—and others in the region—can discuss the possibilities for change with China. While China may wish to avoid considering this prospect, the reality is that a threatening North Korea will prompt responses by others that conflict with China’s preferences for regional security.

Yet all these substantive proposals for a new type of great-power relationship are likely to be stillborn unless China and the United States remove a corrosive that is eating away at our trust and ties: cybersecurity.

Cybersecurity anxieties take different forms, which compound a rising risk of confrontation. One dimension is espionage. A second is commercial espionage, which U.S. and other sources believe is rampant, extremely costly and destructive. A third is sabotage. And a fourth is the question of cyberwarfare—and whether and how we should apply such principles of war as hot pursuit, collateral damage, proportionality and unacceptable damage to conflict in cyberspace.

Decades ago, with the advent of nuclear weapons, security strategists developed doctrines and theories to manage risks of mass destruction. I don’t know whether cybersecurity lends itself to similar discussions. I do know that it is vital that the great powers of the twenty-first century discuss how they might deal with these issues, which could undermine President Xi Jinping’s suggested response to history’s lessons.

There is a debate in the United States about whether China’s concept of “international relations” can ever accept a system based on rules that support an integrative approach. Some—including Henry Kissinger—believe that China’s view of itself as the “Middle Kingdom” only allows for tributary relationships.

Different perspectives among American policy makers and experts may reflect, in part, variations in experiences on economic and security issues. Economic-policy makers observed how Deng Xiaoping employed the international economic system as an enabler of dramatic internal reforms; Zhu Rongji went further, using China’s WTO accession to import international economic rules and relationships. Similarly, China’s economic relations and actions over the past five years of economic crisis have been generally cooperative. In my time at the World Bank Group, I also saw China’s support for—and willingness to adapt to—multilateral development institutions and issues prompted by China’s economic rise.

The experience with security topics raises more doubts, perhaps leading to the difference in perceptions about China’s concepts of international relations in the twenty-first century.

THE IDEA of a new type of great-power relationship does not answer these questions. But it offers us an opportunity to explore various answers.

It is not only China that brings a special historical experience to this task.

The United States, although it is the established power, is not a status quo power. Many international observers are confused by this American quality. Commentators ask why the United States, the world’s most powerful country, doesn’t simply want to preserve the existing order.

One symbol of America’s global engagement is the one-dollar bill. Look at the back of that bill, and you will see a picture of the Great Seal of the United States, in place since the approval of the U.S. Congress in 1782. It includes a Virgilian motto: “Novus ordo seclorum,” or “new order of the ages.” As my professor of diplomatic history pointed out long ago, much of American history is about whether this new order is supposed to be geographically limited to the just-created United States—or broadly applicable.

In addition to security and power—and freedom to trade and dollar diplomacy—American foreign policy has at times sought to promote the principles of the eighteenth-century Enlightenment that were embodied in America’s revolution. Today, those principles are reflected in discussions about human rights and freedoms. But those are also topics that China is debating under such rubrics as good governance, limits on arbitrary governmental action and the rule of law.

The challenge of crafting this new type of great-power relationship is intriguing. It involves much more than a new balance of power. China is a rising power but one guided by many traditional views. The United States is an established power but one comfortable with change. Both the United States and China are highly successful economically and deeply interconnected with many other countries and regions. Their relations will affect many other nations and regions.

My hope is that these ideas and concepts might assist these two powerful and vibrant countries to avoid the Thucydides trap as they explore a new type of great-power relationship. This could be an exciting venture, with much at stake—for China, the United States and the world.

Robert B. Zoellick, former World Bank president, U.S. deputy secretary of state and U.S. trade representative, is currently a distinguished visiting fellow at the Peterson Institute for International Economics and a senior fellow at Harvard University’s Belfer Center. This article is adapted from an address delivered before the Shanghai Forum at Fudan University in Shanghai, on May 25, 2013.

Image: Pullquote: The current dialogue has taken up important topics, but too briefly, too infrequently and with limited engagement at the highest levels, where strategic decisions are likely to be made.Essay Types: Essay