Category Archives: US-China Relationship

The Difficult Course of US-China Relations

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Many anticipated, and or feared, the flood of Executive Orders from the second Trump White House these past weeks. The barrage of Executive Orders follows a playbook conceived from a longtime Trump supporter Steve Bannon.  Bannon referred to it as ‘flood the zone’. Bannon served as the White House’s chief strategist for the first seven months of U.S. president Donald Trump’s first administration, before Trump discharged him. He remains a strong supporter of Trump actions. As Luke Braodwater of the NYTimes describes this Bannon approach:

… Bannon boasted of the ability to overwhelm Democrats and any media opposition through a determined effort to “flood the zone” with initiatives.

 

On Tuesday, just when Democrats thought they might come up for air, news broke that Mr. Trump had ordered a freeze on trillions of dollars in federal grants and loans, prompting a new round of outrage.

 

It is a little unclear how adept the Democrats are in parrying the ‘flood the zone’ approach but there does seem to be some awareness of the tactic: 

“It’s a little bit like drinking from a fire hose,” Representative Gerald E. Connolly of Virginia, the top Democrat on the Oversight Committee, said of the pace of Mr. Trump’s moves. But he said that speed is likely to cause sloppiness and mistakes.”

 

They’re going to stumble,” Mr. Connolly said. “They’re going to screw up, and we’re going to pounce when they do. In their haste to remake the federal government, they’re going to make big, big mistakes.”

 

And the evidence of at least Trump ‘screw ups’ emerged rapidly. The particular initiative that generated a significant amount of chaos was the issuance of the freeze on government spending. In fact the freeze memo was quickly withdrawn though not before a federal judge on Tuesday temporarily blocked a pause on federal funding while the Trump administration declared it would conduct an across-the-board review. Even more chaotically the new press secretary, Karoline Leavitt, a quite blustery press secretary it seems I might add, insisted, however, that the spending freeze in the Order wasn’t being rescinded despite the memo that appeared to rescinded the freeze. Dan Drezner at his Substack,  Drezner’s World, captured the craziness that has transpired recently with this flurry of executive orders, the freeze memo in particular: 

Here’s the thing, though: to paraphrase Mario Cuomo, you can campaign seriously but you have to govern literally. And the first week of Trump 2.0 highlights the problems when an entire administration fails to make this particular pivot. 

 

Needless to say, almost everything after “The American people elected Donald J. Trump to be President of the United States” is either factually or legally incorrect. Taken literally, it is a tsunami of bullshit.

 

Dan summed up this rather chaotic week for the Trump administration this  way: 

The White House and its co-partisans  tried to backfill and claim that everyone overreacted and should have understood what the president really, truly meant. But that dog won’t hunt. As the Manhattan Institute’s Brian Riedl — a pretty conservative dude — concluded, “the blame here lies entirely with the White House for releasing a terribly-written memo that did not include most of the guardrails they are now rushing to add as part of their next-day damage control. Perhaps the White House should try to get it right the first time.

 

If the Trump administration isn’t careful, they are going to blow their political inheritance and destroy the confidence of the American people. If they persist with “seriously but not literally” as a mode of governance, things will get real ugly real fast.

Now the chaos that broke out after the freeze memo kinda interfered with my effort to assess where Trump 2.0 was going with respect to US relations with China beginning with the Trump threat to impose 10 percent tariffs on China on account of fentanyl. Where is Trump 2.0 with respect to US-China relations? Well, interestingly Trump has not  played up the US-China relationship yet, though the imposition of tariffs on China might well signal a change. And while Trump has threatened tariffs we need to see if, and or when they happen, and the bluster against China that will accompany the tariff announcement. 

Meanwhile, Ryan Hass of Brookings has written a very interesting piece – “Can Trump seize the moment on China?” targeting the US-China relationship. He points to the very ‘heart’ of the competitiveness between the two leading powers:

This comprehensive approach [from China] to nurturing national economic competitiveness has generated eye-popping levels of industrial output. China is on pace to produce nearly 45% of global industrial output by 2030, according to the United Nations Industrial Development Organization. Outside of America’s industrial dominance in the wake of World War II, it is hard to find modern historical analogs to the levels of global concentration of output that are now occurring in China. 

Ryan identifies from this massive industrial output advantage for China three risks. First there is the national security risk:

China’s factories and shipyards are on track to have production capacity for military equipment at a scale the United States and its partners could struggle to match. Already, according to Michael Beckley, China is embarking on the largest peacetime military buildup since World War II, producing ships, planes, and missiles five to six times as fast as the United States

Then, there is the risk to US social cohesion:

If America’s economy becomes too dramatically overweighted toward finance, technology, and services, it will leave a large portion of the population behind, resulting in a hollowed-out middle class and a yawning gap between winners and losers in the 21st-century American economy. Such a scenario would fracture the polity and create the seeds of social disorder.

Third, and relatedly, the overconcentration of industrial output in China would undermine America’s allies in Europe and Asia:

America’s long-term strategic interests would be ill-served if vehicle factories shutter across Europe and if Japan’s and South Korea’s industrial sectors are decimated by Chinese competitors. A core challenge for the Trump administration will be rebalancing global economic activity to ensure sustainable opportunities for growth in industrial output outside China.

Rebalancing is the key. But there also is the rub. It is very hard to see how with the current leadership of China, namely Xi Jinping, such a rebalancing is possible. The difficulties are underscored in an article by Zongyuan Zoe Liu in FA. This is an article published back in August entitled: “China’s Real Economic Crisis: Why Beijing Won’t Give Up on a Failing Model”. Zongyuan Zoe is currently the Maurice R. Greenberg Fellow for China Studies at the Council on Foreign Relations. In the piece he wrote:

Despite vehement denials by Beijing, Chinese industrial policy has for decades led to recurring cycles of overcapacity.

 

Partly, this stems from a long tradition of economic planning that has given enormous emphasis to industrial production and infrastructure development while virtually ignoring household consumption. This oversight does not stem from ignorance or miscalculation; rather, it reflects the Chinese Communist Party’s long-standing economic vision.

 

As the party sees it, consumption is an individualistic distraction that threatens to divert resources away from China’s core economic strength: its industrial base.” According to party orthodoxy, China’s economic advantage derives from its low consumption and high savings rates, which generate capital that the state-controlled banking system can funnel into industrial enterprises.

And he then concludes: 

For the West, China’s overcapacity problem presents a long-term challenge that can’t be solved simply by erecting new trade barriers. For one thing, even if the United States and Europe were able to significantly limit the amount of Chinese goods reaching Western markets, it would not unravel the structural inefficiencies that have accumulated in China over decades of privileging industrial investment and production goals.

Overlay this industrial focus by China with an intense competitive urges by members of the Trump team, starting with Marco Rubio, if not Donald Trump himself. Here is Rubio in his confirmation opening remarks speaking about China: 

We welcomed the Chinese Communist Party into this global order. And they took advantage of all its benefits. But they ignored all its obligations and responsibilities. Instead, they have lied, cheated, hacked, and stolen their way to global superpower status, at our expense.

Hardly an attitude likely to generate serious considered negotiations between the US and China. And, then finally, add the necessary US approach to negotiations as seen and set out by Ryan Hass: 

Trump’s team holds a variety of viewpoints on how to maximize America’s leverage, or even on what objectives America should pursue in its competition with China. Left unaddressed, this variance in views risks leading to policy incoherence. To overcome this risk, Trump will need to set a firm direction, identify specific objectives, and put his advisors on notice that they will pay a cost for actions that undermine his goals. 

Look Trump’s transactional urges may surprise us all with movement on the US-China negotiating front but there is little, no, no way that Trump will undertake a more than reasonable approach as urged by Ryan. In fact Ryan describes what is likely to be the more telling direction and its consequences: 

Absent firm and decisive policy direction from the top, there is a risk of policy chaos, with different factions canceling each other out and little progress being achieved to address American concerns about Chinese behavior. In such a circumstance, the U.S.-China relationship likely would grow more fractious. If Beijing abandons the hope of resolving U.S.-China differences through diplomacy, it likely will double down on efforts to hedge risk, including by deepening its relationships with countries who share antagonisms against the United States. 

Based on what we have seen to date, I think we should ‘hunker down’ and anticipate a ‘risk of policy chaos’. More to come.

Image Credit: AP

Struggling with Global Leadership

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So, with the last several Posts here at Alan’s Newsletter, I have been transitioning – altering my mindset, and bidding farewell to the Biden administration and contemplating the reality of the return of Donald Trump as US President with a new administration. There are certainly strong signs that this time around, as opposed to 2017, that the Trump administration is intent on ‘hitting the ground running’. As The Economist noted, for Trump there is nothing more critical than immigration and the removal of illegals:

Mr Trump has long been exercised about immigration. He made building a wall along America’s border with Mexico a central theme of his election campaign in 2016. He duly issued a flurry of executive orders on immigration within weeks of taking office in 2017, including a ban on visas for applicants from various largely Muslim countries and instructions to federal agencies to expedite the construction of the border wall and to detain more illegal immigrants. … Stephen Miller, his deputy chief of staff, is an America First, anti-immigration hawk who has been fighting against bipartisan immigration reform in Congress since 2013. “As God is my witness,” he declared last year, “you are going to see millions of people rapidly removed from this country who have no right to be here.

The question is where does Trump and his team take the US? On immigration? On US-China relations? On relations with allies and the multilateral relations and organizations that the US has built over the past several decades? What approach is Trump going to take in rolling out ‘America First’? Now, there is lots of speculation but with so much being described really knowing is nearly impossible. But that being said, one clear direction is described by Fareed Zakaria. Like many, Fareed has to absorb the recent inducements and/or threats by Trump with respect to Greenland and Canada and the Panama Canal. As a result Fareed suggests:

Having campaigned on a policy of ending wars, making peace, putting America first and disentangling the country from the world, President-elect Donald Trump this week decided to revive 19th-century imperialism. In a single news conference, he pondered making Canada a state and acquiring Greenland and the Panama Canal by economic coercion — and declined to rule out using military force in the latter two cases.

Fareed, in his weekly Washington Post opinion piece titled, “Trump revives 19th-century imperialism. Make Russia great again!”, suggests these territorial aggrandizement initiatives simply put the US today in the same league as Russia and China:

In the news conference, Trump proposed getting rid of the “artificially drawn line” between Canada and the United States. Of course, that is precisely what President Vladimir Putin says about the line between Russia and Ukraine. Or President Xi Jinping about the division between China and Taiwan. This is a world that makes Russia and China great again.

It is tough to really understand the future US foreign policy with Trump at the helm. Now I may be reaching way too far but I was intrigued by the republishing, recently by Foreign Affairs, of a piece by Richard Haass now President emeritus of CFR and Charles Kupchan a Senior Fellow and Director of European Studies at the Council on Foreign Relations. Charlie is also Professor of International Affairs at the School of Foreign Service and Government Department at Georgetown University. The article is entitled, “The New Concert of Powers: How to Prevent Catastrophe and Promote Stability in a Multipolar World”. The piece was originally published in 2021.

For Haass and Kupchan the future of the global order is multipolarity as they describe it in the FA article. As they suggest:

Moreover, even if Western democracies overcome polarization, beat back illiberalism, and pull off an economic rebound, they will not forestall the arrival of a world that is both multipolar and ideologically diverse.

And as they argue the best means, maybe the only structure for the global order to achieve some stability in such a coming multipolar environment is a gathering of major powers:

The best vehicle for promoting stability in the twenty-first century is a global concert of major powers. As the history of the nineteenth-century Concert of Europe demonstrated—its members were the United Kingdom, France, Russia, Prussia, and Austria—a steering group of leading countries can curb the geopolitical and ideological competition that usually accompanies multipolarity.

 

This recent uptake in concert operation and interest in the same includes a major piece by my colleague, Andrew Fenton Cooper, from Waterloo University. You might want to take a look at his recent publication from Oxford Press titled: The Concertation Impulse in World Politics”. But turning back to Haass and Kupchan this is their description and understanding of such a concert:

 

Concerts have two characteristics that make them well suited to the emerging global landscape: political inclusivity and procedural informality. A concert’s inclusivity means that it puts at the table the geopolitically influential and powerful states that need to be there, regardless of their regime type. In so doing, it largely separates ideological differences over domestic governance from matters of international cooperation.

Concerts have two characteristics that make them well suited to the emerging global landscape: political inclusivity and procedural informality. A concert’s inclusivity means that it puts at the table the geopolitically influential and powerful states that need to be there, regardless of their regime type. In so doing, it largely separates ideological differences over domestic governance from matters of international cooperation.

A global concert would be a consultative, not a decision-making, body. It would address emerging crises yet ensure that urgent issues would not crowd out important ones, and it would deliberate on reforms to existing norms and institutions.

 

This steering group would help fashion new rules of the road and build support for collective initiatives but leave operational matters, such as deploying peacekeeping missions, delivering pandemic relief, and concluding new climate deals, to the UN and other existing bodies. The concert would thus tee up decisions that could then be taken and implemented elsewhere. It would sit atop and backstop, not supplant, the current international architecture by maintaining a dialogue that does not now exist.

This new global concert proposal, according to Haass and Kupchan, would have the following membership:

A global concert would have six members: China, the European Union, India, Japan, Russia, and the United States.

The concert’s members would collectively represent roughly 70 percent of both global GDP and global military spending.

The analysis seems to be moving full speed forward until:

This proposal presumes that none of the concert’s members would be a revisionist power bent on aggression and conquest.

Ah, and there is the dilemma – the ‘fly in the ointment’. The reality is that two great powers are evidently revisionist – that is Russia and China, and now under Trump the same may well be said for the upcoming Trump administration.

But as Nathan Gardels, the editor-in-chief of Noema Magazine and also the co-founder of, and a senior adviser to the Berggruen Institute, just recently wrote in Noema:

A revisionist state seeks to change the rules and norms of the extant world order. In recent years, we have become used to castigating China and Russia as the chief renegades in this endeavor. Now, as Princeton political scientist John Ikenberry pithily notes, another “revisionist state has arrived on the scene to contest the liberal international order … it is the United States. It’s Trump in the Oval Office, the beating heart of the free world.”

So, are we at a brick wall when it comes to promoting stability and dampening geopolitical tensions? Well, like many of my international relations colleagues I have spent time examining the contours and the operation of the classic global concert – the Concert of Europe. For Haass and Kupchan this is the model for a contemporary concert designed to diminish tensions and mitigate conflict. But the Concert is 200 years ago and it is not at all clear that a modern day instrument could operate in any way similar to this much earlier European instrument. And I would think we have already a ready-made instrument of concert-like characteristics – the G20. This involves a membership wider than that suggested by these authors. The G20 today includes: Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Republic of Korea, Mexico, Russia, Saudi Arabia, South Africa, Türkiye, United Kingdom and United States and two regional bodies today: the European Union and the African Union. It seems to me this Informal has a much better representation from the Global South and the collective could turn its attention to critical global security issues as well as global economic issues if the motivation were there.

But concerts may not be, or may not be the only mechanism to generate potentially greater stability in a world of increasing disorder. Rather, plurilateral structures – smaller groupings that include major and Middle Powers, especially from the Global South targeting growing challenges to global stability – plurilateral collaborations that could target climate change and the green transition, debt distress and relief, regional conflicts and more. Let’s tackle real threatening problems starting with these plurilateral collaboratives and build our way to a global concert in time. Let’s start here with this smaller step, and who knows, in time it might also provide for a larger grouping, even a ‘global concert’ with possibly better leadership than we seem to have right now.

This first appeared as a Substack Post at Alan’s Newsletter – https://globalsummitryproject.substack.com/publish/post/155031165

All comments and subscriptions for the Substack are welcome

 

“What Can We Expect?”: In the First Instance

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Now you might think, with that title, that I’d be delving into Trump 2.0. Well, not exactly in the first instance. Instead, I am trying to focus on the end of the Biden administration: what folks conclude about the Biden initiatives and where that then leads, possibly, for the upcoming Trump administration. Now, to be clear, I’m not trying to guess where the Trump administration is likely to take us. Not with the inconsistent Trump at the helm again; but it would be good if the incoming administration might choose to take a hard look at what the Biden administration hoped to achieve with its policy initiatives and where, in fact, it found itself in the increasing disorder in the international system. We are particularly interested, not surprisingly, in the state of US-China relations in the face of four years of Biden strategy and policy. What has China done in reaction to Biden strategic competition? And what does the United States do now in the face of today’s US-China competition?

Just the other day, Tom Friedman from the NYT gave us a peek of what he saw in a recent visit to Beijing and Shanghai. Where is China today in the face of the challenging US relations: the end of US engagement, the rise in tensions with Trump 1.0 and the Biden strategic competitive policy. Friedman in an opinion article titled, “How Elon Musk and Taylor Swift Can Resolve U.S.-China Relations” makes “no bones about it” and early in the opinion piece he writes:

I just spent a week in Beijing and Shanghai, meeting with Chinese officials, economists and entrepreneurs, and let me get right to the point: While we were sleeping China took a great leap forward in high-tech manufacturing of everything.

And he starts with Trump 1.0:

If no one has told Donald Trump, then I will: His nickname on Chinese social media today is “Chuan Jianguo” — meaning “Trump the (Chinese) Nation Builder” — because of how his relentless China bashing and tariffs during his first term as president lit a fire under Beijing to double down on its efforts to gain global supremacy in electric cars, robots and rare materials, and to become as independent of America’s markets and tools as possible.

What Trump 2.0 now faces in today’s China that he helped to create is, according to Tom:

The China that Trump will encounter is a much more formidable export engine. Its advanced manufacturing muscles have exploded in size, sophistication and quantity in the last eight years, even while consumption by its people remains puny.

 

China’s export machine is so strong now that only very high tariffs might really slow it down, and China’s response to very high tariffs could be to start cutting off American industries from crucial supplies that are now available almost nowhere else. That kind of supply-chain warfare is not what anyone, anywhere needs.

Further, Tom signals what a Trump administration must now do in the face of much more evident competitor:

But if we don’t use this time to respond to China the way we did to the Soviet Union’s 1957 launch of Sputnik, the world’s first artificial satellite, with our own comprehensive scientific, innovative and industrial push, we will be toast.

So for Tom what it requires is a ‘full court press’ – ‘A Sputnik Moment’ by the US under a second Trump administration. Hmm, if really required one has to wonder if given today’s US politics there is anything even somewhat similar to that much earlier, “all hands on deck” type US strategy.

Tom Friedman, however, is not the only one calling for a concerted US national effort to deal with a charging China that the US helped to create. More focused on the technology/science/innovation front is the examination by my good colleague Scott Kennedy from CSIS. Scott is senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies at CSIS and recently he examined the US-China technology competition in Foreign Affairs, in an article titled, “How America’s War on Chinese Tech Backfired And Why Trump’s Plans Would Make Things Even Worse.

But just before going there I thought it was worth setting up that examination by focusing on probably one of Joe Biden’s last public talks as President, this at Brookings in Washington, just a few days ago on December 10th. The remarks were titled by the White House as, “His Middle-Out, Bottom-Up Economic Playbook”. There was a fair bit of coughing and missing words in the transcript but the message was clear enough:

Today, here at Brookings Institution, I would like to talk about pivotal actions we’ve taken to rebuild the economy for the long haul, you know, and how we’re — how we’re at a critical, in my view, moment in the direction the economy is going to take.

 

After decades of trickle-down economics that primarily benefited those at the very top, we — we’ve written a new book that’s growing the economy — the middle-out and the bottom-up — that benefits, thus far, everyone. And that’s going to be the test with go- — going forward.

 

I was determined to restore U.S. leadership in industries of the future.

 

We understood we needed long-term investments for the future. Investing in America agenda, which includes my Bipartisan Infrastructure Law, CHIPS and Science Act, the Inflation Reduction Act — together, they mark the most significant investment in America since the New Deal. And that’s a fact. I mean, whether it’s good or bad, that’s the fact.

 

We not only — we not only beat the pandemic; we broke from the economic orthodoxy that has failed this nation, in my view, for a long time — a theory that led to fewer jobs, less economic growth, and bigger deficits.

 

And the best way to build that in America was to invest in America, invest in American products and invest in the American people — not by handing out tax breaks to those at the top.

But the tools employed by the Biden administration, as described by the President, barely touched the protections initiated by Trump 1.0 and advanced further in some cases by the Biden administration. But Scott targets exactly those initiatives by the Biden administration, particularly in the technology innovation sectors. As he describes:

Washington’s array of tools is highly expansive: export controls, tariffs, product bans, inbound and outbound investment screening, constraints on data flows, incentives to shift supply chains, limits on scholarly exchange and research collaboration, industrial policy expenditures, and buy-America incentives.

 

The goals of these measures are equally diverse: slow China’s progress in the most advanced technologies that have dual-use potential, reduce overdependence on China as a source of inputs and as a market for Western goods, deny China access to sensitive data, protect critical infrastructure, push back against economic coercion, protect the United States’ industrial competitiveness, and boost its manufacturing employment.

And he concludes by arguing:

Beijing’s shift toward a more expansive and assertive form of mercantilist techno-nationalism poses genuine risks to the prosperity and economic security of the United States and others. Something must be done, to be sure, but Washington’s increasingly restrictive policies have yielded highly mixed results.

So it’s not that China doesn’t pose a challenge but the solutions chosen by the Biden administration, in part built on the earlier Trump years, raise serious concerns and pose real questions in the face of Trump 2.0:

As President-elect Donald Trump returns to power, his administration would be wise to reflect on the fact that existing restrictions on Chinese technology have yielded decidedly mixed results. The Biden administration has described its strategy as a “small yard, high fence,” or placing high restrictions on a small number of critical technologies. That yard is already growing, with negative unintended consequences for the United States.

What then can be done, according to Scott. It seems to be in several parts. First, according to him:

Washington needs to set clear priorities, identifying the most urgent threats that deserve a response. Otherwise, the United States will be dragged into a game of whack-a-mole or, more worryingly, try to block all commercial ties with China. To the extent that the United States attempts to deny technologies to China, the only sustainable approach involves working with allies and other countries so that the United States will not be outflanked by China and lose technology leadership in the rest of the world. If the Trump administration pursues extensive decoupling from China, the result will most likely be an isolated, poorer, and weaker United States.

And additionally Scott targets international organizations and multilateral initiatives:

The Trump administration would also be unwise to ignore global institutions, such as the World Trade Organization, as doing so would dramatically raise the likelihood of unbounded conflict. Instead, Washington should intensify multilateral cooperation to set new rules for global economic activity in order to avoid a race to the bottom.

 

The United States may in some instances need to take unilateral steps to maintain its relative technology superiority, but excessive economic security measures will mean less innovation, slower economic growth, reduced profits, and fewer jobs. With a combination of wise domestic policies, collaboration with allies, and investment in international institutions, the United States can achieve both prosperity and security.

This latter focus is welcome, it seems to me. As bad as some of the Biden tariff and sanction approaches have been, certainly the dismantling of the WTO trade and investment policies stand out, in particular, because earlier administrations were vital to the creation of the multilateral trade framework. While it was, and is imperfect, as any multilateral instrument is, it is a ‘damn sight better’ than where we are today. Geneva at the moment is dead.

But it is not just the economy/technology front that demands apparently a concerted Trump administration effort. There is also national security. The message, it seems, is being delivered by one of the key figures over decades, that is none other than Senator Mitch McConnell.

I plan to return to Senator McConnell, and a number of others on national security, after the holiday break. But it is holiday time and I plan to put down my pen for the holidays. Look for me back here at Alan’s Newsletter in the week of January 6th – 2025, if not earlier. Have a great Holiday time!

This Post first appeared as a Substack Post at Alan’s Newsletter.

https://globalsummitryproject.substack.com/p/what-can-we-expect-in-the-first-instance

All comments and Subscriptions are welcome.

Image Credit: USNews.com

The ‘Global Order’: ‘Who is on First’

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I was trying very hard to ignore the impending vote for US president upcoming next week. We will have plenty of time to contemplate the action and consequences of the presidential choice on US foreign policy and global leadership.

But then again I was not fully able to ignore the consequences for the international order of this event. I was caught by a very recent Special Report from CIGI on: “Scenarios of Evolving Global Order”. Now CIGI is located in Waterloo Ontario and CIGI stands for the Centre for International Governance Innovation. I have a small soft spot for the think tank as I and a number of close colleagues spent some good years there when it launched as a global affairs outfit and, I think produced some good early work on global governance, among other things.

Anyway, the Report is interesting as it attempts to:

… fill a gap between the analysis of current trends and mapping of potential futures by outlining five possible scenarios for an evolving global order. These five scenarios represent a spectrum from the most modest plausible change (reform of the current system) to the most radical (transformation of the whole system due to a global shock).

There clearly is much current discussion over the evolving global order in the context of significant geopolitical tensions between the two leading powers and the numerous conflicts burdening international relations. So the Report describes 5 different scenarios built on these assumptions:

• The current international system is not working; international institutions, including the United Nations and Bretton Woods institutions, are unable to address most contemporary challenges.

• Responses to contemporary global challenges are siloed, nationally and institutionally.

• The United States’ global leadership is waning due to reduced capacity and internal focus.

• The relative economic power of liberal democracies is diminishing.

• Emerging powers — including, but not limited to, China and India — are increasingly asserting their influence and driving change.

• Finding new pathways of international cooperation on security issues may be more elusive, meaning attention may focus on cooperation on economic issues.

• Deglobalization, and regional integration as an alternative to multilateralism, continues to accelerate by many, but not all, measures.

• Momentum for nationalist and isolationist policies continues to build in many countries.

The result five different scenarios as filled out by the author team:

Scenario 1: Reform of the Existing Global System

Scenario 2: Replacement of the Existing Global System

Scenario 3: The Emergence of a Bloc-Based Global System

Scenario 4: A Case of Disorder

Scenario 5: Transformed Global Order

Each scenario is interesting and for every scenario there are two pathways described by the authors leading to an identified outcome:

The authors’ view is that these five scenarios broadly represent core directions that global order may evolve toward in the coming months and years. They acknowledge that there are numerous potential pathways that the five scenarios could take — by choosing only two for each, many possibilities remain for further exploration.

Now each scenario is worth assessing – and I will try and examine some perghaps at a later date, but I was struck by the perspective the authors identified for the structure and the dynamics for all five scenarios. As the Report suggested:

All of the scenarios explored assume the current and evolving global dynamics are multipolar (rather than other forms such as bipolar, hegemonic or concerted). It is, of course, possible that global order does not continue to evolve in  a multipolar way — for example, that one group of states forms a security and economic coalition in a way that dominates all the rest or that the world devolves into a bipolar world utterly dominated by American and Chinese spheres of control. The world is currently operating with multipolar dynamics on most issues, and this is likely to continue into the future.

Now that assumption of a multipolar system struck me. The reason is I came across an interesting Substack Post from Clarence Gu and Chenghao Sun, ChinAffairs+ describing in the Post titled “Yan Xuetong & John Mearsheimer Conversation: Who Shapes Global Order, and Who Will Win the Competition?”an interesting encounter, the third in fact, between these two experts. Now Yan Xuetong is the Dean of the Institute of International Relations at Tsinghua University, a highly prestigious university in China and John Mearsheimer is, as he describes himself, “the  R. Wendell Harrison Distinguished Service Professor in the Political Science Department at the University of Chicago, where he has taught since 1982 and an international relations theorist. More specifically, I am a realist.”

Now I have known John for many years as we were graduate students together at Cornell University with the same adviser, the recently passed Richard N Rosecrance, renowned international relations expert. But we were seldom on the same side of the fence when describing the underlying dynamics of the international system. But that is neither here nor there.

Both Yan Xuetong and John are known for their focus in international relations on ‘realism’, and in fact John’s  writings identify what is known as ‘offensive realism’. And while the two differ to a degree in this encounter at Tsinghua in Beijing they both strongly endorse the notion that the system is driven by the need by states to maintain dominance in a current bipolar not multipolar world (You will note by the way that the quotes that follow have been slightly edited due at times to  imperfect transcription). As John describes the international system:

How do you survive the international system? The system is where there is no higher authority. The answer is very simple. You want to be very powerful. You want to maximize your power, you cannot be certain of the intentions of those other states. It pays to be really powerful, to pay to be a hegemon.

 

If you think more specifically, the argument is that you can only be a regional hegemon, number one. Number two, you want to make sure that no other state is a regional hegemon. The ideal situation is to be the only regional hegemony in the international system.

 

All of this is to say we are involved today, in an intense security competition. It shows no signs going away. And if anything will get worse with the passage of time. This is a tragic situation. It has nothing to do with Chinese culture or American culture. And many people in China blame the United States for this trouble. … So my argument is, it’s the system that has caused this intense security competition.

Yan Xuetong is even more direct. He states:

The new trend of global order is Counter-Globalization. Then certainly today, I think because today’s title is Global Order and US-China relationship, we have to talk about how the relationship between China and US impact the current global order, my understanding is that the China-US relationship just like John argued that it will be intensified in terms of conflicts.You cannot expect China and US suddenly find a way to set down those disputes become the partners. If that happens, it means our theories are wrong. And actually, why the China-US conflicts are increasing and intensifying. It’s because now we’re in a bipolar configuration. The power structure is not multipolar.

 

The power structure is not multipolar. The current power structure is bipolar. And in the IR community, we all agree the situation after the World War One was multipolar, and after World War Two is bipolar.

 

What I mean is that the historic experience tells us, today we still have to understand what the international configuration is. It is not multipolar, not unipolar, it is bipolar, because except China no other major powers have capability or national power that account for 1/3 of the United States. None of them, except China. I don’t know how exactly we can do the measurement, but at least China’s capability is larger than 1/3 of the United States, possibly I would say 2/3 of the US.

Well, I won’t go into the five scenarios at this point though they are worth reviewing. The point here is to raise concern over analyses that are largely driven by structure rather than dynamics generated by policy – security, economic and political. These are the drivers that shape international outcomes. It is difficult at this moment to determine whether the structure is slightly less hegemonic, or is already bipolar, or in fact has become multipolar. The real analytic need, however, is to focus on the leading states and their foreign policy determinations. Structure is there, of course, but it does not drive foreign policy action or outcomes.

This Post first appeared at my Substack, Alan’s Newsletter. All comments and free subscriptions are welcome

Image Credit: Clarence Gu

 

Reshaping the US Global Order Role

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It is not a surprise with a month to go till the US election that ‘folks’ are assessing where the US global order role is, where it should be, or needs or can be, as we look towards a new administration. I have no crystal ball to tell me who is about to win the election and I am not about to contemplate the return of Trump. But I will look, however, at a possible Harris administration and it appears evident that observers and experts are with a month to go reflecting on what’s next for US global leadership.

Let’s start with one who has had responsibility in the near past for US foreign policy. Secretary of State Antony Blinken recently penned an assessment of ‘his’ foreign policy in FA, titled, “America’s Strategy of Renewal: Rebuilding Leadership for a New World”. Now you’ll not be surprised that the piece is a narrative and strong expression of policy gone right:

President Biden and Vice President Harris pursued a strategy of renewal, pairing historic investments in competitiveness at home with an intensive diplomatic campaign to revitalize partnerships abroad.

This twin-pillared strategy, they believed, was the best way to disabuse competitors of their assumptions that the United States was declining and diffident.

Blinken acknowledges that US leadership and action was required to meet the challenge of these revisionist powers that appeared to be determined to reshape leadership and the principles of the current global order:

A fierce competition is underway to define a new age in international affairs. A small number of countries—principally Russia, with the partnership of Iran and North Korea, as well as China—are determined to alter the foundational principles of the international system. While their forms of governance, ideologies, interests, and capabilities differ, these revisionist powers all want to entrench autocratic rule at home and assert spheres of influence abroad.

 

They all wish to resolve territorial disputes by coercion or force and weaponize other countries’ economic and energy dependence. And they all seek to erode the foundations of the United States’ strength: its military and technological superiority, its dominant currency, and its unmatched network of alliances and partnerships. While these countries are not an axis, and the administration has been clear that it does not seek bloc confrontation, choices these revisionist powers are making mean we need to act decisively to prevent that outcome.

Implicitly and explicitly Blinken describes what he believes to be a very successful competitive policy with these revisionist actors and most particularly China. As Blinken describes Biden administration policy efforts:

The Biden administration’s commitment to compete vigorously yet responsibly along these lines took away the revisionists’ pretext that the United States was the obstacle to maintaining international peace and stability. It also earned the United States greater trust from its friends—and, along with it, stronger partnerships.

 

Second, we infused U.S. alliances and partnerships with new purpose.We elevated the Quad—the partnership with Australia, India, and Japan—and took concrete steps to realize a shared vision for a free and open Indo-Pacific, from enhancing maritime security to manufacturing safe, effective vaccines. We launched the U.S.-EU Trade and Technology Council, marshaling the world’s biggest economic partnership to shape global standards for emerging technologies and protect the United States’ and Europe’s most sensitive innovations.

To Blinken the alliances and partnerships that the US renewed or built were the keys to Biden administration success in a highly competitive world:

From day one, President Biden and Vice President Harris made a foundational choice that in a more competitive and combustible world, the United States cannot go it alone. If America wants to protect its security and create opportunities for its people, it must stand with those who have a stake in a free, open, secure, and prosperous world and stand up to those who threaten that world.

Notwithstanding then the revisionist power efforts to alter the global order, the US and its partners have been able to maintain the free and open global order and limit revisionist efforts to undermine the opportunities for the US and its partners:

The choices the United States makes in the second half of this decisive decade will determine whether this moment of testing remains a time of renewal or returns to a time of regression—whether Washington and its allies can continue to outcompete the forces of revisionism or allow their vision to define the twenty-first century.

Clearly Blinken is referencing the possibility of  a return to Trump. Otherwise Blinken seems to show some content with the actions of the Biden administration. That satisfaction is not shared by all. From the outside today but with experience of serving in the Biden administration another distinct point of you is expressed by a colleague, Jessica Chen Weiss. Jessica was from 2021 to 2022 a senior advisor to the policy planning staff at the U.S. Department of State on a Council on Foreign Relations International Affairs Fellowship for Tenured IR Scholars (IAF-TIRS). Jessica just recently took up a new academic appointment as the David M. Lampton Professor of China Studies at Johns Hopkins School of Advanced International Studies in Washington, D.C. and a nonresident senior fellow at the Asia Society Policy Institute Center for China Analysis. Once again in FA, Jessica examines Biden administration foreign policy in a piece titled, “The Case Against the China Consensus”. Jessica does not fall in line with Blinken’s description and actions of recent US foreign policy – its successful competition with the revisionist powers, most notably China. As Jessica describes recent Biden administration actions:

Washington faces growing criticism for pursuing open-ended competition with China without defining what success would look like. Even as China’s coercive capabilities and threatening behavior have rightly focused U.S. attention on the risks to American interests, the absence of clear metrics for success leaves the door open for partisan aspersions of the Biden administration’s approach.

With that Jessica strikes out toward an improved US-China relationship. As she describes it:

Yet beneath this charged atmosphere, ample space for debate and discernment remains. The apparent hardening of a U.S. consensus on China is shallower and wobblier than it appears. In this fluid environment, there is an opportunity for the next presidential administration to develop a more affirmative, less reactive approach, one that dials down the heat and focuses on reducing the risks while preserving the benefits of the vast web of ties that connect the United States and China.

Now it is clear from Jessica’s analysis the current administration has taken steps to at least maintain a balance with China:

The Biden administration, by contrast, has rightly invoked a sense of shared purpose, underlining the urgency of defending an international order in which might does not make right and working with governments of different persuasions to tackle problems that respect no borders or walls.

Still the emphasis from the current administration to compete successfully with China is dominant and leads to significant persistent competition with China that can, unfortunately lead to conflict:

But in the broader U.S. public and policy conversation, the impulse to thwart China often overwhelms efforts to work toward common objectives and advance U.S. interests. Rhetoric about winning the twenty first century reinforces the idea that competition is zero-sum, accelerating a rush on both sides of the Pacific to prepare for conflict and making it all too easy for critics in both societies to deride ordinary forms of diplomatic, commercial, and scientific interaction as naive at best and appeasement at worst. This emphasis on preparing for worst-case scenarios prevails in both countries.

For Jessica, then, the current policy posture is inadequate and maintains a dangerous locked in competition:

To halt this spiral, Beijing and Washington will need to identify the outcomes they wish to see, avoiding measures of success that are defined by slowing down or one-upping the other. Pursuing resilience and deterrence, not primacy or hegemony, would set them on a more stable course. Post–Cold War U.S. unipolarity in global politics was the exception, not the rule. Today, neither China nor the United States can aspire to dominance across every sector and every technology.

Resilience and deterrence, then is the goal. And here is some of what the US and presumably China must do:

It is therefore imperative that China and the United States maintain a degree of integration in order to detect and learn from new advances. If the technological leaders in a given sector are Chinese, Washington should want U.S. firms to have access to the latest innovation. Right now, Chinese manufacturers are far in front in solar, battery, and electric vehicle production. Licensing Chinese technology to construct an electric vehicle factory in the United States, for example, would build domestic expertise and help U.S. automakers transition more quickly with top-of-the-line technology.

Yet it is not clear that within the current US-China competition, and the efforts by this administration to stabilize the relationship – high level discussions including military-to-military discussions – that the US  is not seeking to maintain the economic integration that Jessica suggests is vital. There seems to be in her analysis a hint at least that what is required is the end of competition:

Diversification is healthy, but the United States needs to establish limits on decoupling and “derisking.” …

 

Right now, much of the U.S. public and policy conversation is consumed by how to counter China and defend American workers, infrastructure, technology, and intellectual property against foreign threats. This focus downplays the domestic harms that measures ostensibly aimed at strengthening U.S. national security can have on the health and vibrancy of the United States’ democracy, society, and innovation ecosystem. Getting China right is critical to the United States’ success, both under the next president and for years beyond.

Now positively Jessica does prompt a close look at the state of US-China competition. A closer look at the state of global economic competition is needed and worth engaging but for the moment it would not seem likely that a Harris administration, if she were to win the presidency, would abandon, or at least dramatically diminish political and economic competition between the US and China. And without greater understanding of the goals each seeks, the US and China that is, there is not a strong logic to acting unilaterally.

A close examination, and strong dialogue might provide insight in constructing an altered foreign policy that is in part driven by competition but with much greater bilateral and multilateral actions better able to contain the US-China competition and engage in policies that stabilize the relationship. Deterrence for sure but stronger two-way assurances that lowers the heat on several fronts including: Taiwan, the Indo-Pacific, the South China Sea, nuclear policies and more. We all would benefit from that.

This blog first appeared on my Substack at Alan’s Newsletter

https://open.substack.com/pub/globalsummitryproject/p/reshaping-the-us-global-order-role?r=bj&utm_campaign=post&utm_medium=web&showWelcomeOnShare=true

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The Enduring Weakness of Multilateralism: An Aspect

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Though it was heartening to see the Presidential debate this past week with a strong performance by Vice President Kamala Harris, it was disheartening to see that Donald Trump remains a major force in US politics and still a strong contender notwithstanding some of his wild statements and his conspiracy theory assertions. While the event highlighted the ‘weirdness’ of Donald J Trump, the candidate, the game is not yet won. We may yet see him reoccupy the White House. Such an outcome would threaten the alliance(s) system, global trade and continuing US presence in the current multilateral system driven by Trump’s transactional model of US foreign policy behavior.

Trump’s return would likely drive current US foreign policy ‘over the cliff’. But changes have been underway for some time and many of them are weakening the multilateral system built over many decades. Many foreign policy analysts have focused on the structural elements – notably the decline in the international measures of power of the United States and its impact as a result on the global order. I was struck by a letter titled, “Muster Global Majorities”  prepared by Mark Malloch-Brown. This is just one of nine requested by FP to greet a new US president. Now, Malloch-Brown was the former deputy secretary-general of the UN well aware of the multilateral system and he targeted the decline of the US:

But whoever prevails on Nov. 5—and congratulations, by the way—this will not change the much deeper shifts underway in the distribution of global power and values alignment that are now surfacing at the U.N. and its Bretton Woods cousins, the World Bank and the International Monetary Fund (IMF). They have seen an approximate quadrupling of membership since their post-World War II founding; a more than tripling of global population; and a global GDP that is more than 10 times bigger.

 

But you must see there is a global shift underway, and the United States, more than ever, is not an unchallenged No. 1 but rather a precarious first among equals in a multilateral system and which in responding to wider intellectual and political change in the world resents any claim to monopoly leadership. As Shakespeare observed in his great play on succession and power, Henry IV, Part 2: “Uneasy lies the head that wears a crown.”

Malloch-Brown in his letter, in fact, is pointing to two evident declines: the decline in power of the US in the context of the global system, the structural elements with the rise of China and with the emergence of a number of the Large Emerging Powers, the likes of India, Brazil, Indonesia and more.  But the decline is also evident from a diminishment in US leadership in the global order, the behavioral aspect of any analysis.

While there is a relative decline in the power dimensions for the United States, it is the decline in policy leadership that is in some ways most evident. Take trade. As Alan Beattie has written just recently in the FT article entitled, “Can Globalization Survive the US-China Rift”:

Multilateralism is weak. The US is undermining the WTO by citing a national security loophole to break rules at will. The EU won a case against Indonesia over its nickel export ban, but the WTO’s dysfunctional dispute settlement system has delayed compliance.

 

But this does not mean regional or geopolitical trading blocs will start setting the rules of trade instead. The US talks a good game about building alliances, but the political toxicity of trade deals in Washington stops it offering market access to incentivise countries to join. The Indo-Pacific Economic Framework, the US’s main initiative in the Asia-Pacific, is widely regarded as all stick and no carrot.

Rather than a continued reliance on the multilateral rules and the WTO, the multilateral trade institution – of which the US is one of the primary creators –  responsible for managing trade and trade friction, the United States has chosen to neuter the global trade rules by collapsing the trade dispute mechanism of the WTO. The US has turned away as well from promoting freer trade and free trade agreements and has come to rely more and more on protectionism. As pointed out by Bob Davis in his FT piece, “How Washington Learned to Stop Worrying and Embrace Protectionism”, he described the US turn to protectionism:

… the president [Biden] made a decision that upended decades of Democratic White House rule. He ordered heavy new tariffs on Chinese imports of high-tech items and continued the massive tariffs he inherited from his Republican predecessor.

 

The significance of the moves—and the challenge that it presents to Biden’s successor—was obscured by the roller-coaster news cycle. But it bears noting: The Biden administration is the first since at least President John F. Kennedy’s time to fail to negotiate a major free trade deal, instead embracing tariffs. Even Trump, the self-proclaimed “Tariff Man,” concluded a significant free trade pact when he replaced the North American Free Trade Agreement with a U.S.-Mexico-Canada deal (USMCA), which toughened rules on auto imports but established liberal rules on digital trade. He also negotiated a smaller digital agreement with Japan.

 

The turnabout is emblematic of a broader change in the U.S. economic and political thinking that is unlikely to be reversed under either a President Trump or Harris. The era of hyperglobalization, which began around 1990 and saw global trade jump by 60 percent in 20 years as supply chains spread across the earth like spiderwebs, has come to an end. We are now in an era of growing protectionism, and as trade growth has stalled, the United States and many other advanced economies have hiked tariffs and begun subsidizing industries that they view as critical to their well-being.

The turnabout with an increasing reliance on tariffs and a more full throated rise of US protectionism in fact ties the US, that is US economic policy to its political-security policy and actions. Davis makes the pointed linkage today between the two for US policy action:

Peter Harrell, the White House’s former senior director for international economics, said the change marks a fundamental rethinking of U.S. trade policy. “We are in an era of geopolitical competition with China,” he said. “That means we aren’t going to accord China the same trading privileges and rights” accorded to allies—despite World Trade Organization requirements to treat members equally.

 

It boils down to the fact that the economic juice [from cutting tariffs] was not worth the political squeeze,” said Evan Medeiros, a Georgetown University China expert who had been an official on Obama’s National Security Council.

 

In the second part of its decision, the administration ramped up some tariffs to block Chinese imports in areas where the United States was spending billions of dollars on subsidies to create or strengthen a domestic industry.

Tariffs were quadrupled to 100 percent on Chinese electric vehicles this year, as [Lael] Brainard had advocated, doubled to 50 percent on Chinese semiconductors and solar cells, either this year or next, and tripled to 25 percent on EV batteries this year. Even low-tech Chinese syringes, which had previously been shipped duty-free, now face 50 percent tariffs as a spur to boost domestic production.

 

The primary reason for the U.S. turn to protectionism is the growing economic and military challenge from China. But it also reflects a profound change in ideology: The gains from trade—lower prices, overall improvements in living standards, greater competition—are no longer seen by many political leaders as worth the downsides in the loss of manufacturing jobs, dependence on imports from adversaries such as China and Russia, and political polarization. The Trump administration, packed with anti-free traders, gave a big push to this neo-protectionism; the Biden administration has confirmed and deepened the shift.

The bottom line is that geopolitical tensions, particularly the deep US-China competition, has undermined US commitment to a multilateral system that the US was a principal architect in creating and maintaining over many decades. This outcome to date is deeply troubling.

Image Credit: CNBC

GrappIing with Explanations for US-China Relations

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I was intrigued by the recent efforts to understand and reveal the dynamic and direction of the US-China relations. In a global order where US-China tensions, or not, are likely the most consequential for either encouraging stability or instability in global affairs, new, and possibly some old insights, are key. It is why I was caught by a number of articles by colleague Ryan Hass of Brookings. Ryan is currently the Director of the John L. Thornton China Center and the Chen-Fu and Cecilia Yen Koo Chair in Taiwan Studies at Brookings. He is also a senior fellow in the Center for Asia Policy Studies and is, as well, a nonresident affiliated fellow at the Paul Tsai China Center at Yale Law School. Importantly, Ryan served as the director for China, Taiwan and Mongolia at the National Security Council (NSC) staff from from 2013 to 2017. In that role, he advised President Obama and senior White House officials on all aspects of U.S. policy toward China, Taiwan, and Mongolia, and coordinated the implementation of U.S. policy toward this region among U.S. government departments and agencies. The point of this Post: it is very helpful to follow Ryan’s recent assessments of the US-China relationship.

I found quite helpful a number of relatively recent articles by Ryan where he tries to understand what drives the US-China relationship. The current views range from: individual great power assessments of their own power in relation to their competitors; to a range of interactive actions between and among the great powers; to domestic drivers and their impact on relations with other great powers. I was pleased to see him assess various conceptions of great power actions and their impact on current global relations with a focus on US-China  relations. So what drives US-China competition and explains in part stability in international affairs?

For Ryan it is the domestic factors that energize each country’s foreign policy actions as set out in his Brookings article from March titled, “How does national confidence inform US-China relations?”. As he writes in this piece:

Based on a review of the relationship over the past 75 years, this paper argues that when both countries feel secure and optimistic about their futures, the relationship generally functions most productively. When one country is confident in its national performance but the other is not, the relationship is capable of muddling through. And when both countries simultaneously feel pessimistic about their national condition, as is the case now, the relationship is most prone to sharp downturns. Domestic factors dictate the trajectory of relations. They do, however, play a larger role in influencing the relationship than otherwise has been observed in much recent public commentary.

 

This model for evaluating the relationship yields several policy-relevant conclusions. It suggests the relationship is dynamic and responsive to developments in both countries, as opposed to being captive to historical forces leading immutably toward conflict. It highlights that the relationship has navigated frequent zigs and zags over the past decades and rarely travels a straight line for long.” …  The current task for policymakers in Washington and Beijing is to navigate through the concurrent down cycles in both countries while keeping bilateral tensions below the threshold of conflict.

Clearly, while the interactions of the two are important aspects of the bilateral competitive relations,  it is domestic dynamics that are, according to Ryan, the significant drivers that promote cooperative relations or energize tensions:

At their core, both countries believe their governance and economic models are best equipped to meet the 21st century’s challenges. Both believe they are natural leaders in Asia and on the world stage. Both countries are contending with rapid societal transformations, which are being exacerbated by the impacts of the fourth industrial revolution. And both countries are determined to limit vulnerabilities to the other while seeking to gain an edge in emerging technologies.This is all occurring while the United States and China remain unsatisfyingly locked into a relationship that is at once both competitive and interdependent. The United States and China are competing to demonstrate which governance, economic, and social system can deliver the best results in the 21st century.

Thus in the present circumstances of US-China competition the following is the case, according to Ryan:

It [this article] argues that the United States and China presently find themselves in a simultaneous cycle of insecurity and dissatisfaction with their national conditions. Like when U.S.and PRC national down cycles have coincided in the past, this simultaneity is serving as a propellant in both countries for framing the national contest for power and influence in dramatic and, to some, existential terms.

 

Rather, by analyzing upturns and downturns in U.S.-China relations over the past 80 years, the U.S.-China relationship appears most prone to sharp volatility when both countries simultaneously are experiencing cycles of insecurity and pessimism about their futures.

 

That the U.S.-China rivalry has continued to intensify throughout the Trump and Biden administrations supports the argument that factors beyond the personalities and preferences of individual leaders inform the trajectory of U.S.-China relations. Trump and Biden are different in many respects. One through line of both of their presidencies, though, has been a sense of pessimism and loss of control among large portions of the American electorate about their country’s future.

Now the question is in the current political circumstance – with the end of Biden’s run for a second term and his replacement by Kamala Harris – what appears to be a far more optimistic leader, its seems to me,  whether this may open up a stronger prospect that the US-China relations could, assuming a Harris electoral win, stabilize and open up the prospect for more collaborative global governance efforts led by the two leading powers?

Whether Ryan’s domestic framing is an adequate explanation for US-China relations is unclear. Ryan himself allows that this described approach is not a detailed empirical analysis of great power relations but rather more of a thought experiment.

Now it is clear that this approach, just described, is but one of many contenders for understanding the state of great power relations and more particularly the US-China great power relations. In particular Ryan raises some classic IR approaches. One in particular I was interested in and Ryan examines this which he describes as: “immutable historic forces or a function of their leaders’ personalities and preferences.” As he concludes:

In other words, the United States and China are not predestined to conflict based on past patterns between rising and established powers. The nature of bilateral relations also is not simply an extension of two leaders’ preferences and personalities. There are other factors involved, specifically both countries’ internal dynamics and their levels of confidence in their national directions.

So Ryan appears unenthusiastic over ‘simple’ great power dynamics that are urged by some IR specialists.  He is not attracted to a view that focuses on the state of national power and a leader’s determination to act, or to not act, in the face of a leader’s assessment of immediate power advantage or not with rivals . Ryan mentions this in this Brookings piece but then tackles it more directly in a follow-on article where he describes in greater detail the framework, “peak power”. Ryan lays this out in an article titled, “Organizing American Policy Around “Peak China” is a Bad Bet” in China Leadership Monitor. The core argument in the ‘peak power’ thesis is that a great power, read that China, is more likely to act aggressively towards its competitors when leaders determine that that its national strength based on economic, political and military factors is waning:

China’s leaders explicitly reject suggestions that the country’s best daysare behind it. They believe China’s path to greater global influence is widening as America’s dominance in the international system wanes. It would be a mistake to organize American policy around “peak China” theory.

There certainly has been broad analysis that China, unlike in past decades, is currently struggling economically, demographically, and suffering push back from regional and other powers internationally and more. Chinese dominance regionally or even beyond is increasingly questioned. The peak power view of China has been popularized in part by two colleagues, Michael Beckley from Tufts and Hal Brands, the Henry A. Kissinger Distinguished Professor of Global Affairs at SAIS. Ryan examines their analysis of China’s leadership. As Beckly and Brands warned in a 2021 in a Foreign Affairs piece titled: “The End of China’s Rise,”the growing limits to China’s economic and political power. As Ryan suggests these IR specialists focus on strategic imperatives of great powers and their need to maintain influence and authority in the international system:

Such is the work of grand strategists who seem unconcerned about understanding China’s own vision and its strategies for securing it. Proponents of “peak China theory” treat the country as an inanimate object that is being blown off course by immutable historic forces. They assume that Beijing’s national ambitions resemble those of past rising powers that ran up against forces opposing their goals. Such analyses overlook the fact that China has agency. China’s leaders also maintain their own internal narratives and metrics for measuring progress in pursuit of their national objectives.

Ryan’s review leads him to this conclusion about China’s actions:

If any forecast of China acting as a peaking power is to hold explanatory value, there must be evidence that China’s leaders accept the diagnosis of their current condition and feel an urgency to act before their moment at the apex of national power passes. In the case of China today, no such evidence is available, at least not in the public record.

Now, I was encouraged by Ryan’s analysis of China’s power and actions to go back to the Beckley and Brands piece. Now to be fair, I should note that the two did produce a jointly authored book after the article and there may be a more elaborate explication in the volume of peak power and its influence on great power politics though most comments on their approach generally refer to the article. Here they describe what they see as the state of China’s international position in the face of declining domestic power factors:

China is a risen power, not a rising one: it has acquired formidable geopolitical capabilities, but its best days are behind it. That distinction China’s leaders are determined to move fast because they are running out of time. It matters, because China has staked out vaulting ambitions and now may not be able to achieve them without drastic action. The CCP aims to reclaim Taiwan, dominate the western Pacific, and spread its influence around the globe.

And from the article by Beckley and Brands there is surprisingly just this one paragraph in the piece that points to the consequences for great powers and the global order from the impact of peak power:

When authoritarian leaders worry that geopolitical decline will destroy their political legitimacy, desperation often follows. For example, Germany waged World War I to prevent its hegemonic aspirations from being crushed by a British-Russian-French entente; Japan started World War II in Asia to prevent the United States from choking off its empire.

Now I don’t want to extend this Post – it is already too long, and I have not read their follow-up 2022 study but I am underwhelmed by their explanation in Foreign Affairs. I have not examined closely enough the complex details of the politics of Japan before the war in the Pacific but I have examined closely the lead up to World WarI. Their view of Germany and its actions leading to World War I is just dramatically underwhelming. In my reading the crisis was driven by a decades-long decline of the Austro-Hungarian Empire and not just German aspirations and threat posed by Russia. And the state of the entente at the time of the July crisis was far from united, especially in looking at British views of the powers prior to the war.

But let’s not ‘get into the weeds’ on this. I am for the moment content to examine closely the analysis of China’s leadership by Ryan. It appears to reveal much about the state of US-China competition and geopolitical tensions in the current global order.

Image Credit: South China Morning Post

This Blog Post was originally posted at my Substack Alan’s Newsletter. Comments and free subscriptions are welcome there. https://substack.com/@globalsummitryproject/p-148581811

US Tensions Over a Leading Role

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So, I was ruminating a bit on the question of US diplomacy coming off of the previous Substack Post and particularly the Jessica Matthews’s targeting of Biden foreign policy in the upcoming Foreign Affairs article “What Was the Biden Doctrine? Leadership Without Hegemony”. As a reminder, this is what she wrote and I quoted in last week’s Substack:

 

But he [Joe Biden] has carried out a crucial task: shifting the basis of American foreign policy from an unhealthy reliance on military intervention to the active pursuit of diplomacy backed by strength.

 

He has won back the trust of friends and allies, built and begun to institutionalize a deep American presence in Asia, restored the United States’ role in essential multilateral organizations and agreements, and ended the longest of the country’s “forever wars”—a step none of his three predecessors had the courage to take.

 

All of this happened in the face of grievous new threats from China and Russia, two great powers newly allied around the goal of ending American primacy. Biden’s response to the most pressing emergency of his term—Russia’s brutal full-scale invasion of Ukraine in 2022—has been both skillful and innovative, demonstrating a grasp of the traditional elements of statecraft along with a willingness to take a few unconventional steps. … But he has carried out a crucial task: shifting the basis of American foreign policy from an unhealthy reliance on military intervention to the active pursuit of diplomacy backed by strength.

Now I concluded that analysis with a Matthews’s quote with my concluding remark: “Now it seems to me there are questions over the effective use of diplomacy of this Administration but that is for another day.” Well this is another day and I want to focus a little on the current effectiveness of US diplomatic policy.

There appears to be a growing split over whether the US has had, or should I say, will choose to move forward with sharper diplomatic policies and initiatives rather than, if I can put it bluntly, ‘Reach for the Gun’. In fact, in the end, there are questions of whether the US will involve itself at all in serious but distant conflicts especially in the face of seriously weakened multilateral institutions. The foreign policy question is actually two questions then: will a Harris Administration respond to foreign policy crises with sharp diplomacy or resort to force and even more dramatically not only how the US may engage but whether it will engage at all.

Shortly after Harris and Waltz assumed the mantle of leadership of the Democratic Party that a strong positive view was identified. For instance Mark Hannah and Rachel Rizzo wrote the following in FP:

When applied to foreign policy, it could inform a pragmatic, forward-looking realism that’s all too rare in Washington. This sentiment aligns with a growing expert consensus.

 

A recent Carnegie Endowment for International Peace study concluded that the United States’ current approach to the world is “poorly adapted to the challenges of today and tomorrow.” It also noted a widespread demand among analysts for “a major strategic reorientation.” This reorientation could be from an everything-everywhere-all-at-once approach to a more judicious and strategic use of American might.

Let’s start with what appears to be the positive efforts of the current Biden policy efforts and conjure it  as a likely course of action for a new Harris Administration.  The immediate diplomatic approach is the recent Biden actions focused on its key geopolitical concern – that is its perceived strategic competitor and threat – its biggest rival – China. Notwithstanding the tough back and forth the two have undertaken recent discussions that appear to be designed to stabilize this most difficult bilateral relationship. The evidence for this is the recently concluded visit of National Security Advisor Jake Sullivan to China. This most recent meeting with Wang Yi who is the chief Chinese foreign affairs official for President Xi was not the first. For Sullivan and Wang this was one of a series of interactions as described by Demetri Sevastopulo in the FT:

It was the first of several secret rendezvous around the world, including Malta and Thailand, now called the “strategic channel”. Sullivan will arrive in Beijing on Tuesday [August 27th] for another round of talks with Wang in what will be his first visit to China as US national security adviser.

 

While the backchannel has not resolved the fundamental issues between the rival superpowers, says Rorry Daniels, a China expert at the Asia Society Policy Institute, it has aided each’s understanding of the other. “It’s been very successful in short-term stabilisation, communicating red lines and previewing actions that might be seen as damaging to the other side,” she says.

The two leading powers do not see ‘eye-to-eye’ on the role of diplomatic interactions.  China in particular does not accept the framework of stabilization in the context of competition – the US view. Still, there does appear to be a certain diplomatic stabilization as described by Sevastopulo leading up to this most recent series of meetings in Beijing:

Sullivan strived to get Wang to understand the new reality — that the nations were in a competition but one that should not preclude co-operation. “That was a really hard jump for the Chinese,” says the second US official. “They wanted to define the relationship neatly [as] we’re either partners or we’re competitors.”

 

The Chinese official said China did not accept the argument. “Wang Yi explained very clearly that you cannot have co-operation, dialogue and communication . . . and at the same time undercut China’s interests.

 

They discussed possible deals for a summit, including a compromise that would involve the US lifting sanctions on a Chinese government forensic science institute in return for China cracking down on the export of chemicals used to make fentanyl. They also talked about resurrecting the military-to-military communication channels China had shut after Pelosi visited Taiwan. And they discussed creating an artificial intelligence dialogue.

 

Rush Doshi, a former NSC official who attended the meetings with Wang, says it was important to explain to China what the US was doing — and not doing. “Diplomacy is how you clear up misperception and avoid escalation and manage competition. It’s actually not at odds with competition but part of any sustainable competitive strategy.

And in this most recent set of meetings in Beijing, Sullivan was able to meet not just President Xi, important in and of itself,  but critically a meeting with General Zhang Youxia:

Mr. Sullivan’s meeting with Gen. Zhang Youxia, vice chairman of China’s Central Military Commission, was the first in years between a senior American official and a vice chair of the commission, which oversees China’s armed forces and is chaired by Mr. Xi.

The Biden Administration regarded the Beijing meetings, therefore, as important diplomatic effort in stabilizing great power relations:

Sullivan tells the FT that he was under no illusions that the channel would convince China to change its policies, but he stressed that it had played an instrumental role in helping to shift the dynamic in US-China relations.

All you can do is take their policy, our policy, and then try to manage it so that we can take the actions we need to take and maintain stability in the relationship,” Sullivan says. “We have been able to accomplish both of those things.”

If managing great power relations was the US diplomatic goal, that seems to be successfully achieved for the moment. But that positive framing is not replicated in wider global order relations and the US efforts or lack thereof. Thus, the assessment of wider US diplomatic efforts is not nearly as upbeat. This is the message of Alexander Clarkson,  a lecturer in European studies at King’s College London in his analysis of US foreign policy in his WPR article titled: “For Much of the World, the Post-American Order Is Already Here”:

This gradual waning of American influence outside of core areas of strategic focus rarely features in ferocious debates in Washington between those who believe that the U.S. should remain deeply involved in global affairs and the so-called Restrainers on the left and MAGA Republicans on the right who are skeptical of security commitments outside U.S. borders.

 

The limits of the United States’ ability to influence developments on the ground in destabilizing conflicts, or the responses of states engaged in them, have been particularly visible with civil wars in Myanmar and Sudan that barely feature in domestic American news cycles. In both cases, U.S. policymakers distracted by developments elsewhere failed to anticipate emerging escalation dynamics and then failed to develop the strategic leverage needed to rein in brutal armies and militias whose backing from other states rapidly widened devastating wars.

 

Washington’s flailing in the face of conflicts within Myanmar and Sudan that have now become wider geopolitical crises is a product of long-term shifts in the global balance of power. While Washington will continue to play a decisive role in managing conflicts that involve great power competition, such as Russia’s invasion of Ukraine, the tensions between Israel and Iran and China’s strategic assertiveness under Xi Jinping, in many other parts of the world the U.S. impact will be limited to diplomatic press releases expressing grave concern.

Clarkson sees US actions and inactions as a reshaping of the global balance of power. But I suspect it is an unwillingness to exercise direct diplomatic action to what is seen to be a distant conflict. It is also an evident result of the undermining, including by the United States, of effective diplomatic action by the UN. The weakening of the formal institutions – the WTO in trade policy and the UN in security and peace efforts – is now ‘coming home to roost’ at the US doorstep. US inaction is matched by the inability of these and other formal institutions to take on, stabilize and hopefully resolve difficult and potentially threatening conflicts.

The Harris Administration, if it wins, needs to address the manner of engagement but in too many instances the likely failure of foreign policy engagement at all. Much is currently wanting in US foreign policy. It is unclear if a Harris Administration is likely to tackle, and if so, how, these difficult foreign policy questions.

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The Trouble with Today’s Multilateralism: An Intro

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So in this week’s Post I was all set to hone in on the struggles over reenergizing faltering multilateralism in the current global order. Today’s  troubles encompass the formal institutions – the Formals – from the UN, and many of its specialized agencies to the international financial ones – the World Bank, the IMF and the WTO. And the troubles extend to the Informals, the G7, the G20 to the BRICS+ and more. The struggles over multilateralism are the flip side of the return, seemingly ever more strongly power politics – the wars in the Ukraine and Gaza, and geopolitics, especially the rise in bilateral tensions between China and the United States.

But before I could go there, I couldn’t ignore the just excellent article – recommended by my colleague, and China expert, John Gruetzner – in Foreign Affairs by Zongyuan Zoe Liu, titled, “China’s Real Economic Crisis: Why Beijing Won’t Give Up on a Failing Model”. This very good piece leaned strongly into the discussion I had raised in my previous Alan’s Newsletter Post, ‘China, Seemingly, Stays the Course’. The Post chronicled the disappointment expressed by analysts and experts in the West primarily but in a rather more modulated form in China as well. The disappointment according to these experts emerged over the failure in the Third Plenum to initiate significant economic reform in the Chinese domestic economy and a clear determination to tackle domestic consumption.

Liu gets it right:

The Chinese economy is stuck. … But there is a more enduring driver of the present stasis, one that runs deeper than Xi’s growing authoritarianism or the effects of a crashing property market: a decades-old economic strategy that privileges industrial production over all else, an approach that, over time, has resulted in enormous structural overcapacity.

 

Simply put, in many crucial economic sectors, China is producing far more output than it, or foreign markets, can sustainably absorb. As a result, the Chinese economy runs the risk of getting caught in a doom loop of falling prices, insolvency, factory closures, and, ultimately, job losses.

 

Since the mid-2010s, the problem has become a destabilizing force in international trade, as well. By creating a glut of supply in the global market for many goods, Chinese firms are pushing prices below the breakeven point for producers in other countries. In December 2023, European Commission President Ursula von der Leyen warned that excess Chinese production was causing “unsustainable” trade imbalances and accused Beijing of engaging in unfair trade practices by offloading ever-greater quantities of Chinese products onto the European market at cutthroat prices.

 

Despite vehement denials by Beijing, Chinese industrial policy has for decades led to recurring cycles of overcapacity. At home, factories in government-designated priority sectors of the economy routinely sell products below cost in order to satisfy local and national political goals.

Now there continues to be some contention over whether in fact production is below cost but I I was pleased by Liu’s ‘recommendation’ that the two – the West and China – consider options other than just piling on the tariffs. Liu correctly points out the negative consequences of such trade policy:

A China that is increasingly cut off from Western markets will have less to lose in a potential confrontation with the West—and, therefore, less motivation to de-escalate. As long as China is tightly bound to the United States and Europe through the trade of high-value goods that are not easily substitutable, the West will be far more effective in deterring the country from taking destabilizing actions. China and the United States are strategic competitors, not enemies; nonetheless, when it comes to U.S.-Chinese trade relations, there is wisdom in the old saying “Keep your friends close and your enemies closer.

That is why I have suggested negotiating – and one aspect in this case could be Voluntary Export Restraints or VERS. VERS are not super policy  actions – I get that  but they do encourage bilateral discussions rather than just unilateral penalties. As Liu suggest:

The U.S. government should discourage Beijing from building a wall that can sanction-proof the Chinese economy. To this end, the next administration should foster alliances, restore damaged multilateral institutions, and create new structures of interdependence that make isolation and self-sufficiency not only unattractive to China but also unattainable. A good place to start is by crafting more policies at the negotiation table, rather than merely imposing tariffs. … If the government [China] also implemented voluntary export controls, it could kill several birds with one stone: such a move would reduce trade and potentially even political tensions with the United States; it would force mature sectors to consolidate and become more sustainable; and it would help shift manufacturing capacity overseas, to serve target markets directly.

While working through the WTO might be preferable, and many analysts suggest such an approach for multilateral trade frictions, realistically that course of action is out of reach for the moment.

So there you are on the Third Plenum and global trade.  Let me at least turn to the original subject for this Post; let’s at least open the discussion on multilateralism and its problems. I was particularly attracted to a piece published recently by Pascal Lamy. Pascal Lamy (pascallamy.eu) is currently the Vice-President of the Paris Peace Forum, and coordinator of the Jacques Delors Institutes (Paris, Berlin, Brussels). Importantly, Pascal Lamy served two terms as Director General of the World Trade Organization (WTO) from September 2005 to September 2013. He is someone that is very familiar with critical aspects of the multilateral system. Recently his piece, ‘Reshaping the Global Order’ was published in a large edited volume by colleagues from the Center for China & Globalization, CCG,  Henry Huiyao Wang and Mabel Lu Miao, Enhancing Global Governance in a Fragmented World: Prospects, Issues, and the Role of China. Now Lamy sets out the critical structural issues that impair today’s multilateralism efforts. As he says:

The main long-term, structural factors at play can be summarized by sovereignty as a founding principle of an international order, by the obsolescence of the previous order, and by the US-China rivalry.

It is not surprising that he identifies ‘sovereignty’ as the first key to multilateralism’s problems:

Sovereignty has been, is, and will remain the main obstacle to building a fully fledged international order as long as it is accepted as the core principle of international law.

So many analysts acknowledge the burst in new actors in the international system: substate actors, regions and cities and also non-state actors like NGOs, large public and private corporations but all struggle against dominant state actors. National sovereignty dominates international relations and often leads to unilateral actions that undermines wider cooperation.

Then there is ‘obsolescence’.  This focuses around the elements of the system, especially the Formals that were put in place at the end of World War Two at a time when the Global South that has had such a recent impact on international relations existed primarily as colonies of the West:

Obsolescence has to do with the origins of the current global system, the architecture of which dates from arrangements made after the Second World War. The ‘universal’ nature of these arrangements is increasingly seen as a product of a past pattern of Western dominance at a time when new nation states are now reshuffling the old power distribution …

Lamy then targets the impact of the evolving international order:

All in all, the previous international order is being shaken by increasing North-South and East-West tensions and frustrations, and by a change in the balance between geoeconomics and geopolitics, the former losing the force it had gathered in recent decades, and the latter regaining its past dominance over world affairs. We are thus moving toward less of a rules-based system, and more toward the use of force. This context obliges us to consider new paths, tentative as they may be.

And finally Lamy underlines the rise of geopolitical tensions, especially between China and the United States, and the impact that these tensions have had on the current multilateral order:

The intensification of the US-China rivalry is the third main factor shaping the demise of the international order, as this rivalry increasingly pits the two main world superpowers against each other. Indeed, they now believe they have become dangerously vulnerable to each other—hence a change of view on both sides about globalization. Whereas the US and China previously celebrated the benefits of increased economic interdependence in fostering development and reducing poverty, they are now trying to address what today they consider as overdependence and have embarked on a decoupling journey which challenges the rest of the world with hard binary choices and which permeates international life in the form a sort of ‘cold war 2.0.’

So what is to be done? How can a multilateral system be revivified and made effective – bringing greater stability to the global order and energizing transnational global governance efforts?

That’s where we will start in the next Post.

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China, seemingly, stays the course

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It is hard to resist not commenting on Donald Trump’s views, so I will if just briefly. In this instance the comment is over Kamala Harris’s racial makeup. It is ‘weird’ as the Democrats have started saying. In fact that barely describes his comments on her. Mind you, I doubt that it is the last time we will hear such ‘jaw dropping insights’ from Trump when it comes to his likely opponent Kamala Harris.

All right, let’s turn to today’s focus – the state of US-China relations following China’s Third Plenum – really focusing on the Third Plenum. This gathering is the Third Plenum of the 20th Party Congress, which brought together the Party’s top leadership, including all the members of the Central Committee and the Politburo of the Chinese Communist Party.  Third Plenums in particular have especially been closely followed. Why? Well, it really began with the Third Plenum of the 11th Party Congress in December 1978. That Third Plenum ushered in a series of policy changes championed at the time by Deng Xiaoping. This Plenum was in retrospect the start of the ‘Reform and Opening Era’ which was followed by the Third Plenum of the 14th Party Congress when the leadership identified the goal of creating a ‘socialist market economy’. And, at the 18th Party Congress in November 2013, the CCP emphasized in that Third Plenum,  “the decisive role of the market in allocating resources,”. So, it is not unreasonable for experts, officials, etc. to look at each 5-year Third Plenum to identify signals for domestic economic reform which many then anticipate impacts on the global economy with China’s increasingly central role on the international economy.

It’s not a surprise, then, that there was a degree of anticipation for this Third Plenum which had been postponed for months, especially given the flagging Chinese economy. Our colleagues at CSIS including Jude Blanchette and Scott Kennedy described the tortured passage of policy creation:

According to a CCP website, the document went through 38 drafts. Right after the conclave ended, the CCP issued a communique (English, Chinese) summarizing the results of the meeting. On Sunday, July 21, the text of the full, far more detailed Decision (English, Chinese) was issued, which provides a stronger foundation for evaluating the meeting’s significance.

So where are we and what consequences are likely to follow the policy pronouncements?

There was a lot of anticipation. As pointed out by Bert Hofman in his Substack Post: 

This year’s third plenum was highly anticipated due to several factors.  The multitude of structural challenges that China’s economy is facing—debt, demographics, demand, deflation, and decoupling—require the robust economic reforms that third plenums tend to deliver. Second, China’s propaganda machine had built up the plenum’s importance, comparing it with breakthrough plenums of the pasts.

But for most analysts the outcomes have been rather disappointing. As pointed out, again by Bert Hofman, the hoped for policy tilt and more toward markets and/or greater domestic consumption is not evident in the Declaration:

This year’s plenum has dropped the decisive role of the market.  Instead, it  proposes that the party should “better leverage the role of the market.” This is hardly an encouragement of the private sector, whose confidence is still recovering from regulatory crackdowns and COVID lockdowns.  At the same time, in a press conference after the conclusion of the plenum Han Wenxiu, deputy director of the Central Financial and Economic Affairs Commission’s general office, and a main drafter of the plenum decision document, said that it was “necessary to create a favourable environment and provide more opportunities for the development of the private sector” in China.

Nevertheless, the omission of the market’s decisive role is in line with the more statist view on development that has been gaining grounds under Xi Jinping, and that the private sector will be increasingly guided by the party and restricted by regulation.

 

But the nature of reforms has changed—whereas in previous plenums reforms were predominantly aimed at facilitating marketization and liberalization of China’s economy, they are now meant to strengthen the policies and institutions that underpin Xi Jinping’s view of the world.

The party-state dominance seems to be fully in charge. And China can be expected to stay the current course for domestic economic growth and prosperity. As Scott Kennedy argues:

The Communique and Decision give the distinct impression that despite the economy’s various structural problems and cyclical downturn, the CCP is not going to change course, but instead will intensify its efforts to steer the economy on to a sustainable long-term path. The central focus for generating “high-quality development” will be on expanding focus on advanced technologies, what are now ideologically described as “new productive forces” (新质生产力).

 

That said, the Plenum’s analysis and policy proposals on the economy are likely to draw a more skeptical reaction from a variety of corners, domestic and international, because of its deeply statist focus: 1) A strong emphasis on the central role of China’s party-state in directing the economy; 2) The prioritization on investment and production as the drivers of growth and far less attention to consumption and households; 3) Continued support for the “public sector” and state-owned enterprises (SOEs) even while pledging to create a level playing field for private firms; 4) A discussion of the global economy that proposed incremental expanded market access to China while stressing the need for China to leverage its large market for its own benefit; and 5) The expansive discussion of national security and the need to align economic policy with national security, which as Jude Blanchette notes, is centered around the security of the CCP.

Scott’s colleague at CSIS, Claire Reade, underlines that trade partners are unlikely to be fooled by this Plenum Declaration and trade tensions as a result are unlikely to abate and that’s without taking into account the likely economic earthquake of a second Trump Administration:

The latest Third Plenum Decision declares that “overall, we have accomplished the reform tasks” set out in 2013. Since this is patently not the case, it is particularly discouraging. The decision ironically then highlights the gap between its triumphant conclusion and reality by going on to pledge that by 2029, the market will determine the allocation of resources, and private domestic and foreign enterprises will obtain equal treatment with state-owned enterprises.

On balance, trading partners need to continue to be savvy and proactive in taking steps to protect their economies against this massive, state-heavy economy, and companies need to look carefully at their own risk management.

It is not surprising that various Chinese experts are suggesting that a more incremental approach was always a more likely approach of the President and the Party. Here is Huang Yiping, who is the Dean of the National School of Development at Beida, or Peking University, assessing on the Pekinology Substack Post the policy approach coming out of the Third Plenum:

The first point you probably all saw is that the Asian market dropped after the Third Plenum, especially after the full document was out. So some people felt a little bit pessimistic. My own sense, my take, is that the market was probably too optimistic about what they should expect.

So some people felt a little bit pessimistic. My own sense, my take, is that the market was probably too optimistic about what they should expect.

 

In fact, if you were paying attention to what the President himself was saying and the message government officials were trying to convey to the public. It was pretty clear this would not be a grand-scale liberalization program. This will be about reform, about modernization. But the key approach, the President outlined himself very clearly. He called it running towards the problems and trying to correct them. So it’s more like a down-to-earth and very practical approach—when you try to see the problems, you try to overcome them.

 

So when you say, well, the market is disappointed. That’s probably true, but either because the expectation was just overly too high or No. 2, I think the reason why investors are not very upbeat at the moment is because the macroeconomy is not doing particularly well.

Huang Yiping is aware, however, of the consumption problem:

Weak consumption causes two problems. No. 1 is you obviously would easily end up with a domestic overcapacity problem, right? You produce a lot, you invest a lot, and then the final consumption demand is very weak. That means there will be a certain portion of the capacity you cannot find domestic buyers for, and you call it overcapacity. That’s why during the last 45, 46 years of Chinese reform, we almost always had the overcapacity problem.

I think the macroeconomic problem is there is a macro imbalance. Consumption and demand and supply are not very balanced. So that’s one big issue.

So where does that leave us? I anticipate there will be continuing if not growing trade tensions with the US and with Europe as well as China continues its ferocious pace of manufacturing exports and fails to encourage greater domestic consumption. At least to constrain these tensions and protective trade actions in the absence of the WTO, it might be useful to try and negotiate VERs – ‘voluntary export restraints’ with China. It is not optimal – far from it – but it could avoid a trade ‘bloodbath’.

An important opportunity has been missed for the moment and may in fact be even more dramatically lost if Donald Trump wins the next election in  November. Let’s hope the US electorate is smarter than that.

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