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The Dangers of China’s Decline

April 14, 2022,

 By: Hal Brands

 Friedberg’s analysis also leads him to argue that Chinese President Xi Jinping isn’t a departure from his predecessors but just one more in a line of Leninists.That obscures the radicalness of some of Xi’s actions, including ending the term limits on the presidency,....

which has helped keep China from again falling under one-man rule, and asserting control over the technology, real estate, and other vibrant sectors of the Chinese economy, though that could undermine the country’s economic future.

The obvious lesson for Friedberg: It’s best for America to keep its distance from an implacable regime of this sort.

Bergsten has a very different take. To him, Chinese leadership is marked by three “schools of thought”: conservatives, liberals, and those he calls “neocomms” who “want to revert to the hard-line stances of the past.” For Bergsten—as for U.S. treasury secretary after U.S. treasury secretary, Democrat or Republican—the key is to identify the liberals and convince them that economic reform is in the interest of China, not just in the interest of U.S. companies that want to get a bigger market.

If Friedberg doesn’t give Zhu enough credit for trying to remake the Chinese economy, Bergsten is one of a long line of Americans who keep searching for the next Zhu to do business with. So far, there hasn’t been one with Zhu’s sensibility, smarts, and political heft to push through significant reform .

Bergsten recounts the genuine successes of engagement, to which Friedberg gives short shrift. They include boosting Americans’ standard of living through cheaper and varied imports, curbing nuclear proliferation, and working closely together to revive the global economy after the 2008 made-in-America financial crisis nearly produced a global depression. The absence of U.S.-China engagement is also evident in the weak global response to the COVID-19 pandemic.

He proposes a new era of engagement. Once again, as in the early Clinton years, Bergsten urges the United States to decouple economic issues from disputes over human rights and national security. Unlike Clinton and others in the 1990s, Bergsten is not arguing that engagement can make for better human rights in China but that Washington can separate human rights concerns from economic policy. To do so, though, requires wishing away 20 years of disappointment with the results of engagement. China’s economy and political policies are interlinked. Its economic power undergirds its military and technological reach as well as threatens to unseat the United States as number one.

In the early 1990s, engagement meant the United States bolstering a weak China. Now, Bergsten argues, engagement would give the United States a way to influence China that’s bound to surpass it as the No. 1 economy in the world. Bergsten usefully produces a series of statistics—including on GDP growth, research and development spending, education, and trade—to construct a scorecard for China-U.S. rivalry. The bottom line: China eclipses the United States, usually by the middle of the century.

“Time is not on America’s side as China advances,” he writes.

By this reasoning, the United States needs to engage with China to make sure it doesn’t dominate the global economy. Bergsten proposes what he calls a G-2, with the United States and China acting as an “informal steering committee” to handle global problems like climate change, health, and economic development. Without their agreement, he says, global progress is impossible.

Once the two countries make progress, they can recruit others. He portrays the global economy as a series of concentric circles.

Imagine an economic version of the solar system. If the United States and China are the sun in this configuration, Europe and Japan would be orbiting at around the distance of Venus while India and Brazil might be roughly around the distance of Mars. Smaller developing countries would be somewhere around Uranus.

Bergsten isn’t explicit about why he believes the G-2 should include China instead of the United States’ longtime allies Europe and Japan. Although he doesn’t emphasize it, his statistics show that the United States and its traditional allies, which he dubs the “hegemonic coalition,” are far more powerful economically than China is and are likely to remain so through the end of the century. Predictions of an inevitable economic rise can also go wrong, from Western fears of the 1960s that the Soviet Union would overtake the West economically to panic about Japan becoming the No. 1 economy—although in this case, China, with a population four times the size of the United States, seems more likely to become the GDP champ

He seems to choose China out of fear that the United States is abdicating its role as global leader and growing more hostile to Beijing. His book is laced with criticism of former U.S. President Donald Trump, who he mentions 275 times by name, for taking that protectionist turn. In the case of a new global economic crisis, Bergsten wants to make sure the United States and China, the world’s two largest economies, work together.

Absent that cooperation, the world could descend into what he calls “the Kindleberger trap,” after economist Charles Kindleberger, who blamed the Great Depression on the failure of the incumbent power (Great Britain) and the rising power (the United States) to take necessary action. (He mentions the Kindleberger trap by name nearly two dozen times. Chapters in this book are clearly designed so they can be read on their own.)

Beijing has rebuffed previous calls to form a G-2 with the United States, Bergsten writes, because it felt that would “co-opt, and indeed contain, its rise.” But now, he says Chinese leaders may be more receptive if the United States makes it clear that it would be “accorded a truly co-equal role with the United States.” He also says the United States would need to make sure that China is faithfully carrying out its assigned role, though it isn’t clear what America should do if it found China was shirking its responsibilities. Nor does he show evidence of Chinese leadership being receptive to this.

­­In the clearest sign that Bergsten understands the political difficulties both sides would face in acting as global CEOs, he suggests the arrangement somehow largely be kept quiet. “The G-2 should announce neither its formation nor its continuing existence,” he writes. Good luck keeping that news from Congress and the press—or selling it in China, where anti-U.S. sentiments dominate the public sphere and paranoia about U.S. spying helps drive internal political purges.

Friedberg would deal with China much differently, looking to shore up that “hegemonic coalition” so it could contain China’s rise or at least influence Beijing from the outside. For inspiration, he cites former Soviet leader Vladimir Lenin, of all people, who advised disciples to “probe with bayonets” and withdraw if they encounter steel. “China’s current leaders have yet to fully encounter steel,” Friedberg writes.

To start, Friedberg would disengage from China economically. He doesn’t advocate full decoupling, which he recognizes would be ruinous given the interconnections between the two economies. His book was written too early to take Russia’s invasion of Ukraine into account, but even disconnecting the West from Russia’s relatively small economy is proving difficult because of Moscow’s importance as an energy supplier. Imagine trying to pull apart supply chains that have China, the world’s factory floor, as a major hub.

For all the harshness of his criticism of China, most of Friedberg’s recommendations don’t go much beyond what U.S. President Joe Biden is doing. Friedberg would restrict Chinese investment in the United States, limit U.S. technology exports to China, use tax incentives and other inducements to encourage companies to relocate their supply chains away from China, and encourage allies to do the same. He would also boost spending of the U.S. Navy,  refocus the U.S. military toward Asia and “look for ways to pry Russia away from China.” (Again, this is pre-Ukraine.) He doesn’t provide a road map or try to detail the costs.

He spends just a few sentences on one of his most provocative recommendations: creating an economic alliance to help democracies facing Chinese economic coercion. As with NATO, he writes, the alliance would operate on the principle “an attack on one is an attack on all.”

At the end of the Trump administration, then-U.S. Deputy National Security Advisor Matt Pottinger tried something along these lines after China cut off imports from Australia. Beijing was miffed that Canberra was pressing for an independent investigation into the origin of the coronavirus. Pottinger wanted other countries to pledge to buy Australia’s stranded imports.

But his plan went nowhere. The administration never produced a formal proposal, and Australia’s trade minister, Dan Tehan, expressed no interest in the idea when he visited Washington D.C. last summer. Tehan’s main goal was easing commercial tensions with China, not looking to extend the fight. Friedberg doesn’t suggest how to overcome such reluctance, which other trading nations are bound to share.

Although Friedberg considers the United States’ anti-Soviet alliance as a model, he also ignores the crucial role trade can play. Europe and Japan were wedded to the United States in good measure because America opened its markets to textile, electronic, and automobile imports even though that hurt workers in some U.S. industries. Similar trade openings could help the United States recruit new allies in its competition with China or strengthen ties with existing ones.

The Biden administration is now about to launch what it calls an Indo-Pacific Economic Framework to try to strengthen ties with Asian nations. But it says it won’t reduce tariffs or make other concessions with nations that want to expand trade with the United States. Some in the Biden administration and Congress are hoping that the framework becomes a full-fledged free trade agreement, perhaps even leading to the United States joining the Trans-Pacific Partnership that the Obama administration negotiated but Trump—and former U.S. Secretary of State Hillary Clinton, during her campaign—rejected.

That trade pact now includes 11 nations in the Asia-Pacific and has been renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Quite a mouthful, but keeping Trans-Pacific Partnership in the name is one way those nations are signaling they would like U.S. participation. In an embarrassing turn for the administration, China is seeking to join it while the United States remains unwilling.

Winning congressional approval for a free trade deal  would be tough, even if the U.S. renegotiated parts of TPP. Congressional Democrats have long opposed such pacts, and free trade became anathema to many Republicans who followed Trump’s lead. But it’s probably essential to compete economically and politically with China, as both Friedberg and Bergsten want.

At the very least, passage of a new trade deal would require helping those parts of the country that would be hurt by increased imports, including retraining workers there and relocating industries to depressed regions. The United States has done an awful job aiding workers hurt by trade (or by automation) since it started liberalizing trade after World War II. But that is the true cost of engagement, whether the target is China itself or potential allies against it.

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