Lowy Institute

Debate: US China policy

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Hold on to your hats — US-China relations are about to get ugly.

Obama may have turned out to be something of a diplomatic masochist, but even he has his limits. Having been rolled in China and dragged through the mud by the Chinese in Copenhagen, his serenity in dealing with Beijing over the past year appears to be giving way to a combination of indignation and frustration, and a desire to reassert US dominance in the face of China’s new triumphalism.

Last week, Hillary Clinton was dispatched to Asia with a simple message for the region: 'America's back'. That wouldn't have been music to Chinese ears, though the impact of her message was dulled somewhat by the fact that she canceled her trip to attend to a more urgent matter on the other side of the world, and, ironically, never made it past Hawaii. Welcome back.

Meanwhile, back in Washington, the Administration is putting the finishing touches on a massive arms package for Taiwan. At the very least, the deal looks set to contain several hundred advanced Patriot missiles, which, once deployed, would represent a significant qualitative improvement on the ballistic missile defences presently fielded by Taiwan.

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Whether or not the package also includes the advanced F-16 fighter jets that have long been at the top of Taipei's wish-list, or the diesel submarine components that Taiwan needs for its own limited area denial strategy, is as yet unclear. My guess is that it will depend on Beijing's willingness to make a few juicy concessions of its own. 

Finally, as if to underscore his newfound delight in poking Beijing in the ribs, President Obama is apparently also preparing to tee up a meeting with the Dalai Lama, a favourite old stunt in Washington that never fails to arouse the passionate, sometimes truly venomous, reproach of the Chinese Government, and in particular, its indefatigable Ministry of Foreign Affairs.

With any luck, all of this will conform to recent historical experience and be no more than a brief downturn in relations. Every president since Ronald Reagan has had to contend with a crisis in Sino-US relations near the beginning of their term – Bush Snr had Tiananmen, Clinton had the Taiwan missile crisis, and George W Bush had the EP-3 incident – before setting differences aside in the interest of a solid economic relationship.

But there's also a risk that this episode might be the start of something new, the opening moves in a new era of rivalry and tension in Sino-US relations, which many have long been expecting. You don't need to be Thucydides to recognise the potential for combustible political relations in the presence of an established hegemon and a rising challenger. 

Indeed, the intellectual ground in Washington seems to have been shifting on China in recent months. Although we've been fretting about it for a while here in Australia, in the US, a number of prominent commentators – mainstream ones, not just the hard-cases from places like the American Enterprise Institute – have only just begun to question the bizarre but conventional expectation in Washington that a stronger, more prosperous China would also be more cooperative.

As the true strategic insignificance of Afghanistan becomes more obvious, there are signs that many are beginning to reckon with the extent to which the growth of Chinese power has eroded, and threatens to further erode, America's position in the regional and global order.

Paul Krugman is agitating for a trade war with China over its undervalued currency, and Congress is all ears. Roger Cohen, normally a starry eyed optimist, predicts 2010 to be a year of 'rising protectionism, suspended military dialogue, Iranian discord, human rights disappointments and wars of words.' Even Thomas Friedman, globalisation's biggest fan, thinks the US should see China's rise as its twenty-first century Sputnik moment, a challenge against which to define America's own national project.

For Canberra's sake, as much as anyone's, let's hope the coming months are no more than a passing chill, and not the beginning of a long cold winter.

Photo by Flickr user RichardLowkes, used under a Creative Commons license.

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Raoul says in his latest post that American commentators 'have only just begun to question the bizarre but conventional expectation in Washington that a stronger, more prosperous China would also be more cooperative'.

Bizarre, perhaps. But conventional? Who in Washington actually believes that a more prosperous China will necessarily be more cooperative? I would be very surprised if this is the received wisdom among foreign policy thinkers and practitioners.

I think we need to distinguish between, on the one hand, the expectation that China will develop more America-friendly positions, and on the other hand, the expectation that China will acknowledge the authority of the major conventions and institutions of international policy. There may be some advocates of China engagement who take the former view, but I'd guess the majority take the latter.

What I think advocates of engagement want is for China to become a status quo power, rather than a revolutionary one that seeks to overturn the existing world order. Their view is not that China will necessarily cooperate more with the US as it gets richer. Rather, they allow that serious differences will remain and even that they may increase. But their hope is that, if China is persuaded to work within established and new international institutions, such disagreements can be channeled into less threatening and destabilising arenas.

Photo by Flickr user heather, used under a Creative Commons license.

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Is it a conventional expectation in Washington that a stronger China will also be more cooperative, as I recently suggested? Sam’s doubtful, and in a number of respects, I can understand his scepticism.

The notion that a more powerful country will be more deferential seems so counterintuitive, so at odds with the weight of historical experience, that you really would be hard pressed to find anyone, let alone a serious analyst of international affairs, who openly agreed with it.

And yet, strange as it seems, that is precisely the assumption that has operated at the heart of US China policy for two decades, and which continues to shape Washington’s largely bipartisan approach towards China today.

America’s policy of engagement towards China — with its emphasis on trade and investment, on facilitating China’s growth by assuming responsibility for regional stability and security, and on integrating China into the institutions that make up America’s international order — was always intended, or at least justified, as a means to an end. The objective, like American strategy vis-à-vis the Soviet Union during the Cold War, was nothing less than the wholesale transformation of China itself.

Internally, engagement was intended to democratise China by creating economic conditions that would eventually necessitate political liberalisation. Externally, it was just as paternalistic, designed to attenuate China’s great power ambitions by ensuring that Beijing’s interests were fundamentally enmeshed in, rather than arrayed against, the status-quo, a bit like Japan today.

As China became more prosperous, so too, it was imagined, would its stake in the international arrangements that had abetted its rise become more deeply entrenched — to the point where its interests would be virtually indistinguishable from those of the US.

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Thus, Robert Zoellick famously called on China to become a ‘responsible stakeholder’, a formulation in which ‘responsibility’ was defined not only by China’s willingness to acknowledge the conventions and institutions of international policy, as Sam suggests, but also its willingness to accommodate itself to US primacy in Asia (more or les indefinitely) and adhere to American preferences on a range of important international issues, including Iran, North Korea and climate change, among many others.

Of course, from Washington’s perspective, things haven’t exactly gone to plan. As Gideon Rachman recently noted, China’s economic miracle has not brought with it inexorable political change, and, strategically, China has not grown up to resemble post-Cold War Japan. By contrast, Beijing has a narrow, clear-eyed view of its national interests, which it is unwilling, especially as its power and wealth accumulates, to subordinate to those of the US. 

Photo by Flickr user chinadialogue.net, used under a Creative Commons license.

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It's hard enough describing what China is now. Describing where it might be going stretches the standard international relations lexicon. The standard categories of 'status quo' or 'revisionist' power aren't much help. No wonder the panda huggers and the dragon slayers of Washington can never resolve the argument.

Mark's description of the Chinese juggernaut is yet another accounting of the many reasons China should be a status quo power – a booming economy that has now become the world's largest car market and the world's largest merchandise trader exporter. The Chinese Communist Party wants to freeze its present domestic power in perpetuity. And sitting on that huge dollar mountain it has accumulated, China has no interest in breaking down the American-designed global trade system.

Beijing is becoming used to reaching the number one spot in the existing system. Why would you want to revise or revolt against that? The answer is that China's leaders want to choose the bits of the globalisation package they sign up to. That is what makes the Google imbroglio so fascinating.

Let's create a hyphen term. I was tempted for a moment by the idea of China as a 'status quo-tectonic' power. I was drawn to the tectonic imagery by The Economist's piece on the way developing countries have come out of the recession stronger than anyone expected, with profound consequences for the rest of the world.

When the Earth’s tectonic plates grind against one another, they do not always move smoothly; sometimes they slip. A year after the West’s slump began to spread to emerging markets, it has become clear that the recession has been a moment of tectonic slippage, a brief but powerful acceleration in the deep-seated movement of economic power away from rich nations towards emerging markets.

The problem with 'status quo-tectonic' is that the crashing of tectonic plates also summons images of earthquakes, volcanoes and the rise and fall of mountains. Certainly not what Beijing has in mind. So something closer to the 'peaceful rise' slogan is needed.

My nomination is to describe China as a 'status quo-tidal power'. China exults at the way the international tide of trade and power has been running (along with the gold medal tally at the Olympics). The Party wants that version of the status quo to continue — stability accompanied by a continued shift of the tide in Beijing's favour. As long as the trend continues in the current direction, even a little slowing of the pace of the last two years would be something of a blessing.

So picture China as a status quo-tidal power – with the tide running away from the US.

Photo by Flickr user TimboDon, used under a Creative Commons license.

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I like Graeme's description of China as 'status quo-tidal', but I'd like to offer an alternative way of looking at the question of whether China is a status quo or a revisionist power. I think it all depends which 'status quo' we mean. If we mean the stable, open international order that Asia has enjoyed for the past forty years and that has been so essential to China's economic transformation, then yes, China is absolutely a status quo power – it wants to see all that preserved and strengthened. 

But if the status quo we mean is US primacy in Asia, then China is quite clearly a revisionist power. I have no doubt China seeks an end to US primacy in Asia.

Of course, for the past forty years, the two conceptions of status quo I've mentioned here have been synonymous: stability in Asia has depended on US primacy, and no one has been able to imagine any other way to keep Asia peaceful. That view is still widely held, especially in America. On this view, any challenge to US primacy is a challenge to peace and order – revisionist, in other words.

But in Beijing they see things quite differently. They see the linkage between Asian order and US primacy as contingent, and transitory. They find it easy to imagine a future stable Asian order underwritten not by US primacy but by their own, or perhaps by some other arrangement to share power among Asia's major countries. 

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For them, it makes perfect sense to support the status quo of Asian stability, but not the status quo of US primacy. Indeed, they may think that replacing US primacy as the basis for Asia's order is necessary to preserve it in the new circumstances created by the new distribution of power. That makes Beijing a status quo power, under the old banner that says 'we must reform in order to preserve'.

They may be right. Trying to perpetuate US primacy might end up, not as the best or only way to support peace in Asia, but as the surest way to undermine it. As China's power grows, the US will have to decide whether to keep trying to maintain primacy in Asia or surrender it and seek some power-sharing accommodation with China (and maybe others) instead. 

I think it is clear which they will choose. Americans will tend to portray Chinese pressure on their primacy as a revisionist challenge to peace and stability, and react by confronting China strategically. The result would be America defending its primacy at the expense of order in Asia.

Who is the status quo power now? If US primacy is the only possible basis for order in Asia, than defending it is the only way to preserve order. But if Asia's order can be sustained on some basis other than US primacy, then fighting to preserve primacy at the expense of order looks revisionist.  Which all goes to explain why it is so important for us to explore whether or not there are new ways to sustain order in Asia in the Asian century, as some of my Lowy colleagues are doing with their work on Asian security futures.

Photo by Flickr user raemin, used under a Creative Commons license.

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Robert Flawith writes:

Graeme Dobell's mission to move beyond the mutually exclusive dichotomy of 'revisionist power' or 'status quo power' to more accurately describe the role of a mercurial China in the future of international relations is an admirable one.

However, his explanation of China as a 'status quo-tidal' power seemed to me to fail the basic logic test. He writes that the CCP likes that part of the status quo where the relative economic and military power tide is flowing in Beijing's favour.

So, China likes the status quo, so long as the status quo keeps revising itself in Beijing's favour? That sounds like a description of a plain-old revisionist power to me.

Personally, I welcome China's rise and do not believe China poses a threat to the international community, however I also think it is wise to hedge against future security uncertainties in this area. I'm not sure if this makes me a 'Panda Slayer' or a 'Dragon Hugger'...

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Raoul's reply to my post on America's China policy begins by acknowledging that 'you would be hard pressed to find anyone' who agrees with the proposition that a growing China will necessarily become more deferential to the US. Yet in the next paragraph he says that this assumption 'continues to shape Washington's...approach towards China'.

How can both things be true? If nobody believes the premise, how come it shapes US policy?

I would also like to see evidence of any prominent American scholar or policy-maker who really believes that Chinese economic development would make China 'a bit like Japan' with interests 'virtually indistinguishable from those of the US'. There may be figures who believe such things, but I would be startled if it is a majority view or even a very popular one.

Certainly, various presidents and diplomats have hoped that China's 'coming out' might make them more amenable to American views, but none of them expected it, which is why each successive administration has continued to hedge against China in various diplomatic and military ways.

The reason they have all engaged China is not out of naïve faith that it would transform the place politically (though, again, they might have hoped for it), but because there is widespread agreement among American foreign policy elites that economic globalisation is a tide that lifts all boats. In short, it is in America's economic interest that China get rich.

Photo by Flickr user flickr.Marcus, used under a Creative Commons license.

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I liked Graeme's description of China as a 'status quo-tidal' power and agree that China has plenty of reasons for liking the status quo when it comes to the international economy: after all, the current system has proved to be a great environment for facilitating the kind of rapid catch-up growth that has allowed China's economy to grow at an average annual rate approaching 10% since 1980.*

Yet such is China's size that its economic rise is nevertheless undermining that same status quo. Take the two examples of international trade and international investment.

As a major trading power, China has done rather well out of the current global trading system. China's arrival as a key trading power was sealed with its accession to the WTO at the end of 2001, and WTO-monitored and enforced checks on protectionism have helped allow China to grow market share from less than 1% of world merchandise exports in 1980 to a little over 4% by 2001, and to almost 9% by 2008 (and probably into double-digits by the end of last year). 

The problem is that this success has also created some significant strains. 

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China's rapid growth is one reason rich countries have lost enthusiasm for further trade liberalisation, and why other developing countries have been cautious about locking in additional tariff cuts under the Doha process. China's quasi-mercantilist policy of maintaining an undervalued exchange rate has been an extremely successful development strategy. But it has imposed significant costs on the world, including by gradually eroding other countries' support for an open trading regime.

International investment offers a similar story. Once again, China has been a clear beneficiary of the existing, relatively liberal, policy environment, with huge inflows of foreign direct investment making a substantial contribution to the restructuring of the Chinese economy. But now that China is starting to become a significant source of FDI, and not just a recipient, rich countries are having second thoughts about the rules of the international investment game, to the extent of tightening controls – or at least oversight – on some capital inflows. 

Sure, some of this negative reaction can be put down to nothing more than rich country hypocrisy – one rule for you, another for me. But there is more to it than that. In particular, the high degree of state control embedded in Chinese capital outflows means that many recipient countries are understandably nervous about treating them in the same way as foreign investment by private sector players.

There's also a geopolitical element: it's not just a coincidence that the rest of the world decided to get nervous about Sovereign Wealth Funds (SWFs) once Beijing (and Moscow) announced that they were forming their own. Until then, SWFs had been a largely unremarked feature of the international financial landscape.**

So while China has certainly been a big winner from the existing international economic order, one consequence of its victory is a continuing reshaping of that order. And that's only the part of the story that involves other countries' reactions to the rise of China. 

Let's assume China continues on its economic ascent without a radical change in its current model (a big assumption, admittedly, but arguably no bigger than assuming something different). Given the quite different national economic regimes adopted by Washington and Beijing, it then seems quite reasonable to expect that an international economic status quo that is increasingly influenced by the Chinese economic model is going to end up looking different from one that has been centred on the strengths of the US model. 

We might get an international economic order that has a larger role for direct government intervention, a larger role for state-controlled economic actors, and a lower tolerance for unfettered markets than the one we have grown used to.

*One important area where Bejing is less than happy with the status quo is the central role of the US dollar.

**Large changes in the actual and forecast rate of growth of SWFs were also important factors in the increased attention paid to SWFs at this time.

Photo by Flickr user Wolfgang Staudt, used under a Creative Commons license.

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Washington Post columnist Robert Samuelson has made a claim about US-China relations very similar to one made by my colleague Raoul Heinrichs some weeks ago, to which I took exception (the entire debate thread is here). Samuelson says:

The prevailing American assumption was that as China became richer, its interests and values would converge with those of the United States.

Samuelson provides no examples to back up his claim that this is a 'prevailing assumption', which just reinforces the scepticism I expressed in response to Raoul. Nevertheless, Samuelson argues that recent differences between the US and China show this prevailing assumption to be 'fundamentally' wrong. Good thing, then, that it never really prevailed anyway.

Samuelson puts too much weight on recent troubles. There is a natural tendency to believe that recent events are really important, yet previous US Administrations have had quite productive relationships with China after also going through early controversies. Who knows if this current round of troubles represents a substantive shift or just a bump in the road?

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There's also a strange lack of empathy and self-awareness in Samuelson's view of China:

Most American-Chinese disputes reflect China's unwillingness to endanger domestic goals for international ends. It won't commit to binding greenhouse gas cuts because these could reduce economic growth and (again) jobs. On Iran, it values its oil investments more than it fears Iranian nukes. Likewise, it worries that unrest in North Korea could send refugees spilling across the border. Because Taiwan is regarded as part of China, U.S. arms sales there become domestic interference. And censorship is needed to maintain one-party control.

Samuelson takes all this as evidence of a 'China First' strategy, but it really doesn't sound all that unreasonable. Isn't the US Congress' attitude to greenhouse gases pretty similar to the one he ascribes to China? Doesn't the US ever trade off its security and economic interests? Aren't refugee flows a pretty legitimate concern? And which authoritarian state is not concerned with maintaining control?

Samuelson seems shocked by the behaviour of a self-interested state operating in an anarchical system. But why should we be surprised that China is putting its own interests first and only working within the existing world order when it works to China's advantage? 

It all makes one wonder whether the 'prevailing assumption' Samuelson tries to demolish was actually his.

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