Trade war a logical step in the age-old quest for power

Trade war a logical step in the age-old quest for power
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The current trade squabbles are about much more than promoting exports; they're about who will be in the global driver’s seat in the coming decades.

The underlying questions that must be asked are: Is China a status-quo power or a revolutionary/revisionist challenger, and are China and the U.S. destined for conflict?

The rise of China is undeniable. On a purchasing power parity-basis, the country is already the largest economy in the world. With 1.4 billion people, its population dwarves the 325 million who call the U.S. home.

For the foreseeable future, the U.S. will retain the No. 1 spot as the most powerful nation since China’s military is still not capable of directly confronting the U.S. and the dollar forms the backbone of the global financial system.

Washington has cast an incredibly wide political, economic, cultural and military net around the globe, including in alliances and partnerships with dozens of nations. 

However, in the longer run, China is obviously the prime suspect to take over America’s top spot. It has been laying the foundations for this with the Belt and Road Initiative (BRI), Asian Infrastructure Investment Bank (AIIB), Silk Road Fund, New Development Bank and so on.

Like CATO’s John Glaser said: “China’s rise is more a threat to America’s status as the indispensable nation than any tangible threat to national security.” Yet, “Many great powers throughout history have let fixations about national prestige thrust them into destructive wars.”

The U.S. would be wise to prepare for having to share the top spot and perhaps eventually to accept the No. 2 position instead of desperately clinging to its current place.

But it’s almost a given that every hegemony stubbornly likes to think it is the last although history shows that states and empires rise and fall. Obviously, if you are used to being the greatest power for decades, it will be very hard to face reality and focus on managing decline instead of pointlessly trying to guard what once was.

Not that long ago, things were markedly different. For many years, American foreign policy was predicated on the assumption that China could and would like to be integrated into the liberal world order.

Therefore, American foreign policy was fairly pro-China, with the goal of getting it to adopt its own version of "perestroika" and "glasnost" while expecting Chinese people to demand democratic reforms when prosperity had reached a certain level. That hope is largely gone; trade, economic growth and democracy aren’t as closely linked as many assumed. 

China under Xi Jinping has even turned more authoritarian and assertive, and it lets its presence be felt all over the world with infrastructure projects and billions of dollars worth of loans. These days, China is mainly seen as a strategic competitor, if not enemy. 

Harvard’s Graham Allison warned about confirmation bias: “When one competitor ‘knows’ what the other’s ‘real motive’ is, every action is interpreted in ways that confirm that bias. Under such conditions, the competitors become hostage to third party provocations, or even accidents.”

It remains to be seen to what degree Beijing aspires to be the center of the globalized world, but undeniably, for the first time since the Cold War, the West has to deal with a serious strategic challenger.

This year, for the first time, the U.S. officially called China an adversary and threat in the National Defense Strategy, along with Russia, Iran and North Korea.  

Against this backdrop, we should assess the current trade tensions. China steals intellectual property and forces Western companies to share technology and knowledge if they want to do business in China.

That has always been the case, but Western governments used to think that the advantages of a huge potential consumer market and a gigantic provider of cheap goods outdid the disadvantages of doing business with China.

Now that China is closing in on the West, Western nations are getting much more critical of takeover bids for Western companies by Chinese corporations. 

What’s more, Western governments are getting more insecure as liberal democracies are perceived as less able to deliver progress for the masses than before. For decades, social democracies were regarded as the most balanced societies in the world, providing the best combination of freedom, prosperity and cohesion.

Now, leaders in various Western nations are questioning whether liberal democracy is still the best way to go and competing systems like that of China have shown that authoritarian systems are capable of lifting hundreds of millions out of poverty.

An insecure West and confident authoritarian regimes increase chances of serious clashes. Graham Allison’s "Thucydides Trap" is a term to describe a period when a rapidly rising power competes with an established power, which increases the likelihood of war. In the past 500 years, at least 16 such situations have occurred; in 12 cases, the result was war.

China would probably not have a chance against the U.S. in a military conflict, but this does not mean that it will avoid it at all costs. 

Another possibility is that China will first test the waters. Is the U.S. really prepared to put its money where its mouth is? On paper, it has provided safety guarantees to countries such as the Philippines and Japan, but what if this leads to bloody warfare?

American commitments have been in doubt before, and Trump’s actions and words have been undermining trust in the U.S. more than ever.

To beat the odds and avoid being at each other’s throats, at least three things must happen, according to Stanford and Princeton professor Stephen Klotkin:

  • Western leaders have to find ways to make large majorities of their populations benefit from globalization.
  • China has to continue its rise peacefully.
  • The U.S. needs to find a balance between strong deterrence and strong reassurance vis-à-vis China and get its house in order domestically.

When financial markets start reaching a frenzy, Washington and Beijing will probably resort to easing tensions. Yet, the underlying drivers of the trade war will probably not be addressed, making it a matter of time before things start boiling over again.

Andy Langenkamp is a senior political analyst at ECR Research, monitoring international political developments that affect the financial markets. He has also written for the Financial Times and The Guardian.