Talking tough on China is back in vogue. Republican candidate Mitt Romney has resorted to strong language and tough threats. “China steals our designs and patents and our know-how,” declared Romney. “They have walked all over him [Barack Obama]. If I am president that is going to end.” He has promised to brand China a currency manipulator on “my first day in office.” Which leaves two questions hanging in the air: will Obama be obliged to follow suit; and would Romney walk his talk if he were elected?
The problem with those who dismiss these threats as the same old pre-election China-bashing is they assume that nothing much has changed in the China-US relationship since the 2008 presidential election, or indeed the ones before that. In fact, there has been a profound change. Many Americans believe their country is in decline, unlike in 2008. It is also now widely recognised that China is a serious adversary and competitor of the United States; and in time it might replace the United States as the dominant power in the world. Where previously the relationship between the two countries was highly unequal, the United States is now increasingly, though reluctantly, obliged to see China as of not too dissimilar status, if not yet as an equal. And where previously their relationship was defined by a relatively limited range of issues, such as trade and Taiwan, as China has stretched its reach across the world, so their relationship has become ever more complex and ubiquitous. Quite simply, China now occupies a different place in the world and therefore, it must follow, in the American mind.
It is not inevitable that the relationship will become increasingly, perhaps dangerously, fraught. But the potential for conflict will continue to grow apace as China emerges as a more important player in the world. That said, there is nothing new about Mitt Romney’s invective against China. Far from breaking new ground, he inveighs against the traditional targets of jobs, the yuan and Chinese competition. This is hardly surprising in a situation of mass unemployment and the growing current account deficit with China; with most suffering from falling living standards and many out of work, the idea that China should be held responsible is an easy pitch. Easy maybe, but it is also mistaken. The yuan has risen by roughly 20 per cent against the dollar in the past four years; in the early months of this year, however, it has begun to weaken as China’s current account surplus with the rest of the world has narrowed considerably. The surplus is now less than 3 per cent of China’s GDP compared with over 10 per cent in 2007. Romney’s main pitch—that the yuan is undervalued—is becoming an increasingly less sustainable position.
That, of course, in the heat of an electoral battle, will not necessarily weaken its appeal, especially if President Obama begins to tread the same boards. But afterwards, when it comes to the far more difficult task of governing, then a newly-elected President Romney might be inclined to press the pause button rather than, as promised, declaring China to be a currency manipulator within his first 24 hours in office. China, he will be forcibly reminded by financial reality, is America’s banker. Would he really be prepared to risk a serious deterioration in their economic relationship, perhaps even a trade war, for a cause which was misconceived in the first place? It would not be a surprise if, as president, Romney should change his tune once in office in the manner of his recent predecessors.
But even if he did, it would be wrong to assume that the relationship between China and the United States will not become more fraught. The case for this, I think, is indisputable. Put bluntly, the United States is in decline and in China it faces an adversary which in time—and perhaps not that much time—will increasingly usurp its position of global dominance. Global hegemons do not take kindly to losing their pre-eminence and the US will surely be no exception; on the contrary, it seems likely that America will resist, in some degree or another, the idea over quite a prolonged period, in the manner that Britain before it sought to resist its own imperial decline. The fact is even amongst those who accept the idea of American decline, many, nonetheless, deny its underlying causes. Many Republicans, for example, especially those associated with the Tea Party, hold that the reason for the country’s decline can be found in the policies of President Obama, big government and high taxation. This is a fallacy. Far deeper historical factors are at play, which pertain not just to America but also to China; the matter of decline, after all, is relative rather than absolute.
The clearest example so far of a determination to resist the decline of American influence has been the Obama administration’s efforts to revive the country’s position in East Asia following a decade of retreat. The so-called pivot to Asia has had three components: the consolidation of America’s relations with its existing military allies, most notably Japan, South Korea and Australia; participation in the East Asian Summit, engagement with ASEAN, and US intervention in territorial disputes in the South China Sea; and a major push to extend the Trans Pacific Partnership in a bid to wrestle the trade initiative in Asia Pacific and East Asia away from China which, by the terms of the TPP, would be excluded from membership.
The difficulty facing the American position, which has been pursued with diplomatic skill and adeptness, is illustrated by these three points. The first two are a function of America’s primary strength in the region, namely its huge naval presence, but do nothing to address its critical weakness, which is declining economic strength in the region, as measured by trade in particular, but also capital flows and the growing replacement of the dollar by the yuan in regional trade. The Trans Pacific Partnership, in contrast, seeks to reinforce the US’s presence and influence in trade, but its chances of success seem small.
THE assertion of American military strength in Asia will certainly complicate matters for the Chinese—and sour relations between the two countries—but it will do nothing to halt the process of American decline. Ultimately nations rise and fall not because of their military hardware but because of their economic grunt; it was America’s economic prowess that enabled it to become a great military power in the first place, not the other way round. The danger facing the US is that, in responding to the Chinese challenge, it becomes increasingly dependent on the assertion of its military power. In the long run, spending on infrastructure and education will do far more to renew the United States than yet more military hardware. Indeed, in starving the country of the resources needed to refurbish its economy, military expenditure will only serve to hasten the country’s decline. Alas, if the British experience is any guide, declining imperial powers find it extraordinarily difficult to wean themselves off unsustainably high levels of military expenditure in favour of a boots and braces approach to economic renewal.
The challenge China poses to America is quite different from that of the Soviet Union. The latter never sought to become part of the global economic system. It pursued a policy of confrontation and military rivalry with the United States which had disastrous economic consequences. And it failed miserably to match America’s economic dynamism. In stark contrast, China is a fully-fledged member of the international economic system. It has sought to maintain a friendly relationship with the US. And it has prioritised economic growth over military expenditure, which in terms of GDP, has remained relatively low. In consequence, unlike the Soviet Union, it has been a huge economic success.
A Cold War-style response to China would not only lead to a more dangerous world, it would also fail to halt China’s rise and America’s decline, indeed in all likelihood it would only serve to hasten the process. Rather, America should seek—as it has done hitherto—to pursue a policy of engagement and friendly relations with China. This would create the most fertile conditions for America to renew its economy and therefore its long-term prospects as a great power, albeit no longer the dominant one. As China’s rise continues, the temptation and desire to resist on the part of America will become greater—whether in East Asia, over trade matters or in outer space. Powerful forces will be arraigned in support, from sections of the Pentagon, business, organised labour and elsewhere. America should not be tempted; its best interests will be served by pursuing and deepening the rapprochement of the last 30 years.
This is an article from the American Review issue "The China Campaign" available as an iPad app.