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Korean Conciliation: Will it Last?

Georgy Toloraya

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2018 started with a sensation in Asia – a “New Year’s gift,” if we are to use the words of Ri Son-Gwon, head of North Korea’s delegation at the inter-Korean talks held on January 9, 2018 in the South Korean segment of the demilitarized zone in Panmunjom.

In his traditional New Year’s speech, supreme leader of North Korea Kim Jong-un proposed that an inter-Korean dialogue be launched. The proposal was timed to the participation of North Korean athletes in the 2018 Winter Olympics in Pyeongchang. Moon Jae-in’s government agreed immediately, which is understandable: the President of South Korea needs a success to increase his domestic political support. He also needs “join the game” on the peninsula, the stakes in which (peace or war) have been set over recent months by the United States and North Korea, without the participation of South Korea.

The talks (the first since 2013) are being held at the highest possible level (ministers in charge of the relevant matters from both countries), which allows the parties to discuss all manner of problems, and not just those related to sports. The results of the first round instil a certain amount of optimism.

In addition to North Korean athletes (who may even walk out under the same flag as their counterparts from the South) being allowed to participate in the Pyeongchang Olympics, the two Koreas also agreed that a North Korean governmental delegation, a demonstration taekwondo team, fans and a support group comprised of dancers and musicians could also attend. In total, an estimated 500 people will travel to South Korea. Perhaps, as we have seen in the past, the occasion will be used to develop political contacts both between the North and the South and between North Korea and the United States.

The agreement to restore the communications hotline between the militaries of the two countries (which the North Koreans cut it in 2013) and hold military consultations to reduce tensions was sensational news. Humanitarian and sports exchanges are expected to be stepped up.

It is also important that the two parties have outlined the prospects of continuing high-level consultations. Moreover, on January 10, President Moon said that an inter-Korean summit was possible. Particularly noteworthy was the fact that both parties confirmed their respect for former agreements which had been ignored for the last decade by South Korea’s conservative administrations.

What caused such an unexpected turn of events, which has given hope for a détente on the Korean peninsula?

The initiative is in the hands of North Korea. Kim Jong-un played a brilliant diplomatic gambit, breaking out (at least temporarily) of a seemingly hopeless dead-end where he had been driven by international sanctions stemming from his country’s nuclear missile programme. The entire world welcomes news of his initiative to ensure a safe and successful Olympic Games. Having played the “South Korean card,” Pyongyang used it as a “vent” to reduce pressure in the “Korean cauldron” by eroding the united front of its enemies. China and Russia eagerly supported these initiatives, and South Korea is on now on Pyongyang’s side as well, as it is extremely interested in the dialogue being a success. This means South Korea will be against initiatives to increase the pressure on North Korea and oppose Washington’s belligerent threats. Pyongyang has thus weakened the United States–South Korea military union. South Korea will no longer follow in the wake of the U.S. policy of coercion, which had made the country hostage to a possible military operation spearheaded by the United States. And Japan is unlikely to be particularly active, breathing a sigh of relief at the reduced threat of war that would inevitably hit it too.

The unprecedented regime of sanctions and isolation imposed on North Korea, the principal “achievement” U.S. diplomacy attained in the last few months (at the cost of an uncompromising dialogue with both allies and dissenters, including China and Russia), is now also up in the air. South Korea has already announced it will be limiting the sanctions due to the Olympics, and this creates an unpleasant precedent for the United States. Is there any reason why Russia or China should not organize a North Korea-related event that would also justify exceptions? And calls for new sanctions on the part of Washington will hardly be embraced in an atmosphere of dialogue. It is no coincidence that the United States appears to have lost hope in the United Nations. It now seems to be thinking about creating a “coalition of the willing” to defeat North Korea, choosing the “willing” from its allies.

The United States was forced to back down. The American leaders abruptly changed their tone: President Trump, who had recently rebuked Secretary of State Rex Tillerson for “wasting time” in trying to negotiate with North Korea, suddenly announced that he had always favoured negotiations and that the inter-Korean dialogue had started because of his efforts since Kim Jong-un was allegedly scared of pressure. Even avowed “hawks,” such as Nikki Haley, the United States Ambassador to the United Nations, suddenly started to pay lip service to political solutions. Moreover, plans for a “limited” strike against North Korea which, according to The Wall Street Journal, have been secretly discussed within the U.S. administration, are now hanging in mid-air.

Kim Jong-un has thus scored a tactical victory. In fact, the Russia-China proposal of a “double freeze” – stopping North Korean tests in exchange for restricting U.S.–South Korea military drills – was implemented at his initiative. The United States had already postponed the Key Resolve and Foal Eagle drills until after the Olympics. The postponement and possible modification of drills are conducive to the world getting used to North Korea’s nuclear status.

Using inter-Korean relations in this manner is a tried and tested manoeuvre on the part of Pyongyang. The method was first employed back in the early 1970s during a period of détente between the Soviet Union and the United States, when South Korea was searching for “approaches” to North Korea’s allies, and when North Korea was attempting to gain economic aid from developed western countries. North Korea probably tested the manoeuvre in order to decrease its dependence on the great powers, and South Korea played into its hand. On July 4, 1972, unexpectedly for many, the North and the South published a Joint Statement recording the principles of the country’s unification, which was to be achieved independently, peacefully and democratically, on the basis of national consolidation [1].

Later, for declarative purposes, the North proposed the idea of creating a confederation based on the principle of “one nation, one state (with a single national government) – two systems, two regional governments.” In the 1990s, the idea was augmented with the principles of consolidating the nation, national sovereignty, patriotism and the struggle against external interventions [2].

Pyongyang pulled the same trick in the early 1990s. The country was in crisis at the time: political ties with Russia had been severed; Russia had cut economic assistance to the country; and the United States and South Korea had stepped up pressure on the North, believing that North Korea was about to collapse and preparations should be made for “subsuming” the country “German style.” North Korea played a double game: on the one hand, it accelerated its nuclear missile programme, which had been conceived as a “deterrent” against foreign intervention; on the other, it played the “Korean unity” card, signing the Agreement on Reconciliation, Non-aggression, Exchanges and Cooperation between the South and the North.

Pyongyang strove to drive a similar “wedge” between South Korea and the United States during the “liberal decade” (during presidencies of Kim Dae-jung and Roh Moo-hyun). At the 2000 and 2007 summits, Pyongyang and Seoul attained a consensus on the prospects of separate state-building with growing economic and later cultural integration of the two states. As a result, South Korea in essence started acting as North Korea’s principal global sponsor and advocate, unseating China in that role. South Korea’s economic aid became the principal factor in North Korea’s “survival,” and the role of the United States dropped, causing its displeasure.

Washington is hardly pleased with Seoul’s current pro-active stance, although Seoul is protecting its own existential interests and is striving to prevent a war. As far as the United States is concerned, Seoul’s consent to North Korea’s nuclear status, as well as its cooperation with North Korea, are unacceptable. Although Moon Jae-in tried to convince Trump otherwise during their recent telephone conversation.

We can thus assume that the United States will undermine the inter-Korean dialogue. For starters, massive pressure will be put on Seoul to push the nuclear issue to the centre of the talks, which is patently unacceptable for North Korea. At the very first meeting, North Korea’s representative put a definitive stop to all such approaches by the South Korean side. He stressed that North Korean missiles are aimed not at South Korea, Russia or China (a reminder to the great powers of North Korea’s new status and capabilities), but at the United States, and North Korea hold talks on that subject with the United States. Apparently, in the current situation, the United States cannot avoid such a dialogue. The policy of pressure and blockade and threats of force essentially failed.

Will that last? It would seem that the forces hostile to North Korea will soon regroup. They grudgingly consented to the moratorium on military drills for the duration of the Olympics, but they will hardly let this hiatus last any longer, especially since the pretext of “strengthening defence capacities against the crazy regime” is always at the ready, since they are fully cognizant that such provocations will prompt a response from North Korea (for instance, new underwater missile launches or another nuclear test) and that will warrant a return to the customary tactics of isolation and an economic blockade.

That is, unless a miracle happens and the two Koreas achieve a breakthrough in their talks on cooperation and reconciliation, thereby forcing the United States to agree to a semblance of a compromise. At least until the situation escalates once again.

The active stance of China and Russia is of crucial importance for a positive scenario. Russia should make the Korean issue one of the crucial points in its relations with the United States, insisting that the U.S. obstruction of the diplomatic process is unacceptable. In particular, Russia should strive to reduce the scope of possible military drills and move them to regions far removed from the North Korean border and push for the United States to engage in a direct dialogue with North Korea as soon as possible. Russia may also offer the two Koreas a venue for a summit – in Vladivostok or Irkutsk, for example, since, for security reasons, Kim Jong-un cannot travel to the South and he hardly wants to travel to China, and because holding a third successive summit in North Korea is fraught with political costs for the South Korean leader.

  1. G. Toloraya. The Republic of Korea. Moscow: Mysl, 1990, p. 44.
  2. The Democratic People’s Republic of Korea. Moscow: Nauka, 1985, pp. 260–262; Nodon sinmun, Pyongyang, 7.4.1993.

First published in our partner RIAC

Doctor of Economics, Professor of Oriental Studies, Director of the Asian strategy center at the Institute of Economics of the Russian Academy of Sciences

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East Asia

China Vision: China’s Crusade to Create a World in its Own Image

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In the wake of Chinese leader Xi Xinping’s moves to make himself ruler for life, everyone is wondering about his government’s ambitions for its role in the world.  Daniel Wagner has written about what the trends indicate in China Vision: China’s Crusade to Create A World in its Own Image.

The book notes the paradox that China is in regards to investment.  The world’s 2nd largest economy continues to accept billions of dollars in development loans from banks like the World Bank and Asian Development Bank.  Meanwhile, Chinese state banks are loaning trillions of dollars to countries around the world.  Chinese entrepreneurs are feverishly setting up businesses abroad and purchasing foreign companies and real estate. If a foreigner wants to invest in China though, they must accept ownership stake limitations and obey rules that explicitly make them less competitive.  In regards to domestic investment, Wagner argues that China invests way too much on grand public projects, like apartment blocs that remain largely vacant, and not enough on small-midsized businesses.  One of these days (the next global recession?), the chickens will come home to roost and China will have to re-evaluate its blank-check policy.

Much of the book focuses on China’s role in foreign diplomacy and commerce.  The fledgling superpower is in the process of spending trillions of dollars on loans to the developing world, particularly through its Asia-oriented Belt and Road Initiative.  These no-strings attached loans give China enormous power over many of the poorest countries in the world.  Many people, like former Maldivian PM Mohamed Nasheed, have outright accused China of imperialist behavior.  The author writes that, “Kenya was to be forced to relinquish control of its largest and most lucrative port in Mombasa to Chinese control as a result of Nairobi’s inability to repay its debts to Beijing.”  China also owns ports in locales as diverse as Djibouti City and Zeebrugge, Belgium.  Chinese firms are likewise emulating some neo-colonial tendencies.  For instance, Wagner writes that, “Fewer than half of these [African-based Chinese] firms sourced inputs or had African management.”  Controversial Chinese real estate projects like Forest City, Malaysia are arguably examples of literal colonialism.

Through this strategy of buying friends and building a global network of ports, China is strengthening its impunity as a Top 3 naval power.  Increasingly, China is treating the South China Sea as its private fiefdom by ignoring credible territorial claims of the Spratly Islands and Scarborough Shoal by the Philippines, Indonesia, Japan, Brunei, Malaysia and Vietnam.  Most disturbing of all is Xi’s recent verbal aggression towards Taiwan.  By buying friends, China can mute criticisms of this military aggression in the UN and isolate foes like Taiwan (only 19 countries have diplomatic relations with it).  With a rapidly expanding fleet of sea craft, the People’s Liberation Army Navy is better equipped than ever to project hard power via all of China’s ports, from off the coast of the Philippines to Belgium…. On this dire note, I wish Wagner had written more about the budding conflict between China and the other 1B-person country in the world, India.  I predict that the dichotomy between democratic India and totalitarian China will determine the future of humanity.  Seeing as India & China (and China’s close ally Pakistan) all possess thermonuclear weapons and have recent military skirmishes with each other, one can only hope that the Tiger and Dragon don’t initiate WWIII squabbling over a sleepy locale like Kashmir or Nepal.

In the final section of the book, Wagner writes about China’s dominance in the virtual sphere.  Chinese tech companies like Baidu, Alibaba and Tencent are rapidly catching up and even beating Silicon Valley in terms of traffic, profitability and innovation (most importantly, AI).  China has also become the de facto global leader in green technology.  China’s blank-check philosophy funds these rapid advancements.  A lot of this apparent innovation, however, is fuelled by corporate espionage.  For the past few decades, Chinese firms (often with official backing) have been using spies and hacking to steal blueprints and thus reverse engineer inventions.  Ironically, these knock-offs are oftentimes sold to the US government, which creates a huge security risk.  In many cases, Western companies willingly share confidential data with China in order to be granted access to the Chinese market.

China’s running racket of stealing IP and personal user data from US companies that choose to operate in China demonstrates the importance of government regulation… In this case regarding national security and user privacy protection.  Ironically, China enforces data encryption and other cybersecurity measures through regulations like the 2017 Cybersecurity Law.  The willingness of Western companies to literally sell themselves out to China in the frenzied hope of making a quick buck in the world’s largest market is textbook junkie-mentality.  These free market free-basers expose their fundamental flaw in the face of China’s system of state capitalism.  By ceding responsibility of investment from the government to the private sector solely, countries like the US are being vastly outspent by China in everything from space travel to quantum computing research.  As economists like Michel Aglietta and upstart politicians like Alexandria Ocasio-Cortez point out, the state must be responsible for picking up the slack when the free market fails to focus on important long term projects, like a Green New Deal (China already has its own publically funded version of the GND).

China Vision is a good account of the Chinese Communist Party’s domestic heavy-handedness and foreign diplomacy-via-blank-check.  The two are interconnected, as China’s crackdown on internal dissidents informs how it treats foreign countries and human rights activists who dare to oppose it.  Through China’s Belt and Road Initiative of loaning billions of infrastructure dollars to developing nations, it can control them through a carrot-and-stick approach.  China’s spy state apparatus is also being used to sabotage foreign humanitarian organizations, religious groups, governments and companies.  The CCP may soon export its surveillance state blueprint to other interested authoritarian states, setting the stage for a cold war between China and its client dictatorships & the Western democracies.  The People’s Liberation Army is preparing for this possibility with a huge naval buildup in the contested South China Sea, aided by all of the “civilian” ports that it’s building there under the auspices of the BRI.  Daniel Wagner’s book does a good job of explaining these geopolitical trends in a concise and even-handed way.  He explains how colonialism and the Cold War helped to shape China’s cynical outlook on the world and doesn’t exaggerate China’s capabilities.  Anyone in politics, tech, economics or the NGO sphere will learn a lot from this book.

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China’s economic transformation under “New Normal”

Sultana Yesmin

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China’s double digit growth, also termed as “old normal growth” had dominated the country’s economy since 1980s. Despite the rapid economic development over the last few decades, this old normal growth has encountered some setbacks, including economic imbalance, income inequality, limited consumption choices against increasing level of demand, and environmental challenges.

Given this context, a comprehensive new development model, “new normal”, incorporating the innovation, coordination, greening, opening up, and inclusiveness, is formulated by Chinese authorities to enable wide-ranging growth and development throughout the country.

Analysts refer to “new normal” as China’s new phase of economic development. The recent trend of “growth slowdown” or “new normal” economic growth is also referred to new strategy of Chinese foreign policy by the analysts.

During the 2014 Asia-Pacific Economic Cooperation (APEC) CEO Summit in Beijing held on November 09, 2014, Chinese President Xi Jinping first used the phrase as “new normal stage of Chinese economy.” President Xi also referred to China’s stable economic growth in order to improve and upgrade economic structure under the “new normal” conditions.

Subsequent to this, China’s 13th Five-Year Plan (2016-2020) incorporates the “new normal” in economic development with a particular vision of building a moderately prosperous society in all respects by 2020. The key significant features of China’s “new normal” are:

Slower economic growth

One of the key reforms or significant changes on China’s medium-high economic growth rather fast growth over the past few years is exceedingly evident. To be mentioned, over the past 40 years, China has maintained an average annual growth rate of around 9.5 percent that transformed an impoverished nation to an upper-middle-income nation.

In contrast, the gross domestic product (GDP) growth rate lowered from 7.5 percent in 2012-2014 to 6.8 percent in 2017. According to China’s National Bureau of Statistics (NBS), the GDP growth rate was relatively same, 6.6 percent, in 2018, with an expected target of around 6.5 percent at the same time.

For the purpose of economic restructure and high-quality development, China’s local governments have also lowered their GDP growth targets in the same year. The new trend of normal flow of growth is projected to be relatively same in the upcoming years.

Yiping Huang, Professor of economics at the National School of Development, Peking University, and an adjunct professor at the Crawford School of Public Policy, ANU, refers to such transformation of China’s growth model as the transition from “economic miracle” to “normal development,” which is the partial departure from the traditional bottom-up approach.

The World Bank also mentions that, China’s economic slowdown is not unexpected, rather desirable from both from short and medium-term perspectives aiming at fostering China’s transition to a modern economy through the new model. This transition denotes a clear move from high speed growth to slower, steadier, and more sustainable economy.

Market-oriented reform

One of the significant aspects of China’s “new normal” economic model is to facilitate market for playing “decisive role” in allocating economic resources. The “new normal” endeavors for making interest rates, currency exchange rates, and land prices more market-oriented. Incremental steps have already been taken towards the liberalization of interest rate and exchange rate set by market forces, cutting taxes, and reducing costs in order to widen market access, stimulate market vitality, and support economy.

The improvement of market environment, enhancement of private investment and investment-led growth, establishment of comprehensive pilot zones, facilitation of interest rate controls on loans, proactive fiscal policy, prudent monetary policy, and the increase of effective supply among other significant measures have also been outlined in the report on the Work of the Government delivered by Premier Li Keqiang at the Second Session of the Twelfth National People’s Congress on March 05, 2014.

Supply-side reform

President Xi first announced the phrase “supply-side structural reform (SSSR)” in late 2015, which injects new impetus into China’s economic policy framework. The SSSR mainly focuses on reducing distortions in the supply side of the economy and upgrading the industrial sector.

A study on China’s SSSR conducted by Reserve Bank of Australia finds five core policy objectives of China’s supply supply-side reform–cutting excess industrial capacity; reducing leverage in the corporate sector; de-stocking of property inventories; lowering costs for businesses and addressing “weak links” in the economy.

In this regard, China has focused on overcapacity reduction, especially in coal and steel production. As for example, more than 65 million metric tons of steelmaking capacity and over 290 million tons of coal-production capacity were eliminated in 2018.

Moreover, the government has already reduced tax to foster business friendly environment. President Xi has underscored the necessity of strengthening areas of weakness to boost the supply of the public goods and services.

Innovation driven economy, the vital part of SSSR, attempts to enhance the quality of products, reduce ineffective and lower-end supply through the advancement of artificial intelligence, big data, and the inauguration of 5G mobile communication equipment etc.

Services-driven economy

As per the push for services-driven economy, the socio-economic issues for the improved people’s wellbeing have also been addressed in the “new normal”. President Xi Jinping remarks, “Comprehensively deepening reform will not only liberate the productive force but also unleash the vitality of the society.”

The 13th FYP highlights the development of services and measures to address environmental challenges in order to reduce pollution and amplify energy efficiency. During the 2014 Beijing APEC meetings, temporary shutdown of Chinese factories was given “priority of priorities” to curb pollution and ensure air quality. As per the policy, China has started accelerating the development of clean energy industry from 2018.

The green development aside, robust consumption, reducing social imbalances, improving education and healthcare facilities, and expanding social protection get equal priority in the new phase of economic development.

Opening up through Connectivity

The new phase of Chinese economic growth is based on political economy that anticipates trans-border trade and investment facilitation as well as border connectivity through greater integration and sustainable relations among nations. China’s stretching connectivity over Asia, Africa, and Europe through the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road”, altogether known as Belt and Road Initiative (BRI), is extending influence from South China Sea to Indian Ocean. RMB internalization and China’s leading role from multilateral trade forums to climate change accords clearly signify the “new normal” policy of President Xi Jinping.

Implications on China’s socio-economic development

The “new normal” economic model has far-reaching impacts on China’s comprehensive development and path towards building a moderately prosperous society.

First, China’s has comfortably been maintaining its position as the world’s second largest economy. National Bureau of Statistics (NBS) reports, despite the slowdown of GDP growth rate, China contributed more than 30 percent to world economic growth during 2017. Hence, the investment-led growth since 2012 has resulted huge benefits for Chinese businesses and the overall economy.

Second, Chinese people are getting relief from the side effects of old model, mentioned earlier. The country has been witnessing growing equality among people, comparatively equal income distribution, robust consumption, environment-friendly industrialization, quality products, and other developments in other socio-economic sectors.

Third, Qualitative than quantitative aspects of economic growth, balanced and sustainable growth, stable employment, innovation, green development, investment intensification, faster industrial upgrading, and opening up are leading to China’s dream towards a sustainable socio-economic development. For example, the number of Chinese enterprises, around 27 million, and market entities have been increased in China over the past few years under both market and supply-side structural reforms. These new business hubs are boosting the country’s structural transformation and economy.

Finally, China’s new phase of economic growth and new historic juncture reiterate China’s development as per the vision broadly prescribed in Socialism with Chinese characteristics for a new era.

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The Slippery Slope of Sino-US Trade War

Syeda Dhanak Hashmi

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Change is the only constant. After a struggle for supremacy in geopolitical and geo-economical spheres, now technological realms have also been contested among superpowers. The Fourth Industrial Revolution is at the verge of breaking out and it is expected that this stage of modernization will tug the very fabric of society and will alter the way individuals interact with each other and world at large. Ongoing industrial innovation will act as a modus operandi to transform global economies, communities, and politics.

The world is in stern need of a modern global architecture before the fourth industrial revolution starts encroaching on us. That is why a trade tussle emerged on statist lines among all major economic stakeholders of the international economy, especially among those having a larger share in business with the United States. The US President Donald Trump opted a pre-emptive approach and imposed tariffs and nuisance in global economies. Eminent journalist, Bob Woodward highlighted the fact in his book ‘FEAR’ that USA’s protectionist elements are far-greater than ever before and such actions will hinder economic peace with traditional allies or trade partners. Trump’s tariff imposition on China and renegotiation of NAFTA and Free Trade Agreements with EU leaves no doubt about Woodward’s projections. Another famous Nico Colchester prize-winner financial journalist, James Politi of Financial Times referred exchange of tariff brawls between USA and China as “protectionist firepower” by Trump administration aiming against China. To cut short, current trade tariff discourse is in order to contain China in geopolitical, economic and technological leadership.

An ongoing trade war is economic intimidation and coercion by the USA towards China to redevise their trade agreements and get more favorable terms for the country, which will also advance Trump’s populist mantra of America First. Trade tariffs were imposed as a consequence for not responding the sheer allegations on Chinese companies by US administration of unprecedented level of larceny and infringement upon intellectual property rights. US Politicians claim that industrial migration and capital flight from the US to China was the reason of unemployment in the USA, but economists condemned the long-term policies like reliance on imports and not saving much for the future.

China’s rise is perceived as a threat to hegemonic stability, thus an influx of uncertainty is stirring in the realm of international political economies. This rise is analogous to the Thucydides trap and also depict similar characteristics as of power transition theory. But the fault line of this predicament lies in the technological advancement of China by virtue of US private enterprises and regional economic connectivity ventures of the country. In short, it is a feud between the two leading economic powers to overhaul world trading practice (its terms and conditions) coupling with technology and knowledge-based economy with an intent to hedge and wedge each other being the contenders of global hegemony.

Both economic powers, China and USA have been in a state of economic tug of war since June 2018. To resolve his sticky situation, Trump administration imposed 25 percent import tax on $50 billion worth of products of Chinese origin in order to overcome the trade deficit between both economic giants. China countered this move by levying duties on the produce of USA and more than three rounds of tariffs worth $250 billion were exchanged among both parties, in addition, both parties threatened with each other with penalties of $267 billion. However, both countries had annual trade relations of $710.4 billion in 2017 and China is ranked as the third largest export market for the USA.

The Chinese government was alleged for backing their private companies by injecting billions of dollars every year and termed as state-owned private enterprises by several journalists and newspapers. In addition, Chinese companies were suspected to violate patent rights especially the ones related to modern technology and Chinese authorities for restricting foreign companies to access their markets freely. China also announced its strategy named ‘Made in China 2025’ which implies that majority of end-user products will be developed by China in near-term while it is also a challenging situation for the USA for being a techno-center of the world. Vision 2025 asserts that China will be a front-runner in modern technologies like Artificial Intelligence and Biotechnology in the respective year .

While campaigning for elections, Republican President of USA, Donald Trump also proclaimed that Chinese development is equivalent to ‘rape’ and his administration will levy 45 percent tariffs on total imports from China. Formerly China had been under tariff regime of USA on products worth of $50 billion annually and President-Elect also threatened Chinese government to take a radical stance and impose further 25 percent taxes on January 1st, 2019 on products worth $200 billion. Chinese government retaliated this move by imposing tariffs worth $60 billion despite economic coercion from the US government of striking further duties on all products of Chinese origin.

Joseph Stiglitz, an eminent scholar, and Nobel laureate explained stated that:

The United States has a problem, but it’s not with China. Predicament lies in America because they saved too little, and borrowed and imported too much“.

USA and China are heading towards a war which no one wants at this point in time.In this modern era, the US and China must see ahead of time and resolve their bilateral relations which is a cause of disturbance in the international economic order. To do so there is a need to establish new norms of trading and economics which incorporate prevalent treaties and meet the requirement of the 21st century.  To serve the purpose rules should be developed to cater the technology related matters in international trading practices.

Current global situation of power transition and hegemon desiring stability depict the same case as of Thucydides trap which is an outcome of structural pressures spiraling from an emerging power challenge the ruling one. Although this theory is ancient but very relevant to the on-going trade-brawls of China and USA, a case where the leadership of both countries sings hymns of making their country great again. This conflict has no resolution other than either party accepts the dominance of other whereas in this case China is not going to cap and roll their economic endeavors, and the US will also not concur to Chinese supremacy in Pacific, cyberspace and external space. There are certain stern measures which competing economies will have to take in order or else it could be an all-out war.

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