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Is Strategic Balancing a ‘New Normal’ in Interlinked World?

Gen. Shashi Asthana

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The G-20 Summit 2018 will be remembered for extraordinary  large number of bilateral and trilateral meetings, which seem to be even more significant than the main purpose of the meet. There are some high profile bilateral meetings like US – China and US – Russia (Scheduling of which has seen many flip-flops) which are very significant in context of Trade-War or Ukraine crisis. The two trilateral meetings involving US-Japan-India and China-Russia-India are also seen to be very significant because of centrality of Indian position in both the meetings. One of the reasons for this phenomenon is that the world is that the world has got interlinked so much as never before, hence even bilateral relations between global powers impact the world directly or indirectly.

When a large number of countries including US allies, strategic and trade partners joined AIIB, against the wishes of US, it was quite evident that a time has come that many countries will like to have alternate sources of funding other than west dominated IMF or Japan dominated ADB and will follow their own national interest. Similarly when China exhibited aggressive design of converting feature and atolls to artificial islands, with a view to have South China Sea as ‘Chinese lake’ based on unilateral interpretation of history ignoring international laws, UNCLOS and decision of ICJ, a group of democratic countries huddled together to form QUAD with a potential to counter balance such moves, which have possibility of obstructing global trade and exploitation of global commons. The Russian aggression westwards post Crimea, brought many western countries together resulting heavy sanctions on Russia, (followed by the recent standoff with Ukraine, Martial Law in some parts of Ukraine and the criticality continues. The Western opposition and sanctions was instrumental in pushing Russia nearer to Beijing. The international relationships and strategic interests of most countries in the interlinked world of today are so interwoven, that it is difficult to count countries only in one grouping; hence many new issue based groupings have emerged in last few decades.

Are Global Powers pushing everyone to Strategic Balancing?

In the exuberance of pursuing ‘America First’ policy, in last few years US has been highly critical of some of its allies, strategic and trade partners, whenever they did not follow a course which was of interest to America. In some cases it used threatening gestures, while some others were put under sanctions. The policy got a major jolt, when they threatened everyone to support their decision of shifting embassy to Jerusalem, but many countries junked the threat and voted as per their own perception. A similar issue came up earlier, when the last US President got all Head of States of ASEAN countries together to discuss South China Sea issue and wanted a joint statement, condemning Chinese actions, but those countries did oblige.  Pulling out of Paris accord for climate change, Iran Nuclear deal, TPP are some more examples when all the ‘Friends of US’ are not on the same page, and decided to continue with it even without US. Pulling out of nuclear deal with Russia is under global criticism, as it could trigger fresh arms race and a dangerous one, although US has some strategic logic to do so in American interest. The last G-7 Summit was not a pleasant experience for US allies due to alleged self centered economic approach of US. The NATO allies are also relatively lesser confident of US backing and keep waiting for next surprise from US Administration. Under these circumstances, Is US Concept of ‘With US’ or ‘Against US’ is outdated in Interlinked World?

On the other hand Chinese after announcing Belt and Road Initiative (BRI) in 2013, with elevation of President Xi Jinping from ‘Chairman of everything’ to ‘Core’ and ‘Leader for life’, exhibited its expeditionary design starting from South China Sea to land grabbing in Indian Ocean. With its fast growth it tried to showcase its methodology of governance better than democratic model. Its ‘Incremental Encroachment Strategy’ in Doklam as well as South China Sea exhibited its ambitions exceeding beyond peaceful growth to the arena of global strategic dominance; hence it started facing opposition from a group of democratic countries in various forms like formulation of QUAD and other groupings. Interestingly most of Chinese neighbors did not buy its method of governance and some of them went democratic in recent past, while maintaining good relations with it. In case of Russia also, we find Germany, a US ally drawing gas from them. Russia and China helping out North Korea with fuel and essentialities immediately after Singapore Summit between President Trump and Kim. Russia a strategic partner of India supplying military hardware to Pakistan and many other countries. A cross pollination of relations is therefore quite evident.

Analysing the cases of three global powers above, a time has come when most countries want to manage their international relations as per their own national interest, and do not want their strategic choices to be dictated by others. The strategic autonomy is quite dear to every sovereign country. It is also a fact that the world today is much more interlinked; hence issue based relationships is increasing. In context of the above let me analyze few cases justifying the ‘Compulsion of Strategic Balancing’ in international dynamics.

Japan’s Insecurity and Prime Minister Abe’s visit to China followed by meeting Indian Counterpart

During Prime Minister Abe’s visit to China on the 40th anniversary of the ‘Treaty of Peace and Friendship between Japan and China’ hardly any issues of divergences was discussed. It was looked as an effort to ‘Fostering Mutual Political Trust’ and ‘Cooperation and Confidence Building in Maritime and Security Affairs’. Beyond good optics, It can be seen as an effort to balance out/reset relations with China, and a messaging to Uncle Sam, about independence in foreign policy formulation of Japan. Immediately after this first visit to Beijing since 2012, Prime Minister Abe hosted Indian Prime Minister Narendra Modi, in a resort near Mount Fuji for a luncheon Sunday, just a day after returning from talks with the leader of China. While the leaders may call India-Japan partnership having been strengthened as a ‘special strategic and global partnership,’ but beyond the optics, it can be termed as an effort to balance relations between China and India as well.  India would perhaps be looking to move forward in convergences, and need not be concerned of Sino -Japan engagement because India and Japan have hardly any issues of divergences. The balancing/resetting by Japan in international relations was again exhibited, by the fact that Japanese PM seems to be  “determined” to wrap up talks toward peace treaty based on 1956 declaration with Putin, stipulating the return of two of four northern islands by Russia to Japan, while retaining claim on all four. The self confidence of Japan in balancing act between US, China, Russia and India is noticeable.

South Korean bonhomie with North Korea

South Korea despite being apprehensive of dangerous arsenal of North Korea, continues to be an ally of US. Deployment of THAAD, military exercises with US forces, have caused great anxiety not only in North Korea, but in China and Russia as well. Despite heavy sanctions on North Korea, it continued with its nuclear and missile tests. When President Trump started giving confusing signals of ‘America First’ and asking allies to pay for their security, South Korea was inclined to attempt peace in Korean Peninsula and making it nuclear free. It was successful in seemingly impossible diplomatic exercise of getting together Kim and President Trump together for a summit. As an analyst, I do not count the summit anything beyond optics, as nothing worthwhile has changed in nuclear and long range missiles capabilities of North Korea as well as UN sanctions, but South Korea has improved its relations with North considerably applying the theory of strategic balance. North and South Korea had Summits, exhibiting lot of bonhomie, decided to field one sports team under single flag, started people to people contact, and South Korea started helping North Korea with essential humanitarian needs, where China and Russia joined in to start business as usual with North Korea, immediately after Singapore Summit. The optics of keeping missiles and nukes away from North Korean parade does not mean that it will really destroy the only leverage it has, which is making US talk to him, and condemning Rouhani and Assad, looking for regime change there. Some symbolic destruction of few testing sites by North Korea and destruction of few posts along demilitarized zone does not mean that South has full confidence over North Korea but it clearly indicates that South Korea is balancing/resetting relations between them.

India’s Strategic behavior: Is it different than Balancing/Resetting International relations?

Post Wuhan visit of Prime Minister Modi to China it is being alleged by western media that India has perhaps drifted towards China. In my opinion there is hardly any worthwhile change in Indian strategic behavior. India has a set of convergences and divergences of interests with major global players namely China, USA and Russia. India has so far been able to keep these relations exclusive of each other; hence has been able to successfully manage an independent foreign relationship without any bias. In the turbulent complex environment of today, our convergences and divergences have started impacting each other. India’s differences with China on certain aspects of Sino-Pak nexus, use of global commons in South China Sea, its adventurism in Indian Ocean, and obstruction to Indian entry in NSG can also be viewed as convergence of interests with US. India’s differences with US on trade, tariff, and CAATSA in context of Russia can be seen as convergence of interests with China The silver lining is that US being our strategic partner will like to have well equipped Indian Forces to balance China and Indian connectivity to Afghanistan, in case Pakistan does not serve its strategic interest. The US waiver on Chabahar port and connectivity to Afghanistan, as well import of Iranian oil for next six month is a welcome step by US towards its strategic partner India.

After Indian expression to expand the scope and dimension of QUAD, opening it up to other affected countries, there is a general feeling amongst other QUAD members that India is perhaps getting softer towards China in progressing QUAD agenda. The reality is that India has an independent foreign policy.  In Indo-Pacific, it stands with US, Japan and Australia in checking Chinese encroachment of global common like South China Sea, stands for seamless movement in international water and rule based order. Interestingly none of the QUAD members have common unsettled land borders with China. In land frontier and combating proxy war, India has to fight its own battle with some help from friendly countries including equipment from Russia, Israel, France to name a few, besides Indian friends from QUAD, hence it has to tackle relationship with China in a different manner than other members of QUAD. India therefore has to maintain harmonious relations with all its friends and neighbors to pursue its national interest. Despite such complexities, the silver lining is that the US, as well as China want better relations with India and vice versa. Russia also will not like to give up the largest purchaser of military hardware and a strategic partnership which stood the test of time even in ‘Heated Cold War’ era, hence, with smart diplomacy, India should be able to manage an independent foreign policy in current global environment. The number of bilateral and trilateral meetings attended by India clearly explains the balancing diplomatic exercises carried out by India, as per its National interest. Indian participation in two significant trilateral meetings namely US-Japan-India and China-Russia-India signifies the centrality of India. It clearly indicates the efforts required to balance out relations with two separate groupings which have wide gap in perceptions.

Unilateralism is Outdated/Impractical Concept

There is a growing opinion that US needs to revise its policy of sanctions and CAATSA. The analysis suggests that President Trump’s reintroduction of sanctions on Iran,(with many of its allies still honoring Iran Nuclear Deal), as well as further push on CAATSA (without modification) on countries trading with Russia might edge US towards its own diplomatic/ strategic and economic isolation in the long run . The ICJ decision on 03 October 2018 ordering US to remove any restrictions on the export of humanitarian goods and services to Iran to some extent shows that the world may not always buy US narrative on sanctions. Similarly Chinese aggressive stance in South China Sea will continue to bring resistance in different forms by collective efforts of affected parties, and its purse diplomacy will not work everywhere. Ongoing Trade War, strengthening of Taiwan and military posturing in South China Sea are indicators which will discomfort China.  In interlinked world interactions with all countries wherever their interests converge is the order of the day. Japanese trade with China, visit of Prime Minister Abe to China followed by visit of Prime Minister Modi and Countries pursuing relations with Saudi Arabia despite CIA revelations are some examples of this new normal in future. It is also expected that in a multilateral world of today, no one country will be able to dictate the strategic choices of others or force any country not to act in its national interest in future. It also proves a point that any country, which thinks that it can rule the world all by itself, is sadly mistaken in the future world, which is overly interlinked.

The author is a veteran Infantry General with 40 years experience in international fields and UN. A globally acknowledged strategic & military writer/analyst; he is currently the Chief Instructor of USI of India, the oldest Indian Think-tank in India.

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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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