Get Ready for the Next China

Stephen Roach, 07/05/13

The Next China is now at hand. Yet the United States remains fixated on the Old China, unprepared for major transformation in the world's second largest economy. The US-China Strategic and Economic Dialogue slated July 10 to 11 in Washington, DC, provides a major opportunity for both nations to recast what could well be the most vital economic relationship of the 21st century.

China is most assuredly on the move. The debate over a strategic shift to a more balanced consumer-led growth model is over. The focus is on implementation. The 12th Five-Year Plan laid out the strategy - three pro-consumption building blocks of services-led job growth, urbanization-driven income leverage and a more robust social-safety net. But it was tough to get the ball rolling, especially in light of the inertia of China's deeply entrenched power blocs at the local government and state-owned enterprise levels.

China's new leadership under President Xi Jinping and Premier Li Keiqang has broken the gridlock. With a series of stunning moves in the early months of their administration, China's fiscal and monetary authorities have been given new marching orders. The growth slowdown of early 2013 has not been countered by a typical Chinese proactive fiscal stimulus. Instead, the new leadership seems content with 7.5 to 8 percent growth in gross domestic product. Similarly, the central bank did not rush in to stem a liquidity crunch in June. Instead, it used the occasion to caution banks, especially "shadow banks," against returning to an undisciplined and excessive expansion of credit.

The message from this new approach to Chinese macroeconomic stabilization policy is clear: Gone are the days of open-ended hyper growth. Significantly, this message has been reinforced by an important political overlay. Xi's rather cryptic emphasis on a "mass line" (群眾路線) education campaign aimed at addressing problems arising from the "four winds" of formalism, bureaucracy, hedonism and extravagance underscores a new sense of political discipline directed at the Chinese Communist Party. The CCP is being urged to realign itself with the core interests of citizens and their need for fair and stable economic underpinnings.

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This new mindset works only if China changes its growth model. A services-led growth dynamic, one of the pillars for a consumer-led Chinese economy, is consistent with a marked downshift in trend GDP growth. That's because services generate about 30 percent more jobs per unit of Chinese output than do manufacturing and construction - allowing China to hit its all-important labor absorption and social stability goals with economic growth in the 7 to 8 percent range rather than 10 percent as before. Similarly, a more disciplined and market-based allocation of credit tempers the excesses of uneconomic investments, necessary if China is to begin absorbing its surplus saving to spur consumer demand.

With China's new leadership embracing a very different approach to policy and politics, it has little choice other than to move ahead aggressively in implementing its consumer-led rebalancing. The United States needs to take that possibility as a given as it frames its approach to the upcoming dialogue with China. This raises four key issues:

- First, China's consumer-led growth presents the United States with an important opportunity. With the American consumer on ice for more than five years - underscored by average annualized growth of just 0.9 percent in inflation-adjusted consumption expenditures since the first quarter of 2008 - the US is in desperate need of a new source of economic growth. China is America's third largest and most rapidly growing export market. Washington negotiators should push hard on market access, ensuring that US companies and their workers have the opportunity to capitalize on China's transformation.

- Second, and related to the first point, is a potential bonanza in Chinese services. At 43 percent of its GDP, China has the smallest services sector of any major economy in the world. Under reasonable assumptions, the scale of Chinese services could increase by around $12 trillion by 2025. Increasingly tradable in a connected world, the coming explosion in Chinese services could translate into a windfall, up to $6 trillion, for foreign services companies from retail trade and transportation to hotels and finance. For the United States, with the world's largest and most dynamic services sector, this could be an extraordinary opportunity. US negotiators should push especially hard for access to Chinese services markets.

- Third, it's high time for US negotiators to give up the ghost of Chinese currency bashing. It has been the wrong issue from the start - after all, there can be no bilateral fix for a multilateral US trade imbalance reflected in deficits with 102 different nations in 2012. That multilateral imbalance is an outgrowth of an unprecedented US saving gap - a far cry from the politically inspired charges of Chinese currency manipulation. Moreover with the renminbi now having risen by 35 percent since July 2005 and with China's current account surplus having shrunk to less than 3 percent of its GDP, the argument is vacuous. The US-China strategic and economic dialogue has been hijacked by the Chinese currency issue for far too long.

- Fourth, concerns over cyberattacks should be elevated immediately to a high-priority issue between the two nations. In the early June summit between Obama and Xi, the US pushed on this point in the face of recent publicly disclosed evidence about China's aggressive cyberhacking attacks on US military and commercial targets. The two presidents agreed to set up a working group focused on this issue, starting with the early July dialogue. However, since the summit, revelations of comparable efforts on the US side - namely, the so-called PRISM and TAO (Tailored Access Operations) programs of the National Security Agency as disclosed by a former NSA contract worker - have cast this contentious problem in a new light. With both nations heavily involved in cyberespionage, there can be little doubt of the urgency in dealing with this critical issue.

The Chinese and the US economies are at pivotal junctures. Both need to rebalance - China needs to save less and consume more whereas America needs to save more and consume less. At the same time, both need to grow enough to absorb surplus labor - the structurally unemployed in the United States and a vast and impoverished rural population in China. China has a strategy and a plan, and the commitment of its new leadership, to push ahead with due haste on its rebalancing agenda. The United States has none of these.

Philosophically opposed to strategy and anything that smacks of planning, the United States remains steadfast in its commitment to the wisdom of the Invisible Hand. That wisdom is now in question.

But there is another twist. As China shifts to consumer-led growth, it will start to draw down its surplus saving and current-account surplus. That could lead to a reduction in its vast $3.4 trillion foreign exchange reserves, thereby dampening China's demand for dollar-based assets. Who will fund a seemingly chronic US saving shortfall - and on what terms - if America's largest foreign creditor ceases doing so?

We live in an asymmetrical world - but the asymmetrical rebalancing of two codependent economies could pose enormous challenges to both the United States and China. The upcoming Strategic and Economic Dialogue offers an opportunity for both nations to grasp the implications of these tectonic shifts.

Stephen S. Roach, a faculty member at Yale University and former chairman of Morgan Stanley Asia, is the author of Unbalanced: The Codependency of America and China (Yale University Press, forthcoming in January 2014). © 2013 The Whitney and Betty MacMillan Center for International and Area Studies at Yale

http://www.realclearworld.com/articles/2013/07/05/get_ready_for_the_next_china_105300.html

(請參照【中國發展觀察】欄下的《中國經濟平衡發展的重要性 – J. Parker》一文 – 卜凱)

Michael Auslin教授的評論再度曝露美國新保守派的偽善與偏執。Snowden事件後他還有臉拿cyberwar做文章，大言不慚的談什麼：

The new era both sides want should instead be one of clear-eyed realism, and an acceptance that our divergent social, political, and philosophical systems make competition inevitable, conflict possible, and strategic partnership impossible.

真正的現實主義者了解：

國際政治上沒有什麼信任、原則、敵意、哲學基礎可言。只有自己當前和長遠的利益，對方的實力，以及對方的實力是否(相對的)足以保護他自己的利益才是決策過程所需要考量的因素。

Can U.S.-Chinese Relations Be Saved?

Michael Auslin, The National Interest, 06/12/13

There is something unsettling about high-level U.S.-Chinese summits. American participants must present an uneasy combination of faux bonhomie and furrowed-brow concern over the serious issues that divide Washington and Beijing. The Chinese usually look both confident and yet stiff, perhaps reflecting resentment at being browbeaten over the myriad shortcomings of their system while reminding their counterparts that their country has nonetheless had the greatest growth rates in the history of recorded economies.

In all, there is a sense that the relationship should be going better. That, after four decades of intense diplomacy and interaction, the two sides should have developed deeper trust and some type of true working relationship. That China, which has risen above its poverty and isolation to become the world’s second-largest economy and political heavyweight in less than a generation, should not only be more appreciative of the liberal international order that allowed its economic growth but should also be far more supportive of the norms that underlie the system. And that the United States should have decided by now how to reconcile the Janus-faced reality that China is both a business partner and a strategic competitor. Rather, Washington hides behind diplomatic niceties about deeper partnership while suffering from an emotional and conceptual ambiguity, which leads to being ridden by the tiger of international relations—instead of riding it.

To mix metaphors further, Sino-U.S. relations are a Potemkin village. Despite over ninety governmental mechanisms in the bilateral relationship, if one presses Asia experts on examples of real cooperation between the two nations—even to name one truly significant achievement in the U.S.-Chinese partnership—the result is a studied silence. It is the failure that dare not speak its name, an emerging case study in the triumph of realist notions of international politics and the shortcomings of “engagement.”

When the national-security adviser to the president of the United States has to say

[There is an] observation and the view by … some people in the United States and some people in China, that a rising power and an existing power are in some manner destined for conflict … We reject that, and the Chinese government rejects that. And the building out of the so-called … new model of relation between great powers is the effort to ensure that doesn't happen …

The fears are not being spun out of fevered imaginations, but sadly seem to conform to previous great-power competitions.

This past week was supposed to mark the beginning of a new era in U.S.-Chinese relations, according to the spinmeisters. Yet, after eight hours of private conversation between presidents Obama and Xi at the exclusive Sunnylands estate in California, the depressingly vague and long laundry list of promises for future collaboration sounded like an American State of the Union address: long on generalities, short on specifics. On all substantive matters, the two sides left the summit as far apart as when they arrived, just as has happened each time in the past. The Chinese continued to evade responsibility for persistent cyber attacks on American businesses and cyber theft of American military secrets. The usual bromides about pressuring North Korea were trotted out, with the obligatory Chinese endorsement of the abysmal Six-Party Talks. Good fellowship was on display, but nothing touched the core disputes between the capitals.

Given the sheer amount of time both sides have spent on high-level dialogues over the years, a reasonable conclusion is that relations are at best stagnant, at worst becoming more conflicting. Asian and Western analysts have talked themselves dry about codes of conduct, working groups, legal interpretations, forming a G-2 and the like. Yet there remains little agreement on North Korea, Iran and Syria; no movement on piracy of intellectual property; a chasm on cyber aggression; and hardened attitudes towards security issues such as maritime territorial disputes between China and its neighbors.

Based on last week’s summit, there is a deeper fear that we should acknowledge: the U.S.-Chinese relationship has already hit its high-water mark, rendering the prospect of meaningful future collaboration increasingly dim. It is easy for Americans to get nervous about challenges to our global position (call it Great-Power Shane Syndrome), but it is hard to see how Chinese interests are converging with those of America. Instead, the stronger China gets, the more it seems to both push back on U.S. and allied interests and to test the flexibility of international norms. Dozens of top-level meetings between our civilian and military leaders on both sides have done nothing to arrest this momentum.

Because of this lack of progress, prudence recommends at a minimum a cautious, if not defensive, attitude, toward China. Pretending to have a partnership and shared interests can only lead to growing frustration in the relationship. Moreover, acting as though progress in solving disputed issues is occurring, when in reality it is not, is likely to lead to miscommunication. It would be better to offer hard medicine early on, and make our expectations and goals clear. That approach will underscore for Beijing the consequences to its interests of a worsening of relations.

To take a less restrained tone, Washington and Beijing are indeed at the precipice of a new era, in which they lose control over Sino-U.S. relations to ever-greater upheavals of distrust, conflicting interests and aggressive maneuvering. Such a cycle would compel both parties to focus solely on preventing further deterioration in the relationship, with little energy for building the much-ballyhooed greater partnership. This potential outcome would give an ironic connotation to Xi Jinping’s claim that he wanted to create a “new type of great power relationship.”

The new era both sides want should instead be one of clear-eyed realism, and an acceptance that our divergent social, political, and philosophical systems make competition inevitable, conflict possible, and strategic partnership impossible. Responsible statesman should not see this as a negative, or a failure, but will rather be freed up to realistically ensure that we neither lose control of an inherently untenable situation, nor find ourselves backed into a corner by miscommunication and lack of clarity in our expectations and goals.

This approach could engender greater frankness from the Chinese as well and allow space in our meetings to explicitly raise ethical issues and to discuss the philosophical bases that ultimately inform and shape our respective policies. This is the most basic way we can provide clarity to China on how we will refuse to compromise on our principles for the sake of expediency, while underscoring that it is indeed our political, economic and social system that has been proven superior through the test of time.

A true relationship must be built on complete honesty. Until very recently, it was fairly easy to grow our economic ties while deemphasizing differences on political and security issues. Now the acme of statesmanship should be to clarify, preserve and protect our interests—and be a good steward of our liberal system—by recognizing China’s differing goals. To thus reset Sino-U.S. relations on a more realistic footing would be a legacy for which any American leader should strive.

Michael Auslin is a resident scholar at the American Enterprise Institute. Follow him on Twitter: @michaelauslin.

http://nationalinterest.org/commentary/can-us-chinese-relations-be-saved-8589

李英明教授的《中美開展柔戰時代》大作可與 Noah Feldman 教授的The Coming Cool War With China一文相對照。雖然兩位的重點和論點有所不同，但關鍵用詞則如出一轍。

如果李教授「柔戰」的概念基於他的靈感或深思，則「柔戰」一詞自然是個有創見的「用法 」或「指號」。

如果李教授「柔戰」的概念來自 Feldman 教授或其他評論者文章的啟發，則應註明出處。做為一位學者或教育工作者，不註明出處的引用，可謂「此風不可長」。

投書 -- 中美開展柔戰時代

李英明/中華科大副校長, 旺報, 06/12/13

中國大陸一直希望與美國建立所謂的新型大國關係，這次的習歐莊園會也被中國大陸列為這種建構的重要工程。

新型關係主要表現為國際政治的權力競爭不僅圍繞著軍事及經濟實力展開，還會透過價值觀、文化、制度等柔實力進行。這種關係不只會進行軍事及經濟實力拼搏，還會環繞柔實力的展現，進行話語權的競爭，從而賦予軍事及經濟實力拼搏合法正當的辯護。因此，由這種關係所支撐起來的國際政治，又可叫做話語權政治。

伴隨著這種話語權角逐而來的是，公眾外交成為外交運作的主旋律。習近平主政以來，打具有特色風格的夫人牌，代表著大陸對公眾外交重視的程度，已超出一般人的想像之外，而近幾年來，大陸在世界各地廣設孔子學院，也顯示大陸對於柔實力及爭取話語權的重視。

中國大陸與美國之間所建立的是剛中帶柔，柔中帶剛的剛柔相伴相生的新型關係。這種關係不只會存在於中美之間，其實也會很明顯地體現在國際政治的舞台，我們可以稱這種剛柔相伴，並以柔為導向的國際政治，叫做柔戰的國際政治；而由此延伸而來的是，我們可以稱後冷戰時代為柔戰的時代。

柔戰，意謂著不是絕對的對抗，而是軟化或柔化的競爭或鬥爭。而對過去熱或冷戰的時代，可以稱之為硬戰或剛戰的時代。

The Coming Cool War With China

Noah Feldman, 06/03/13

Someone steals your most sensitive secrets. Then, planning a face-to-face meeting, he says he wants to develop “a new type” of relationship with you. At what point, exactly, would you start thinking he was planning to drink your milkshake?

Ahead of the first summit meeting between U.S. President Barack Obama and President Xi Jinping of China on June 7, the two nations are on the brink of geopolitical conflict. As its officials acknowledge, China is a classic rising power, poised to challenge U.S. dominance. In historical terms, the sole global superpower never gives up without a fight.

“China’s peaceful rise” was a useful slogan, while it lasted, for China’s leaders. “America’s peaceful decline” will get no one elected, whether Democrat or Republican. Geopolitics is almost always a zero-sum game. If China can copy or work around U.S. missile defenses, fighter jets and drones, the U.S.’s global position will be eroded -- and the gains will go directly to China.

At the same time, trade between the two rivals remains robust. Last week, Henan-based Shuanghui International Holdings Ltd. agreed to buy the U.S. pork-processing giant Smithfield Foods Inc. (SFD) for $4.7 billion. This could be the single-largest Chinese acquisition of a U.S. company, and it is reason for enthusiasm. Mutual ownership of significant corporate assets across borders doesn’t miraculously guarantee peace, nor can it make conflict disappear overnight. But it gives both sides the incentive to manage geopolitical conflict, and not let it overtake the tremendous mutual benefits created by trade.

Entwined Economies

The juxtaposition of rising tensions over cyber-attacks and the pork cooperation perfectly captures the paradoxical state of Chinese-U.S. relations -- and explains why officials on both sides are struggling to come up with a new conceptual framework to understand the change. Never before has a rising power been so economically interdependent with the nation challenging it. The ties go beyond the U.S.’s 25 percent market share for Chinese exports or China’s holdings of 8 percent of the outstanding U.S. national debt. They include about 200,000 Chinese studying in the U.S. and perhaps 80,000 Americans living and working in China.

The combination of geopolitical competition and economic interdependence sets the terms for the struggle that won’t be a new Cold War so much as a Cool War. If the Soviet Union and the U.S. avoided all-out conflict because of mutually assured nuclear destruction, the relations between China and the U.S. today could be defined by the threat of mutually assured economic destruction. The economic costs of violent conflict would be incalculably large.

As a practical matter, however, we mustn’t assume that economic interdependence precludes the possibility of old-fashioned violence. On the positive side, China is urging North Korea to re-engage with the six-party talks and denuclearize the Korean Peninsula -- a sign that the government in Beijing realizes that its unruly ally could do significant damage to regional stability. On the negative side, North Korea seems perfectly content to ignore its mentor’s directives. As we learned during the Cold War, proxies don’t always behave the way their would-be masters want them to. It is far from clear that the Americans and the Soviets wanted their allies in the Middle East to go to war in 1967, 1973 or 1981.

What steps, then, should Obama take in preparation for a summit at which he will confront an adversary who wants a much greater role in their mutual relationship? How should we think about keeping the Cool War from getting hot?

‘Chinese Dream’

The first is to understand the structure of motivation on the other side. A nationalist Chinese public will expect a rising China to be treated as a counterpart by the U.S. -- and Xi, who has spoken of achieving the “Chinese dream,” must be attuned to this public expectation over the medium term. In the immediate future, however, the legitimacy of the Chinese Communist Party still depends upon continued high rates of export-driven growth. And Xi’s most important job -- today, tomorrow and forever -- is keeping the party in power.

Understanding this motivation reveals the main U.S. levers against a rival bent on narrowing the military-technology gap: China’s continuing dependence on the U.S. export market, and more broadly, China’s need to integrate into the global economy to maintain economic vitality. Of course, it would be precipitous for Obama to draw any direct links between U.S. security interests and America’s willingness to keep its borders open to Chinese companies.

But the message should nevertheless be communicated clearly: The U.S. won’t tolerate being subject to cyber-attacks designed to change the military-strategic balance. A country that steals your trade secrets can become your economic enemy; one that steals your national-security secrets is signaling that it may become an actual security enemy.

The long-term strategy for managing the Cool War is the same: Keep the pork foremost. The positive gains from trade can and must be leveraged to move both sides’ incentives away from force and toward cooperation. We shouldn’t be seeking to create a utopia. But we can and should use the magic of trade and economic cooperation to shift the incentives that push great powers to fight each other. The iron laws of history, like the iron laws of economics, are malleable.

(Noah Feldman, a law professor at Harvard University and the author of the forthcoming “Cool War: The Future of Global Competition,” is a Bloomberg View columnist. Follow him on Twitter. The opinions expressed are his own.)

To contact the writer of this article: Noah Feldman at noah_feldman@harvard.edu

To contact the editor responsible for this article: Max Berley at mberley@bloomberg.net

http://www.bloomberg.com/news/2013-06-02/the-coming-cool-war-with-china.html

Giants, but Not Hegemons

Don't Count on a War Between U.S.-China

Zbigniew Brzezinski, NY Times, 02/13/13

WASHINGTON — Today, many fear that the emerging American-Chinese duopoly must inevitably lead to conflict. But I do not believe that wars for global domination are a serious prospect in what is now the Post-Hegemonic Age.

Admittedly, the historical record is dismal. Since the onset of global politics 200 years ago, four long wars (including the Cold War) were fought over the domination of Europe, each of which could have resulted in global hegemony by a sole superpower.

Yet several developments over recent years have changed the equation. Nuclear weapons make hegemonic wars too destructive, and thus victory meaningless. One-sided national economic triumphs cannot be achieved in the increasingly interwoven global economy without precipitating calamitous consequences for everyone. Further, the populations of the world have awakened politically and are not so easily subdued, even by the most powerful. Last but not least, neither the United States nor China is driven by hostile ideologies.

Moreover, despite our very different political systems, both our societies are, in different ways, open. That, too, offsets pressure from within each respective society toward animus and hostility. More than 100,000 Chinese are students at American universities, and thousands of young Americans study and work in China or participate in special study or travel programs. Unlike in the former Soviet Union, millions of Chinese regularly travel abroad. And millions of young Chinese are in daily touch with the world through the Internet.

All this contrasts greatly with the societal self-isolation of the 19th- and 20th-century contestants for global power, which intensified grievances, escalated hostility and made it easier to demonize the one another.

Nonetheless, we cannot entirely ignore the fact that the hopeful expectation in recent years of an amicable American-Chinese relationship has lately been tested by ever more antagonistic polemics, especially in the mass media of both sides. This has been fueled in part by speculation about America’s allegedly inevitable decline and about China’s relentless, rapid rise.

Pessimism about America’ future tends to underestimate its capacity for self-renewal. Exuberant optimists about China’s inevitable pre-eminence underestimate the gap that still separates China from America — whether in G.D.P. per capita terms or in respective technological capabilities.

Paradoxically, China’s truly admirable economic success is now intensifying the systemic need for complex social and political adjustments in how and to what extent a ruling bureaucracy that defines itself as communist can continue to direct a system of state capitalism with a rising middle class seeking more rights.

Simplistic agitation regarding the potential Chinese military threat to America ignores the benefits that the U.S. also derives from its very favorable geostrategic location on the open shores of two great oceans as well as from its trans-oceanic allies on all sides.

In contrast, China is geographically encircled by not always friendly states and has very few, if any, allies. On occasion, some of China’s neighbors are tempted by this circumstance to draw the U.S. into support of their specific claims or conflicts of interest against China. Fortunately, there are signs that a consensus is emerging that such threats should not be resolved unilaterally or militarily, but through negotiation.

Matters have been not helped by the American media’s characterization of the Obama administration’s relative rebalancing of focus toward Asia as a “pivot” (a word never used by the president) with military connotations. In fact, the new effort was only meant to be a constructive reaffirmation of the unchanged reality that the U.S. is both a Pacific and Atlantic power.

Taking all this into account, the real threat to a stable U.S.-China relationship does not arise from any hostile intentions on the part of either country, but from the disturbing possibility that a revitalized Asia may slide into the kind of nationalistic fervor that precipitated conflicts in 20th-century Europe over resources, territory or power.

There are plenty of potential flash points: North Korea vs. South Korea, China vs. Japan, China vs. India, or India vs. Pakistan. The danger is that if governments incite or allow nationalistic fervor as a kind of safety valve it can spin out of control.

In such a potentially explosive context, U.S. political and economic involvement in Asia can be a crucially needed stabilizing factor. Indeed, America’s current role in Asia should be analogous to Britain’s role in 19th-century Europe as an “off-shore” balancing influence with no entanglements in the region’s rivalries and no attempt to attain domination over the region.

To be effective, constructive and strategically sensitive U.S. engagement in Asia must not be based solely on existing alliances with Japan and South Korea. Engagement must also mean institutionalizing U.S.- Chinese cooperation.

Accordingly, America and China should deliberatively not let their economic competition turn into political hostility. Mutual engagement bilaterally and multilaterally — and not reciprocal exclusion — is what is needed. For example, the U.S. ought not seek a “trans-Pacific partnership” without China, and China should not seek a Regional Comprehensive Economic Pact without the U.S.

History can avoid repeating the calamitous conflicts of the 20th century if America is present in Asia as stabilizer — not a would-be policeman — and if China becomes the preeminent, but not domineering, power in the region.

In January 2011, President Obama and now-departing Chinese President Hu Jintao met and issued a communiqué boldly detailing joint undertakings and proposing to build a historically unprecedented partnership between America and China. With Obama reelected and Xi Jinping preparing to take over China’s presidency in March, the two leaders should meet to revalidate and re-energize the U.S.-China relationship. Whether this relationship is vital and robust, or weak and full of suspicion, will affect the whole world.

Zbigniew Brzezinski was national security adviser to President Jimmy Carter. His most recent book is “Strategic Vision: America and the Crisis of Global Power.”

This article has been revised to reflect the following correction:

Correction: February 14, 2013

An earlier version of this article misstated the author’s most recent book. It is “Strategic Vision: America and the Crisis of Global Power,” not “Giants, but Not Hegemons.” 

http://www.realclearworld.com/2013/02/13/dont_count_on_a_war_between_us-china_145247.html

Why China and the US won’t go to war over the South China Sea

China’s increasing assertiveness in the South China Sea is challenging US primacy in the Asia Pacific.

Carlyle A. Thayer, UNSW Canberra, 05/13/13

But these developments do not presage armed conflict between China and the United States. The People’s Liberation Army Navy has been circumspect in its involvement in South China Sea territorial disputes, and the United States has been careful to avoid being entrapped by regional allies in their territorial disputes with China. Armed conflict between China and the United States in the South China Sea appears unlikely.

Another, more probable, scenario is that both countries will find a modus vivendi enabling them to collaborate to maintain security in the South China Sea. The Obama administration has repeatedly emphasised that its policy of rebalancing to Asia is not directed at containing China. For example, Admiral Samuel J. Locklear III, Commander of the US Pacific Command, recently stated, ‘there has also been criticism that the Rebalance is a strategy of containment. This is not the case … it is a strategy of collaboration and cooperation’.

However, a review of past US–China military-to-military interaction indicates that an agreement to jointly manage security in the South China Sea is unlikely because of continuing strategic mistrust between the two countries. This is also because the currents of regionalism are growing stronger.

As such, a third scenario is more likely than the previous two:

that China and the United States will maintain a relationship of cooperation and friction.

In this scenario, both countries work separately to secure their interests through multilateral institutions such as the East Asia Summit, the ASEAN Defence Ministers’ Meeting Plus and the Enlarged ASEAN Maritime Forum. But they also continue to engage each other on points of mutual interest. The Pentagon has consistently sought to keep channels of communication open with China through three established bilateral mechanisms: Defense Consultative Talks, the Military Maritime Consultative Agreement (MMCA), and the Defense Policy Coordination Talks.

On the one hand, these multilateral mechanisms reveal very little about US–China military relations. Military-to-military contacts between the two countries have gone through repeated cycles of cooperation and suspension, meaning that it has not been possible to isolate purely military-to-military contacts from their political and strategic settings.

On the other hand, the channels have accomplished the following: continuing exchange visits by high-level defense officials; regular Defense Consultation Talks; continuing working-level discussions under the MMCA; agreement on the ‘7-point consensus’; and no serious naval incidents since the 2009 USNS Impeccable affair. They have also helped to ensure continuing exchange visits by senior military officers; the initiation of a Strategic Security Dialogue as part of the ministerial-level Strategic & Economic Dialogue process; agreement to hold meetings between coast guards; and agreement on a new working group to draft principles to establish a framework for military-to-military cooperation.

So the bottom line is that, despite ongoing frictions in their relationship, the United States and China will continue engaging with each other. Both sides understand that military-to-military contacts are a critical component of bilateral engagement. Without such interaction there is a risk that mistrust between the two militaries could spill over and have a major negative impact on bilateral relations in general. But strategic mistrust will probably persist in the absence of greater transparency in military-to-military relations. In sum,

Sino-American relations in the South China Sea are more likely to be characterised by cooperation and friction than a modus vivendi of collaboration or, a worst-case scenario, armed conflict.

Carlyle A. Thayer is Emeritus Professor at the University of New South Wales, Australian Defense Force Academy, Canberra. The ideas in this paper were first presented at the Annual Conference of the Association for Asian Studies held at San Diego, 22 March 2013.

http://www.eastasiaforum.org/2013/05/13/why-china-and-the-us-wont-go-to-war-over-the-south-china-sea/

Faced with the reality of conflict falling short of war, both sides need to cultivate allies as a component of their struggle. The Cold War's major strategic developments, from Soviet expansion to containment, from détente to Richard Nixon's opening to China, all clustered around the question of who would be aligned with whom. The Cool War, too, will involve a struggle to gain and keep allies. The meaning of alliance, however, will differ from what it meant during earlier wars, in which trade between the different camps was severely constricted. In the Cool War, the primary antagonists are each other's largest trading partners. Each side can try to offer security and economic partnership, but cannot easily demand an exclusive relationship with potential client states of the kind that obtained in the Cold War. Instead the goal will be to deepen connections over time so that the targeted ally comes to see its interests as more closely aligned with one side rather than the other. Much more than during the Cold War, key players may try to have it both ways. This is why many countries attempt to negotiating free trade with one or both sides, while keeping security ties with the other.

The Pacific region is the first and most obvious place where the game of alliances has begun to be played -- and it challenges the post-World War II "hub and spokes" arrangement of bilateral treaties between the United States and Japan, South Korea, Taiwan, and Australia that guaranteed security without joining them into a single regional alliance on the model of NATO.

Over the course of the last decade, China has replaced the United States as the largest trading partner with each of these Pacific countries. Consider this: In some fashion, the United States is now engaged in guaranteeing these countries' freedom to trade with China.

In November 2012, China joined Japan, South Korea, India, Australia, New Zealand, and the 10 members of the Association of Southeast Asian Nations to announce negotiations for what the group calls a Regional Comprehensive Economic Partnership. Taken as a whole, the proposed free trade group would include a population of some 3 billion people with as much as $20 trillion in GDP and approximately 40 percent of the world's trade. It represents an alternative to the American-proposed Trans-Pacific Partnership, which would include the United States but not China. For the moment, neither is mutually exclusive, but the exclusions are significant.

China's long-term interest is to supplant and eventually replace the United States as the most important regional actor. It has benefited from U.S. security guarantees and now sees no reason why it should be hemmed in by American proxies. At the same time, it must be careful not to frighten Japan and South Korea so much that they cling to Washington's embrace. Creating a regional trade alliance that included traditional U.S. regional allies but not the United States would serve these complicated and slightly contradictory goals. It would provide countries like Japan and South Korea with the incentive to draw closer to China while framing that movement in terms of economic advantage rather than security.

Emblematic of the Cool War's contradictory new reality is that China is negotiating for free trade with Japan at precisely the moment when geopolitical tensions between them are at their highest point in decades. The conflict over the Diaoyu/Senkaku Islands went from civilian to military in a matter of months, as both sides scrambled jet fighters and mobilized navies. This conflict is itself logical: the product of uncertainty over the changing balance of power. Yet the economic partnership is strengthening simultaneously.

The U.S. response to the changing geostrategic situation has been to signal increasing willingness to empower its regional allies, particularly Japan. The incorporation of a Japanese admiral as the second in command at last summer's RIMPAC exercise, the world's largest joint naval drill, was a signal that the United States views with favor a potential Japanese shift away from pacifism and toward a more active regional security role. And though U.S. President Barack Obama recently extended its agreement with South Korea to avoid its military nuclearization, the option remains on the table.

But this regional response will not be enough. The United States will also have to broaden its base of allies using the tools of ideology. The strongest argument that can be made to countries that trade freely with China is that Chinese hegemony would threaten their democratic freedoms. Sen. John McCain's proposed league of democracies -- a kind of free-form alliance of ideologically similar states designed to leave out China and Russia -- is therefore likely to be revived eventually, though probably under another name.

India is the leading candidate for membership. The originator of the Non-Aligned Movement is not in the same position as it was during the Cold War. Today, nonalignment risks letting China rise to regionally dominant status. India's interest is to balance China in the realm of geopolitics while urging it to respect international law, especially the laws of intellectual property and trade. India must, of course, be careful not to push the Chinese too far. China could use border troubles with India to feed domestic nationalism. But India could potentially be increasingly open to joining a democratic league to help contain China. The natural ground for the alliance is democracy and human rights -- the features that the United States and India share but China lacks.

China's great advantage in the race to find allies is its pragmatism. Unlike the United States, which often struggles awkwardly with its autocratic allies, China typically makes no demands that its allies comply with international norms of human rights or other responsible behavior. China's natural allies are, as a result, often bad international actors, as the examples of Iran, North Korea, and Syria make clear. Meanwhile, Beijing has an independent interest in opposing any form of humanitarian intervention or regime change based on a human rights justification -- hence its opposition to any justifications by the U.N. Security Council for intervention in Syria.

So it is natural -- and so far, cost-effective -- for China to provide cover for such allies. Russia shares the same interests, and the once-chilly China-Russia relationship has been considerably warmed by overlapping interests in trying to limit Western regime change. Indeed, Russia may emerge as China's most important geostrategic ally -- a development signaled recently by Xi Jinping making Russia his first foreign trip after assuming the Chinese presidency. Nothing of the kind had happened since Nixon's opening to China created a 30-year rift between the former allies. If the United States reached out to China in the Cold War to weaken the Soviet Union, China may try to use Russia similarly in the Cool War. Certainly, Russia's Vladimir Putin seems like he would oblige.

China has also been highly effective in creating alliances with resource-rich African states. China became Africa's leading trading partner in 2010. China typically opts to work with existing governments -- whether they are autocratic does not matter -- to build infrastructure that is sorely lacking. The Chinese tout their own expertise in rapid development; they bring Chinese labor to do the job; and they promise to deliver the benefits of improved roads, rivers, and revenue streams for government.

China's pragmatic approach to Africa is free of any evangelical spirit and appeals to its interlocutors' naked self-interest -- and the Chinese make no bones about the fact that they are pursuing their own self-interest as well. They make little or no attempt to reform African governance or African ways of life. They may condescend, but they do not lecture. Unlike Western interactions with Africa, the Chinese encounter does not seem plagued by bad conscience. How much this will ultimately matter to Africans remains to be seen. Backlash has begun in some places, and there will no doubt be more. But a policy of pragmatic honesty may confer real advantages when dealing with countries and peoples who are accustomed to being met with self-serving lies. China aims to get the benefits of resource colonization without paying the international price of being hated as a colonizer -- and it has a reasonable chance of succeeding.

* * *

Extensive cooperation in economics, intense competition in geopolitics: This new situation poses extraordinary risks. Yet economic interdependence also poses unique opportunities for the peaceful resolution of conflict. What's more, it creates common interests that mitigate the impulse to domination. Trade is the area where cooperation can have the greatest transformative effects -- and the greatest potential avenue for resolution of conflicts. Today, China is an active participant in the World Trade Organization (WTO) regime, which is the most effective expression of international law ever created. Countries obey the decisions of WTO tribunals out of straightforward self-interest: The cost of defection is outweighed by the benefits of staying in the international trade regime. This is not a route to world government, utopian or dystopian, but rather a model of self-interested rule of law in an important economic realm.

To manage the Cool War, we must always keep in mind the tremendous gains that both the United States and China have achieved and will continue to experience as a result of economic cooperation. Both sides should use the leverage of their mutually beneficial economic relationship to make fighting less attractive. The positive benefits of trade will not render geopolitical conflict obsolete. But focusing on them can help discourage a too rapid recourse to violence.

The world is going to change under conditions of Cool War, and efforts to keep the conflict from heating up must take account of these changes. New networks of international alliances are emerging. International organizations like the WTO will have more power than before and should be deployed judiciously and creatively. International economic law can increasingly be enforced as a result of participants' mutual self-interest. Global corporations will have to develop new national allegiances as part of a Cool War world, but they can also provide incentives to discourage violence and associated economic losses. Human rights, long treated as a rhetorical prop in the struggle between great powers, will still be used as a tool. But over time, respecting rights may come to be in China's interests, with major consequences for the enforcement of human rights everywhere.

What unifies these conclusions is a willingness to embrace persistent contradiction as a fact of our world. We must be prepared to acknowledge both diverging interests and also areas of profound overlap. We must be forthright about ideological distance, yet remain open to the possibility that it can gradually be bridged. We must pay attention to the role of enduring self-interest while also remembering that what we believe our interest to be can change what it actually is.

The United States and China really are opponents -- and they really do need each other to prosper. Accepting all this requires changing some of our assumptions about friends and enemies, allies and competitors. It means acknowledging that opposed forces and ideas do not always merge into a grand synthesis and that their struggle also need not issue in an epic battle to the finish.

It would be uplifting to conclude that peace is logical, that rational people on all sides will avert conflict by acting sensibly. But such a conclusion simply betrays the facts -- and possibilities -- of this tense relationship. Instead I offer a more modest claim:

Geostrategic conflict is inevitable, but mutual economic interdependence can help manage that conflict and keep it from spiraling out of control.

We cannot project a winner in the Cool War. If violence can be avoided, human well-being improved, and human rights expanded, perhaps everybody could emerge as a winner. If, however, confrontation leads to violence, we will all lose.

Noah Feldman is the Bemis professor of law at Harvard University as well as a senior fellow of the Society of Fellows. He is the author of six books, including Cool War: The Future of Global Competition, from which this article is adapted.

http://www.foreignpolicy.com/articles/2013/05/16/china_united_states_cool_war_power