US Has Choice of Engagement or Containment

Magnitude and projections of China's GDP and its rapid climb up the technological ladder worries Washington

Eugenio Bregolat

Eugenio Bregolat was foreign policy adviser to former Spanish prime ministers Adolfo Suárez and Leopoldo Calvo Sotelo (1978—1982). He was three times Ambassador of Spain in the People's Republic of China (1987—1991, 1999—2003, 2011—2013). He is the author of The Second Chinese Revolution.

When the IMF announced, in 2014, that China's GDP, at purchasing power parity, had overtaken that of the US, all the geopolitical alarm bells rang in Washington. In 35 years since Deng Xiaoping launched his reform and opening-up policy, China had delivered the most rapid and wide-ranging process of economic development in human history, transforming one of the poorest countries in the world into an economic great power. The World Bank considers that “China has done in a generation what to most countries has taken centuries”. And according to the PriceWaterhouseCooper projection published in January 2017, in 2050, China's GDP could be around 50 percent larger than that of the US at market prices, and around 70 percent larger at purchasing power parity. Other projections, like those by Goldman Sachs or The Economist, show similar results. These facts and estimates about a country of the dimensions and capacities of China obviously awe the whole world, beginning with the preeminent power, the US.

As China's economic power has increased, the number of those in the US who consider China a competitor, if not a rival, or even a potential enemy, has grown consistently. Obama's “pivot” to Asia and its economic leg, the Trans-Pacific Partnership Agreement, were synonyms for containment of China. Donald Trump's version of containment is far cruder. The “trade war”, theoretically intended to rebalance the US trade deficit, is only a front. What really worries the US is the magnitude and projections of China's GDP and the rapid way it is climbing up the technological ladder, with their inevitable military and geostrategic consequences. Some of the China hawks advising Trump put it very clearly. Steve Bannon, when he was on Trump's staff, said: “We are at war with China. To me, the economic war with China is everything, and we have to be maniacally focused on that. If we continue to lose it, we are five years away, 10 years at most, of hitting an inflection point from which we'll be never able to recover.”

Those who share similar views consider that continued high rates of growth in China are contrary to the vital interest of the US, and therefore, have to be blocked. That is the true meaning of the economic war unleashed by Trump — not a mere trade war. How far is he ready to go?

In the second half of the last century, the US resisted two challenges to its economic and technological predominance; one came from the USSR and the other from Japan. The Soviet challenge was a technological one, epitomized by the “Sputnik moment”. When the Sputnik was launched in 1957, the US thought that it had been technologically outstripped by the Soviets. Eisenhower's response was to create the NASA, Kennedy put in place the Apollo project and only 12 years after the Sputnik the American flag was planted on the moon. The USSR, its military might notwithstanding, was a giant with clay feet, because of its dismal economic system. Why has Trump not responded with a “Made in the US” program, or a new and more daring space project, to demonstrate US technological superiority? Why did the US react to the Sputnik challenge with confidence and hope, and now reacts with fear and arrogance, trying to block China's plan of technological development? How would the US have reacted if in the mid-19thcentury, Britain, which resented at the time the US theft of its technology, had forbidden it to approach the technological frontier? Is it possible to understand the US reaction as anything else than a sign of weakness? And it was the fear of Sparta, the established power, regarding the emergence of Athens, according to Thucydides triggered the Peloponnesian War.

Japan presented at the same time an economic and a technological challenge. In the early 1980s, the US feared it would be overtaken in both fields by Japan. A part of American public opinion considered Japan a greater danger than the USSR. In 1985, the US blocked Japan's growth with the “Plaza Accord”, which imposed a concerted realignment of the main world currencies. As a result, the Japanese yen appreciated more than 80 percent in three years against the US dollar. Japan had to accept the US terms because it was an American protectorate, which is not the case of China. The much stronger yen, plus Tokyo's economic policy mistakes, account for Japan's “lost decades”.

It is impossible to understand the true geostrategic meaning of China's process of economic development ignoring its ambition to be at the technological frontier. China had occupied this position since time immemorial until the 15thcentury. Francis Bacon remarked that without three decisive Chinese inventions (paper, powder and the compass) the European Renaissance would have been unthinkable. Joseph Needham demonstrated that since a few centuries BC until the 15thcentury China produced an average of 15 scientific ideas every century, a creative capacity unmatched by any other civilization, included the Greek one, before the European Renaissance. The sources of China's creativity, nevertheless, dried up, China missed the train of the Industrial Revolution and it suffered, as a consequence, the “century of humiliation”. China learned the lesson of history and does not want to be left behind by the contemporary technological revolution. To ask China to abandon its efforts to conquer the technological frontier is tantamount to asking it to surrender its sovereignty, accepting the possibility of another“century of humiliation”. On the other hand, China can only avoid “the middle income trap” by moving up the value chain, as have all other economies, from the US to Japan and Asia's“four little dragons”. Neither the US can force China to remain for ever a middle-income country, nor can China accept such a diktat.

If the US wants a great reduction of its trade deficit with China, Beijing is ready to oblige. The US, as well as the EU, have commercial and economic differences with China. The WTO provides the right framework to overcome them. China has to accept European and US legitimate complaints, in spite of the fact that those practices have been followed by all developing countries. In the early stages of industrialization, the US was also protectionist and copied British technology, disregarding intellectual property laws. The Pentagon's Defense Advanced Research Projects Agency has financed many of Silicon Valley's great inventions: transistors, GPS, integrated circuits, the internet, stealth technology, and many others. These technologies, financed by a defense budget that dwarfs those of the eight countries following the US in defense expenditure taken together, were later transferred to the private sector, resulting in an “industrial policy with American characteristics”. The US goal of blocking China's economic and technological development cannot be accepted by any sovereign country. To prevent China's re-emergence as a world power, or the emergence of a multipolar world order, so as to preserve American hegemony, brings us back to the Wolfowitz Doctrine of the early 90s:America should ensure that no rival superpower is allowed to emerge in Western Europe, Asia or the former USSR.

The bottom line in the bilateral relationship between the US and China boils down to whether it has to be based on engagement or containment, cooperation or confrontation. Should the US treat China as an enemy, it could turn it into one. Those who think this would be a dismal mistake are headed by Henry Kissinger. In an article in The New York Times on January 12, 2009, on the eve of Barack Obama's inauguration as president, he wrote: “This generation of leaders has the opportunity to shape trans-Pacific relations into a design for common destiny, much as was done with trans-Atlantic relations in the immediate post-war(World War II)period”.And in On China,published in 2011, Henry Kissinger rounded off this idea proposing the establishment of a Pacific community integrated by the US, China and the other countries of the region. This vision dovetails with President Xi Jinping's concepts of “community of common destiny for humanity” and “a new type of international relations”based on win-win cooperation.

Should an almost half-a-century of engagement policy with China, started by Nixon's first trip to Beijing in 1972, be finally abandoned by the US, we would find ourselves in a Hobbesian, Darwinian world dominated by a naked struggle for power. The reemergence of China as a world power is a corollary of the success of Deng Xiaoping's policies and the capacities and efforts of the Chinese people. Nixon's and his successors' decision to admit China into the world's economic order greatly facilitated this success. China's emergence as a big power is already a fact of international life that has to be accomodated. Interviewed by Edward Luce on July 20, 2018, Kissinger said: “We are in a very, very grave period.” He was not more explicit, but given the turn that US policy toward China is taking, it is not difficult to understand what he meant.