US-China Relations: Competition or Cooperation? | Global Trade Magazine
  December 19th, 2017 | Written by

US-China Relations: Competition or Cooperation?

United States Could Assert Leverage, But Isn’t

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  • China is asserting its dominance in the western Pacific, at the expense of the US.
  • The perception of US decline is causing TPP nations to seek greater cooperation with China.
  • Without TPP, the US doesn't have a lot of other options to create an incentive for China to reform.

The relationship between the United States and China is a complex one. There is a high level of economic interdependence between the two countries. At the same time, China is taking steps to assert its dominance economically and militarily in the western Pacific, at the expense of the United States.

That’s where the greatest risk of conflict between the US and China can be found. The US has naval and alliance commitments in Asia, and China is seeking to push the US out of the East and South China Seas, both strategic for geopolitics and trade. On the other hand, US and Chinese interests appear to overlap in the acute crisis with North Korea, allowing for for growing cooperation.

Does the US retains sufficient leverage in its relationship with China to assert its interests through negotiations? The US withdrawal from the Trans-Pacific Partnership relinquished a major source of pressure on China in the long term. The US also could potentially assert leverage over China in the Arctic, but isn’t.

The problem with not asserting US interests in negotiations with China now, is that the situation may inevitably deteriorate in the future to the point where war is the last option left on the table. No one wants to see a US-China war; a more assertive US response to Chinese actions now could obviate that eventuality.

China’s new assertiveness largely derives from its economic prowess. Its economy appears stable and with that comes a clearer vision of how it can present an alternative, non-Western vision of economic development, a decade or two down the road. China has also built up its military prowess, but it’s also devoted significant resources to its soft power, the Belt and Road initiative being one such example.

“On economic issues, I actually see China being largely supportive of global economic institutions, particularly the World Trade Organization and the International Monetary Fund,” said David Dollar, a Brookings scholar, at a Brookings conference of experts to discuss the future of US-China relations last month. “They rely very heavily on the WTO and they’re becoming a key financer of the IMF….They got a WTO accession agreement that was appropriate for a developing country, and they’ve stuck by it.”

So, China is now championing international institutions while the current US administration disparages them. The US withdrawal from the Trans-Pacific Partnership (TPP) removed a leverage point the US had in potential geopolitical negotiations with China.

The withdrawal from that trade agreement “had a devastating impact on US credibility in the region,” said Jonathan Stromseth, a senior fellow at Brookings. “This has been further exacerbated by the lack of any clear articulation of a new economic engagement strategy by the current administration.”

TPP nations such as Vietnam viewed TPP in strategic terms, as did the Obama administration in the US. “The perception of US decline is causing them to hedge by seeking greater cooperation or improved relations with China,” Stromseth added.

“Pulling out of TPP was a huge mistake for the United States,” said Dollar. “Countries were looking at it to deepen their relationships with the United States and create a positive incentive for China to reform. Now that we don’t have that, we don’t have a lot of other options.”

Another area of potential US leverage over China is in the Arctic, with its growing potential as a northern trade route as sea ice melting accelerates. “The Chinese were banging on the door to get into the Arctic Council, where they had huge economic and strategic interests to get into that space, and we controlled the key,” said Bruce Jones, vice president and director of the Foreign Policy program at Brookings. “Since China wants this thing a lot and we have the key, we have the leverage; if and when we see better behavior in the South China Sea, we’re willing to open up in this other space.”

But there is no indication that the Trump administration has applied this element of leverage to the US relationship with China. Trump’s withdrawal from the TPP likewise compromised a US negotiating point with the People’s Republic. All this is ironic, since Trump claimed in his campaign for the presidency that his business experience will allow him to negotiate better deals for the United States and that his business success, he said in The Art of the Deal, was built on finding and applying leverage.


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