Strategic Partnership or Strategic Competition

As part of our China Focus, we asked two leading scholars to reflect on the tensions and possibilities in U.S.-China relations. Bonnie Glaser is a senior associate at the Center for Strategic and International Studies. James Nolt is a senior fellow at the World Policy Institute. We asked them first about the potential for a strategic security partnership between the United States and China, then about their economic relationship.

Question: What would it take for the United States and China to establish a strategic security partnership, what would such a partnership look like, and should the two countries ultimately move in this direction?

Bonnie Glaser

In the absence of a greater convergence of values and agreement on the normative underpinnings of the international system, a comprehensive strategic security partnership with China is neither feasible nor desirable. Fundamental ideals such as promoting democracy, good governance, and rule of law, upholding human rights, encouraging the spread of free market ideals and institutions, which form the basis for U.S. alliances with Great Britain, Japan, and Australia, as well as cooperation with other democratic security partners, are not shared by China. The lack of common values and shared international objectives does not mean that Sino-American cooperation on important security matters is not viable, but selective cooperation is radically different from a strategic security partnership.

Differing ideologies and values are apparent in the U.S. and Chinese approaches to Darfur. Beijing’s insistence on according top priority to respect for state sovereignty and the principle of non-interference in countries’ internal affairs hampers effective cooperation to end the atrocities being conducted against innocent civilians in the Sudan. China supports the dispatch of UN peacekeepers to replace African Union forces, but only once prior approval is secured from the Sudanese government, which staunchly refuses to comply. The use of force for the purposes of humanitarian intervention is anathema to Beijing. China’s reluctance to employ coercive diplomacy such as sanctions also impedes greater security cooperation. In the case of North Korea, China resisted the imposition of sanctions for years. Only in the wake of Pyongyang’s detonation of a nuclear explosion did China finally agree to support limited sanctions in UN Resolution 1718 that primarily target North Korea’s ability to further develop or export weapons of mass destruction.

Another major obstacle to the establishment of a strategic security partnership between the United States and China is mutual mistrust, which runs deep. Persisting U.S. uncertainty about whether Beijing will use the economic, political, and military power that it is amassing to strengthen or undermine the global system and American interests is a hindrance to deepening bilateral cooperation. China’s worries that the United States will obstruct reunification of Taiwan and Mainland and even support Taiwan independence constrains Beijing from working too closely with the United States. Chinese expectation that the United States will seek to slow its emergence as a great power on the world stage also causes China to limit its cooperation with the United States. It remains to be seen whether these suspicions abate or intensify as Chinese power grows.

Nevertheless, security cooperation between the United States and China is critical to both countries’ interests and increasingly essential for the promotion and maintenance of regional and global stability. The list of security issues on which the United States and China are cooperating is in fact expanding rapidly and should be further increased where the two countries’ interests overlap. Working together, along with other nations, to combat global terrorism, de-nuclearize the Korean peninsula, and prevent Iran and other countries from acquiring nuclear weapons serves both American and Chinese interests. In the area of non-traditional security, where there is substantial intersection of interests, cooperation is only in a nascent phase and much more can be accomplished. In the energy sphere, for example, greater joint efforts should be made to promote energy efficiency, expand the use of clean energy technologies, and diversify energy supplies. Effective collaboration on these and other issues can build confidence, allay mutual suspicions, and build a firmer foundation that may eventually enable the U.S. and China to tackle even more sensitive and thorny issues.

The Clinton administration sought to work with China with the goal of building toward a constructive strategic partnership. The Bush administration is encouraging China to be a responsible stakeholder in the international system and to contribute actively to strengthening that system from which it has derived significant benefits. There is significant overlap in these Democratic and Republican approaches. Both value security cooperation with China yet also judge the establishment of a comprehensive security partnership to be premature.

James Nolt

The key to successful security cooperation between the United States and China is to recognize that both countries are status quo powers, that is, they have more to gain by maintaining peace and stability in East Asia than by resorting to war. U.S.-China security relations have been sidetracked somewhat during the Bush years because of misplaced efforts from within the administration to trumpet a supposed China threat. In fact, China’s military effort is quite modest. China is a rising economic power, but a declining military one. China is becoming more like Japan: an economic superpower without comparable military might. It is diverging from the model of the former Soviet Union with its overdeveloped military on a relatively weak economic base.

The case for a China threat is usually made by exaggerating Chinese military spending, describing Chinese arms procurement without systematically comparing China’s capabilities to those of its neighbors or the United States, and taking hypothetical discussions in Chinese military journals as statements of policy or intent. Chinese military spending has been rising recently, but mainly to cover rapid increases in personnel costs as the booming civilian economy attracts potential recruits away from military careers. Actual arms procurement remains quite modest, far below levels that would be required to sustain the current force size as old weapons wear out. Therefore the Chinese armed forces are rapidly declining in manpower and numbers of major weapons systems, especially the vital air force. China’s navy and air force are vastly weaker than those of the United States today or the Soviet Bloc at its peak in the 1980s. China does not come close to posing the sort of broad challenge to U.S. military power represented by the Soviet Bloc during the Cold War. Chinese military journals do speculate about China’s role in all sorts of possible conflicts, but the intellectual musings of military professionals are not implemented by military forces adequate for challenging Taiwan, let alone a superpower like the United States. China’s armed forces are adequate for a prolonged guerrilla defense against foreign occupation, but are quite inadequate for projecting significant force beyond its borders, especially by sea and air.

An even more important reason China is so different from the old Soviet Bloc and will not constitute a similar threat to the United States is that the Soviet Bloc was largely self-sufficient for all its key economic resources. Foreign trade was not vital to its prosperity or military success. China, by contrast, is heavily dependent on foreign trade, most of it traveling not by land but by sea, where it would be subject to U.S. interdiction in the event of war. About two-fifths of China’s trade is with the United States itself. Another two-fifths is with countries that are military allies of the United States. Almost all of this trade, and part of the remainder, would be lost in the event of war. China’s economy would be devastated. China has prospered so much in recent decades because it has focused on growing its civilian economy and letting its inefficient military-industrial sector decline. Its trade-related growth represents its profound national commitment to prosper as a trading nation dependent on cooperation with trading partners like the United States and its allies. China has radically rejected the policies of the Mao-era designed, like those of Stalin, to produce military and economic self-sufficiency. Its entire national direction indicates acceptance of and development within the existing world order.

Americans need to appreciate China’s profound adaptation of its policies to the world market so that we can distinguish it from the powers that have confronted us in the past by rejecting the international economic order. We should also understand that China is not building a major navy or air force that could challenge the hegemony of U.S. air and sea power. Even as a nuclear power, China has only maintained minimal deterrent forces. When we are confident of our own security, it is easier for us to deal with China as a strategic partner in those broad areas where we do have interests in common. These include preserving peace in the Korean peninsula, encouraging stability in Central Asia, increasing cooperation across the Taiwan Strait, and cooperating in the fight against Islamic terrorists. We can also move forward on confidence-building measures and military exchanges that help reassure each other of our peaceful intent.

More comprehensive arms reduction would be desirable. But such reductions would be more difficult to achieve through negotiations because the United States has such overwhelming superiority in so many areas that it would be more difficult to find a formula for balanced reduction than in the case of U.S.-Soviet arms control agreements during the Cold War. Furthermore, the Cold War was clearly a two-sided conflict where the sides were obvious. Asia today has multiple axes of potential conflict and alignment, greatly complicating efforts to compare and balance force reductions. Arms cuts are more likely to come from banning certain classes of weapons and from unilateral reductions. The United States, with no significant rivals to its sea and air power, could slash these substantially without reducing our power .

Question: Do the United States and China have irreconcilable economic perspectives—over labor rights, trade balances, and investment policies—or can the two countries develop a strategic economic partnership on the basis of mutual benefit, a coordinated approach to regional economic integration, and an overlapping commitment to establishing a level playing field in international trade and investment?

Bonnie Glaser

There exists considerable scope for economic cooperation between the United States and China, but the range of significant bilateral disagreements and political factors in both countries make a “strategic economic partnership” between Washington and Beijing unlikely for the foreseeable future. The issues giving rise to friction—trade balances, currency valuation, the enforcement of intellectual property rights, labor policy and financial system reform in China, to name a few—don’t lend themselves to easy or quick solutions. Nevertheless, Washington and Beijing both have compelling reasons to manage their differences and coordinate their strategic economic approaches.

Interaction between, and the integration of, the American and Chinese economies has expanded tremendously over the past two decades, with mixed consequences for various interest groups in each country. Today, the two economies are highly interdependent, with vast trade and financial flows, as well as increasing integration of production and supply chains. Consumers in China and especially the United States have benefited enormously from swelling trade and its tide of cheaper goods, while industrial sectors and their labor forces have seen differential results, in accordance with their international competitiveness. China has provided a fast-growing export market in recent years, but a vast bilateral trade imbalance—widely, but wrongly, attributed to an undervalued yuan—has alarmed much of the U.S. public and leadership. Although many U.S. observers have noted systemic improvements in China’s WTO compliance and commercial rule of law, many U.S. industries—and their representatives in government—continue to cry foul over free trade violations and lax IPR enforcement in China. The United States and China both voice support for progress in the Doha round of WTO negotiations but in practice have often found themselves on opposite sides of specific issues.

While the U.S. and Chinese governments agree on the broad contours of many economic goals, they differ over pace and approach. Both agree, for example, that China’s rising trade surplus is unsustainable and contributes to global imbalances that could trigger a financial crisis. For China, it results in mounting pressure on the yuan to appreciate and excess liquidity that then spurs skyrocketing loan growth and economic overheating. The United States insists that China’s tightly controlled exchange regime is a major reason for the bilateral trade imbalance, while underplaying the impact of U.S. domestic economic factors such as low savings and high consumption funded by excessive borrowing. Beijing is reluctant to allow the yuan to appreciate too quickly because of domestic stability concerns and because it lacks a strong financial system to withstand the shock of rapid appreciation. The Chinese blame the widening bilateral trade imbalance in part on restrictions on U.S. high-tech exports to China.

Significant gaps exist between U.S. and Chinese labor policies. To advance Hu Jintao’s goal of cultivating a harmonious socialist society, China has adopted redistributive measures such as raising the minimum wage, but its persisting concern with independent labor movements suggests that it will continue to tightly control workers through state-authorized labor unions. U.S. businesses are among the most vocal opponents of China’s draft labor contract law, which sharply raises compensation and makes it more difficult for businesses to fire workers, demonstrating that American business and government interests are not always in congruence.

China’s policy toward foreign capital is shifting and could become a new source of friction between the two countries. Because China’s growth no longer relies on foreign capital for funding and because it wants to get out of the low value-added trap, Beijing is becoming more selective toward foreign investment, choosing to leverage its market size in exchange for technology transfers and foreign expertise. At the same time, it is also grooming “national champions” to compete against foreign firms, especially in strategic sectors including banking, automobiles, machinery tools, and telecommunications. China is still among the most open developing countries to foreign capital, and local governments are still chasing foreign investors with zeal to register high local growth. But China is beginning to throw up more hurdles for foreign firms to protect the competitiveness of domestic companies.

The two countries do share common interests, such as sustaining trade flow and addressing the global imbalance gradually to avoid a massive financial crisis and disruptions in exchange rates. The fact that China has used much of its $1 trillion foreign exchange reserves to purchase U.S. treasury bonds—which makes the cost of capital low in the United States—also underscores that neither wants a sharp recession in either economy. A coordinated approach in this sense appeals to both countries. But within this framework of broad agreement, political factors—a rise in popular protectionist sentiments and concerns with social stability in China’s case, and electoral and congressional politics in the U.S. case—as well as conflicting economic calculations lead to differing policy preferences. The potential for friction remains high, as China begins to climb the value-added chain, which will put its businesses into more direct competition with American firms, and uses the power of the state to prop up domestic firms.

The Strategic Economic Dialogue, launched during U.S. Treasury Secretary Hank Paulson’s September visit to Beijing, could provide a novel and useful channel for discussing shared economic concerns, insulated from the fray of working-level U.S.-China economic relations and the rancor of domestic distractions in both countries. By virtue of a degree of detachment from day-to-day issues and domestic politics, strategic dialogue can allow leaders to conceptualize and discuss their countries’ interests in the aggregate. Strategic dialogue and cooperation mechanisms might also help officials bridge the different speeds and rhythms of political discourse and policymaking in Beijing and Washington. Moreover, strategic dialogue can provide opportunities to focus attention and initiative on problems that otherwise disappear over the policy horizon. There is a host of such problems—development of effective organs of regional and global economic governance, combating environmental deterioration and global warming, adapting to energy shortages, to name a few—facing Chinese and American policymakers. Regular high-level consultation on such issues will help policymakers on both sides determine where shared interests lie, so that the United States and China can work together where it is in the interest of each to do so.

James Nolt

The enormous growth of U.S.-China commerce over the past quarter century testifies to the compatibility of the two economies, not irreconcilable differences. Certainly, in any relationship that has grown so fast there is a range of issues in dispute, as with most of our trading partners. But these disputes are minor compared to the overall benefit of our commercial relations.

One of the most politically charged issues is the large and growing U.S. trade deficit with China. First, it is important to realize that the reasons for this deficit are not principally because of Chinese import restrictions or unfair trade. If this were the case, then other advanced industrial countries would have similar problems with China. But most do not. Many countries within the European Union, Japan, and South Korea do not have significant trade deficits with China because they make more of the products that China is seeking to buy, especially productive machinery. Countries like Canada and Australia do not have significant trade deficits with China because it needs their raw materials.

The fundamental problem for the United States is that much of what we export is not what China most needs. Or, in the case of arms and certain dual-use technologies, the United States itself bans exports to China that some of our allies do not. Second, many of the labor-intensive consumer products China exports to the United States would be provided by other developing countries if barriers to trade with China were increased. Jobs making bicycles or sneakers, for example, would not return to the United States, but would just migrate to some other low-wage country. Third, a trade deficit with one particular country is not necessarily a problem. China buys lots of things from Europe and elsewhere in Asia and these countries then have money to spend on imports, some of which is spent in the United States. Furthermore, the trade deficit allows Chinese to invest in U.S. Treasury bonds and other securities, helping keep down our cost of borrowing. The best way to deal with the trade deficit is to continue to make progress in fairly enforcing the rules of our global multilateral trading system and not single out China for exceptional and thus discriminatory treatment.

Across a whole range of issues, including labor rights, environmental protection, and intellectual property rights, there are disputes with China, but these are contentious issues in our commercial relations with many other developing countries too. As with the trade deficit, the best way to deal with these is to work within existing multilateral institutions to strengthen monitoring and enforcement of compliance with rules. Rules should be impartially enforced as much as possible. China should not be singled out and punished for behavior that is in fact common among developing countries.

Some hope that economic progress and stability in Asia can be facilitated by regional economic integration like that which has occurred in Europe. This may be useful and desirable, as part of the process of multilateral integration of the economies in the region, but the prospects for its success should not be exaggerated. The East Asian economies are not as integrated as were those of Western Europe when it launched its integration process after World War II. East Asian countries are far more diverse in income levels, economic size, and forms of government than the original European Common Market. Most countries in East Asia are also more dependent on trade with countries outside the region than within it. The economic and political cohesiveness of East Asia is low. However, any process that promotes peace and regional cooperation is beneficial for the United States.

Responses

Bonnie Glaser

There is much on which James Nolt and I agree; but we also have substantial differences, especially in our assessments of the trajectory of China’s military modernization and the challenges that buildup poses to American interests. I share the concern that part of the U.S. foreign policy community has exaggerated the “China threat,” disregarding positive diplomatic developments that have accompanied the growth of Chinese power as well as the perils of engendering a self-fulfilling prophecy of mutual hostility.

Yet underestimating Chinese military power is as dangerous as overestimating it. Nolt’s claim that China is a rising economic power, but a declining military one, simply defies the facts. China’s vast economic expansion has finally begun to translate into improvements in its military capacity, especially to conduct offensive operations against Taiwan and to carry out an area denial strategy vis-à-vis the United States and Japan. The PLA does not have to come close to posing the sort of broad challenge to U.S. military power represented by the Soviet Bloc during the Cold War to pose a threat to American interests.

There is little hard evidence for Nolt’s claim that China’s double-digit increases in military spending nearly every year for more than a decade is mainly to cover increases in personnel costs. The PLA’s personnel costs are certainly swelling, but such expenditures have not absorbed all of the increase in China’s military spending. China is a difficult target to obtain reliable information on budgets and expenditures. There is a lack of transparency compounded by dispersal of military expenditures well beyond the official defense budget. It is undeniable, however, that a considerable sum has been devoted to acquiring new weapons and capabilities, including more than 10 varieties of ballistic missiles deployed or in development; advanced fighter jets, five modern submarine acquisition programs, land-attack cruise missiles, anti-ship cruise missiles, air and amphibious lift, and anti-satellite weapons. One can argue that these developments are in reaction to perceived threats to Chinese interests or simply commensurate with the growth of other elements of Chinese power, but they cannot be ignored.

While it is true that China has benefited from the prevailing international system it remains to be seen whether China will always be a status quo power. Beijing is currently seeking to amass comprehensive national power, and hasn’t decided to what ends it will employ that power in the future. The United States has nothing to gain from a conflict with China and a lot to lose from such a war.

I agree with Nolt that the United States and China have important interests in common, including preserving peace on the Korean Peninsula, promoting stability in Central Asia, preventing the further proliferation of weapons of mass destruction, and combating terrorism. But it is also important to recognize that our two countries have competing visions of the future security architecture of East Asia, diverge over the right of the people of Taiwan to determine their future, disagree on whether humanitarian intervention in other countries’ affairs is justified, and have fundamentally different value systems. Strategic partnership with China of the kind that exists with our allies is simply premature and unwise. That said, Beijing and Washington can and must be strategic interlocutors. If China and the United States are peacefully to cohabit regional and global security landscapes, they must continue to engage in candid dialogue and cooperate where it serves shared interests.

James Nolt

Bonnie Glaser’s essay well summarizes many important issues in U.S.-China relations. I agree with much of it. Yet with her sharp focus on individual issues the broad context gets lost. Our differences may be more than just a case of the glass half empty or half full. I suspect at root they represent differences in our views of social power and what politics can accomplish. Consider three issues: 1) the promotion of democracy, 2) the U.S.-China trade deficit, and 3) mutual suspicion in security issues.

Much of the “sound and fury” of public political contention is rhetorical flourish of limited significance. This is no less true in U.S.-China relations than in any other issue area. It is often difficult to ignore the posturing and focus on what is vital. For example, Glaser maintains that there is a convergence of values between the United States and close allies in contrast to the United States and China. I doubt if many Europeans or even Canadians would agree with that since the United States, in its “war on terror,” has embraced torture (practically if not rhetorically) and discarded habeas corpus. In fact, very few Americans would agree with all of what passes for “democracy promotion” in U.S. foreign policy, especially where this ostensible objective has had its deepest application: Iraq and Afghanistan. Democracy entails first and foremost rule of law, but Donald Rumsfeld and his fellow anarchists in the Bush administration seem to believe that freedom arises spontaneously from the destruction of an oppressive state. More often the result is warlordism or mafia rule. We Americans love the rhetoric of democracy promotion, but in practice we should have more humility about what blundering foreigners can accomplish.

China is no model of democracy, but its policy of non-interference in internal affairs of partner countries is more coincident with the values of many Americans than our recent attempts to promote “democracy” from the barrel of a gun or our Cold War practice of overthrowing elected leftist governments. Supporting human rights policy should entail that we should not promote oppression, whether here or abroad. First, do no harm. It should not be a blanket excuse to dispose of disagreeable regimes.

The U.S.-China trade deficit is at the center of much anti-China fury in Congress and beyond. However the appropriate question to ask is whether trade imbalances can be legislated away any more than business cycles or religious beliefs. Trade imbalances exist because of the individual choices of millions of consumers and business agents. Does China have a trade imbalance with all its major trading partners? If it did, we could argue that this results from some generalized policy of protectionism. But in fact the United States is China’s only major trading partner that does have major trade imbalance with it. The reason is structural. China, a booming manufacturing economy, demands enormous imports of industrial raw materials, productive machinery and factory equipment, none of which are major U.S. competitive strengths any more. Labor activists might justly decry labor standards in China, as with scores of other developing countries, but enormous global wage gaps cannot be legislated away anytime soon. Progress is aided by peace and stability, not threats or embargoes.

Glaser argues that U.S.-China mutual mistrust is a major obstacle to security partnership. Certainly we had much greater reason to mistrust the armed-to-the-teeth Soviet Union during the Cold War than we have now to mistrust China with its much weaker, shrinking, and dilapidated military forces. Yet even with the Soviet Union we were able to recognize broad areas for mutual security cooperation, leading to several important arms control and confidence-building agreements. France continued to mistrust Germany during the 1950s but did not stand in the way of West German rearmament within the NATO alliance.

Lingering U.S.-China mistrust (which is easy to exaggerate) is no excuse for ignoring the reality that China poses nothing remotely comparable to the Cold War threat from the Soviet Union. Nor is it a valid excuse for not moving forward in many areas where security cooperation is valuable, including the Korean peninsula (where we share an interest in peace and stability), Central Asia (where we share concerns about Islamic fundamentalism), and in the United Nations. The problem is less China itself than the Bush administration’s blundering and often ineffectual unilateralism. China might cooperate more readily with a more competent American administration more cognizant of real power and interests.

Bonnie Glaser is a senior associate at the Center for Strategic and International Studies. James Nolt is a senior fellow at the World Policy Institute.