The U.S.-China rivalry and Japan

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BY GLEN S. FUKUSHIMA

In its National Security Strategy published in December 2017, the Trump administration declared, “China and Russia challenge American power, influence and interests, attempting to erode American security and prosperity. They are determined to make economies less free and less fair, to grow their militaries, and to control information and data to repress their societies and expand their influence.”

However, U.S. President Donald Trump maintains a special relationship with Russian President Vladimir Putin, so much so that he has vigorously tried to hide from the public the content of his conversations with Putin. The relationship is so unusual that it triggered an unprecedented investigation in 2017 by the Federal Bureau of Investigation to examine whether Trump, as president, was working in behalf of Russian interests.

In stark contrast to his cordial relationship with Russia, Trump has evinced a hostility toward China as shown by his slapping hundreds of billions of dollars of tariffs on Chinese products exported to the United States. Although the “trade war” between the two countries playing out through the mutual imposition of tariffs has gained the world’s attention, it’s only the tip of the iceberg of the intensifying rivalry between America and China.

Changing American views

On Oct. 4, U.S. Vice President Mike Pence gave a speech at the Hudson Institute that many have labeled the “Chinese Iron Curtain Speech,” alluding to Winston Churchill’s historic 1946 speech predicting the Cold War between the U.S. and the Soviet Union. According to Pence, “Beijing is employing a whole-of-government approach to advance its influence and benefit its interests. It’s employing this power in more proactive and coercive ways to interfere in the domestic policies of this country and to interfere in the politics of the United States.”

On Oct. 10, the U.S. Congressional-Executive Commission on China, a bipartisan commission established in 2000, issued its annual report, finding that “we see an ascendant and increasingly aggressive China, seeking to take center stage in the world, and in so doing, determined to shape new global norms on development, trade, the internet, and even human rights. … China’s authoritarianism at home directly threatens our freedoms as well as our most deeply held values and national interests.”

On Nov. 29, the Hoover Institution issued a report titled “Chinese Influence and American Interests: Promoting Constructive Vigilance.” The extensively documented 191-page study was prepared by more than 30 scholars over a 1 1/2 year period. Among the report’s findings is that “China is exploiting America’s openness in order to advance its aims on a competitive playing field that is hardly level. For at the same time that China’s authoritarian system takes advantage of the openness of American society to seek influence, it impedes legitimate efforts by American counterpart institutions to engage Chinese society on a reciprocal basis.”

On Dec. 13, U.S. National Security Adviser John Bolton spoke at the Heritage Foundation to explain the administration’s new Africa policy. He stated: “China uses bribes, opaque agreements, and the strategic use of debt to hold states in Africa captive to Beijing’s wishes and demands. Its investment ventures are riddled with corruption, and do not meet the same environmental or ethical standards as U.S. developmental programs. Such predatory actions are sub-components of broader Chinese strategic initiatives … with the ultimate goal of advancing Chinese global dominance.”

Implications

What these speeches and reports reflect is a fundamental shift in American perceptions of China over the past 10 years. As recently as 2009, at the beginning of the Obama administration, the prevailing view in the U.S. was that increased trade and economic ties, as well as diplomacy and active cultural exchange, would lead to greater openness and political liberalization in China. However, these hopes have been betrayed, and the Chinese Communist Party under President Xi Jinping is, according to the congressional study cited above, “deeply committed to preserving its monopoly on power through state-sponsored repression, surveillance and indoctrination.”

Three aspects of this change of perception are noteworthy. First, it is bipartisan, with Democrats as well as Republican political leaders sharing the view that China poses a serious challenge to American leadership in the world. Some Democrats in the past had taken a more benign and idealistic view of China’s potential to democratize, but President Barack Obama himself is an example of a Democrat who learned through experience that China has its own authoritarian model of society, politics and development that it is aggressively imposing on others.

Second, the change of perception is not confined to policymakers in Washington. The American business community, which has been eager to sell products and services to China, as well as to manufacture there, has until recently been a moderating influence on U.S. policymakers who wanted to take harsh measures toward China. However, problems including barriers to market access, theft of technology and intellectual property, arbitrary changes of laws and regulations detrimental to foreign companies, etc., have led many U.S. business leaders to openly support the U.S. government’s tougher line toward China. And the U.S. intellectual community, including scholars, have been alarmed by Beijing’s efforts to suppress free speech, academic freedom and civil society — even outside of China.

Finally, the change of perception is consistent with a global trend that is emerging in response to Chinese attempts to expand its influence around the world. That the issue is not confined to the U.S. can be gleaned from the Hoover Institution report referenced above, in which 10 “International Associates” from abroad participated, and which includes an appendix examining Chinese attempts to influence the domestic politics of Australia, Britain, Canada, France, Germany, Japan, New Zealand and Singapore and ASEAN.

Prospects

What this trend means is that the current tensions and rivalry between the U.S. and China will continue for the foreseeable future on three levels. The first is that of trade. This is the easiest issue to address because progress can be shown by China buying more from the U.S. This can be achieved by reducing tariffs, eliminating import quotas, or outright purchases of American products and services — easier for China to do than for most other countries given the central role the government plays in the economy. These purchases will also have the effect of reducing pressure against Beijing from the U.S. producers and their elected political representatives who will benefit from increased sales to China.

There will be an incentive for the U.S. to lift tariffs on Chinese products in response to these purchases by China, since over time the negative effects on U.S. producers and consumers from such tariffs will grow. And a continuing tariff war will have a negative impact on the U.S. stock market, which is already showing signs of a major correction and perhaps a significant tumble as signs of a potential recession loom for 2019 or 2020.

In addition, the transactional nature of trade and trade agreements are short-term and easier for Trump to understand, manipulate, and use to his advantage in his attempt to gain support from his domestic constituents. Witness the gap between the rhetoric of “success” and the very limited substance of what was actually achieved in renegotiating the U.S.-Korea Free Trade Agreement and the North American Free Trade Agreement.

Second, compared to trade, structural issues are more difficult to resolve precisely because they are structural — i.e., embedded in the Chinese social and economic system. Trade is quantifiable — e.g., how much tariff levels are reduced, how many cars are sold, how much the trade imbalance has been reduced. Structural issues are more difficult to identify, quantify, and remedy, especially since many of them are not fully under the control of the central government. In addition, policies such as “Made in China 2025” — the latest drive to modernize the economy — are considered essential to the nation’s economy, technology, and global competitiveness. Expecting Chinese leaders to abandon it would be nothing short of naive.

Therefore, the likelihood of fully resolving these issues in the 90-day period set for the bilateral negotiations is low. However, with the pressure of the midterm elections behind him and with a Democratic majority in the House of Representatives that will keep him on the defensive with subpoenas, hearings and investigations, Trump is unlikely to put structural economic issues with China as a top priority on which to continue a trade war. Instead, U.S. Trade Representative Robert Lighthizer will likely be tasked with continuing negotiations beyond the 90-day period to achieve a semblance of progress.

Third, a partial resolution of the trade issues and ongoing negotiations on the structural issues will do little to avert the tensions that are certain to continue as China challenges the U.S. economically, politically and militarily. The only question is whether a future U.S. administration will choose to pursue a more strategic, nuanced, and long-term policy toward China that will effectively engage America’s allies and partners, rather than the “America First,” tariff-centered, transactional approach being pursued by the Trump administration.

How will Japan respond to this intensifying Sino-American rivalry? Japan has traditionally feared the U.S. and China getting too friendly with each other, since this might result in a “G2” world that could marginalize Japan. On the other hand, tensions between the U.S. and China could have negative repercussions for Japan, and could lead to Japan needing to balance with considerable sensitivity its postwar political and security alliance with the U.S. with its increasingly dependent economic ties — trade, investment, finance, tourism, etc. — with China.

The uncertainty created by the Trump administration is encouraging many nations around to world to seek new friends and to hedge their bets, and Japan and China are no exceptions.