The Dangers of Detachment

Ali Wyne

Source Link

The past three years have conclusively demonstrated the dangers of excessive dependence. No country can any longer doubt the risks of relying too heavily on another for vital commodities, especially a strategic competitor. The COVID-19 pandemic exposed a widespread lack of essential medicines, even among rich countries such as the United States, and the concerning degree to which China dominates the production of basic protective equipment. Then, in 2022, Russia’s invasion of Ukraine revealed how much the EU had come to rely on Moscow’s gas and oil exports. These events have forced Washington and Brussels to consider various ways of reconfiguring commercial ties with Beijing and severing them with Moscow.

It was not supposed to be this way. In the quarter century after the Cold War ended, Western countries largely believed—or at least hoped—that the Soviet Union’s dissolution would inaugurate a new normal of benign relations between democracies and autocracies. Then U.S. Senator Barack Obama articulated this view in 2006, contending that “competition between the great powers” was an antiquated way of viewing international relations. Obama concluded that “the world’s most powerful nations . . . are largely committed to a common set of international rules governing trade, economic policy, and the legal and diplomatic resolution of disputes.” But that assessment no longer holds. The West increasingly, and understandably, regards interdependence not as a stabilizing factor in its relations with China and Russia but as a potential vulnerability.

Yet the West’s efforts to rapidly shift course could bring new challenges. If an earlier era of globalization led to what the political economists Henry Farrell and Abraham Newman have called “weaponized interdependence”—in which states that control key information and financial hubs coerce and punish others—the years to come could produce what might be called “weaponized detachment,” in which greater economic independence emboldens states to act more aggressively. In other words, Beijing and Moscow could become less fearful of contesting Western influence and more likely to deepen their partnership, especially if they are able to bolster ties with nonaligned powers and countries across the developing world. Western countries, then, should be careful as they adjust economic relations with their main competitors.

CUTS HURT

For the West, dissolving long-standing commercial bonds will take time. Even after Russia invaded Ukraine, G-7 members decided against imposing a near-outright ban on exports to Russia. And although the EU is no longer directly importing oil from Moscow, the bloc is indirectly doing so by purchasing discounted supplies from countries that have declined to sanction Russia—including China, India, and Turkey. Still, the trend is clear: the West is working to close sanctions loopholes and accelerate its transition to clean energy and fossil fuels that do not come from Russia.

Paring back connectivity with China will be more difficult, and not only because the West has far more extensive economic ties with Beijing than it ever did with Moscow. There is less consensus about how to manage relations with China. Washington regards Beijing—in the words of the 2022 National Security Strategy—as “the only competitor with both the intent to reshape the international order and, increasingly, the economic, diplomatic, military, and technological power to do it.” But the view from Brussels is less stark. In a March 2019 document, the European Commission defined China as “a cooperation partner” and “a negotiating partner” while also calling it “an economic competitor” and “a systemic rival.” In order to develop a more coordinated approach, U.S. and European leaders have largely shelved talk of decoupling in favor of “de-risking.” In addition, they increasingly agree that reducing interdependence with China in core areas of frontier technology is both an economic and a security imperative. This concern presently centers on computing, but it is likely to encompass other domains over time, including bioinformatics and clean energy.

Growing Western cohesion is a serious challenge to China and Russia. Following its invasion of Ukraine, Moscow incurred the most sweeping sanctions that have been imposed on a major economic power since World War II. These penalties have already severely limited Moscow’s leverage over the EU: in 2021, Russia provided 45 percent of the bloc’s gas and 27 percent of its oil, but as of the first quarter of 2023, those figures had declined to 17 percent and three percent, respectively. Over time, sanctions will also erode Russia’s defense industrial base by limiting the country’s ability to procure semiconductors.

China, meanwhile, has damaged its standing in the West with its assertive “Wolf Warrior” diplomacy and its unwillingness to condemn Russian aggression in Ukraine. Beijing’s plan to become self-reliant in the production of semiconductors was always ambitious, and it became harder to execute as the West began erecting trade barriers, starting in earnest with the Trump administration’s initiation of a tariff campaign in mid-2018. Multilateral export controls agreed to by Japan, the Netherlands, and the United States have further complicated the task, undercutting China’s ability to master advanced techniques that are essential to building the three-nanometer and five-nanometer chips at the leading edge of innovation.

THE WIDENING GYRE

It is unclear, however, how effective Western economic pressure on Russia and China will ultimately prove to be. For starters, the West’s overall weight in the global economy is diminishing. In 1993, the six Western member countries of the G-7 accounted for 50 percent of gross world product. Today, that figure is 40 percent. Although Russia’s decoupling from the West proceeds apace, Moscow is far from a global pariah. It is deepening its relationships with China, Iran, and Saudi Arabia. It maintains significant energy ties and a profitable arms trade with India. In the developing world, Russia has gained traction with its disingenuous claim that higher food and energy prices are the result of Western sanctions, not its own aggression. Should Ukraine’s nascent counteroffensive underwhelm, even transatlantic unity against Moscow could begin to dissipate. And isolating China would be vastly harder, given its centrality to the global economy. China’s gross domestic product is more than nine times as large as Russia’s, and it is projected to contribute 22.6 percent of global growth over the next five years. In addition, it serves as the largest trading partner for more than 120 countries.

China and Russia also increasingly see strategic competition in existential terms and will thus not easily buckle to Western economic pressure. Russian President Vladimir Putin has alleged that the West aims to “transform a local conflict into a phase of global confrontation” and warned that Russia’s “existence” is at stake. Meanwhile, Chinese President Xi Jinping has accused the West of engaging in “all-around containment, encirclement, and suppression of China” that “has brought unprecedented severe challenges” to its economic development. He has urged the country’s national security establishment to “be prepared for worst-case and extreme scenarios.”

And as Western pressure continues to increase, these states could be further emboldened. Now that Russia is largely cut off from the West, Moscow may judge that it has little to lose from intensifying its military devastation of Ukraine or launching more aggressive electoral interference campaigns and cyberattacks against NATO member states. Putin is also likely to escalate Russian operations in the developing world; consider, for example, the expanding military and economic foothold of the Wagner paramilitary company across central Africa. Western sanctions may make Russia less powerful, but even a severely weakened Russia will still have significant resources and connections—including the world’s largest nuclear arsenal, prodigious energy reserves, and expanding economic ties with non-Western countries—with which to sow instability.

The West’s residual economic connectivity with China far exceeds that which it maintains with Russia. Reducing ties will accordingly take longer, but given Beijing’s economic pull, doing so may also prove more consequential. China’s quest for greater financial self-reliance has so far been unsuccessful: the yuan accounted for just 2.3 percent of global payments in March, essentially unchanged from two years earlier. If the Chinese government does not embrace more open capital markets, the yuan stands little chance of overtaking the dollar as the world’s reserve currency. Nevertheless, Beijing will try to settle more of its bilateral trade in yuan and, as the president of the European Central Bank, Christine Lagarde, observed in April, “international currency status [for the dollar or the euro] should no longer be taken for granted.”

In the technological realm, China believes that developing a domestic semiconductor supply chain is a foundational imperative, and it is resourcing that effort accordingly. In 2022 alone, the government provided roughly $1.75 billion in subsidies to 190 domestically listed chip companies. In addition, as it devises new ways of evading export controls, Beijing is building new leverage by expanding its role in the production of the less advanced semiconductors that power consumer electronics. The geopolitical research firm Rhodium Group and Stiftung Neue Verantwortung, a think tank, estimate that China could account for 46 percent of global manufacturing capacity for 50- to 180-nanometer chips within a decade.

DIRE STRAITS

Many prominent Western observers—including Harry Harris, the former commander of U.S. Pacific Command, and Ross Babbage, a former senior Australian defense and intelligence official—believe that Chinese leaders may seek to reunify Taiwan with the mainland by 2030. It is a frightening possibility. But the outcome could be even more dangerous for Taiwan if the Chinese government operates on a longer timeframe, because Beijing will likely grow more capable over time of absorbing economic retaliation from the West. Consider what might happen if an invasion comes shortly before 2049, when Xi hopes to have achieved “the great rejuvenation of the Chinese nation.” By then, China’s economy will likely be the world’s largest, substantially less dependent on the dollar, and in possession of a more “Western proof” semiconductor supply chain than it has now. Beijing would have less to fear from attacking Taipei than it does now.

Greater Chinese independence from the West could have ramifications that go beyond just Taiwan. For instance, China might feel emboldened to more aggressively press its territorial claims in the East China and South China Seas and encroach further across its disputed border with India. Its increased economic heft and security could make Beijing less hesitant to arm U.S. adversaries, including Russia, if these adversaries attack their neighbors. And the more that China protects itself from Western economic pressure, the more comfortable the global south might feel adopting its technology platforms, strengthening bilateral trade ties, and participating in geoeconomic undertakings including the Belt and Road Initiative. Developing states, after all, would feel more confident both in Beijing’s growth outlook and in their ability to maneuver around whatever secondary sanctions Western countries might impose on them for dealing with China.

These outcomes are far from guaranteed, particularly given that China faces major economic headwinds. It is in demographic decline and experiencing slowing growth, and the world’s advanced industrial democracies are increasingly aligned against it. Beijing has little prospect of achieving hegemony in Asia, let alone overtaking Washington and establishing a new unipolar order. But considering how improbable China’s present influence within the international system would have seemed only 30 years ago, it is premature to assume that the country’s quest for greater financial and technological self-reliance is doomed. Indeed, it is already circumventing export controls aimed at slowing its development of cutting-edge chips by leveraging third countries and using cloud computing services.

PEACE FOR OUR TIME

Interdependence may not seem worth defending, given that it has historically failed to prevent war. But no structural phenomenon can prevent conflict; the decision to initiate hostilities is ultimately a human one. And interdependence can compel potential belligerents to reconsider their plans by making aggression more costly for countries that do decide to engage in it. In addition, as with the West’s interactions with a resurgent China since the late 1970s, interdependence can slow the transformation of suspicion into antagonism. Finally, interdependence can create space for the kind of great-power cooperation that seems increasingly unthinkable today. For example, hope for a trilateral arms control dialogue involving China, Russia, and the United States seemed plausible a decade ago, but it does not right now.

It is concerning, then, that officials in Beijing, Brussels, Moscow, and Washington are all taking a dimmer view of interdependence. In fact, their skepticism alone could make the world more fraught. Drawing on 40 case studies of great-power conflicts between 1790 and 1991, the political scientist Dale Copeland concluded in 2014 that the level of interdependence matters less in explaining the outbreak of hostilities than did expectations about its trajectory. “It does not matter whether past and current levels of commerce have been high if leaders believe they are going to be cut off tomorrow or in the near future,” he wrote. “It is their pessimism about the future that will probably drive these leaders to consider hard-line measures and even war to safeguard the long-term security of the state.”

The early years of the 2020s have made it clear that autocracies can be dangerous when they are deeply embedded in the Western order. But they can also be dangerous when they are minimally integrated. It would be unfortunate—and ironic—if economic pressure by the West inadvertently made China and Russia more aggressive competitors over time and diminished the West’s own capacity to shape the international system.

Western policymakers are unlikely to pivot back toward proposing new trade deals or encouraging companies to build supply chains involving China and Russia. But given the facts, the United States and Europe should not abandon interdependence altogether. Instead, they should consider how to establish a more sustainable configuration of interdependence, one in which they and their strategic competitors are invested. The West should proceed cautiously and incrementally, but rigorously, as it works to enhance the resilience of supply chains for vital commodities and critical technologies, reducing its exposure to potential coercion while preserving scientific and technological exchanges that are essential to maintaining the vibrancy of its innovation ecosystems.

Above all else, the West should accept that China and Russia are likely to endure. Recent history may encourage the United States and Europe to pursue obtain a total victory, as the Allied powers achieved over Germany and Japan in World War II and as Washington ultimately did over Moscow when the Soviet Union collapsed in the late 1980s. But such an outcome is unlikely to happen today. The long-term challenge for the West, then, is to manage the risks that come from both dependence and detachment—and figure out how to live with them.