Here be dragons...

Western leaders, waking up to China's geopolitical agenda, will resist siding with the Trump Administration over trade.

No longer the "indispensable leader"

“The [National Security Strategy] makes clear that ‘America First’ is more than just a campaign slogan but now a guiding force in the US's foreign policy making. [Mr] Trump’s strategy draws attention to the US's trade imbalances with other countries and warns of ‘economic aggression’ from other countries like China as key national security concerns.”

Jeremy Diamond, CNN, 19 December 2017

When President Donald Trump (unusually) personally launched the US’s new National Security Strategy (NSS) on 18 December, he seemed effectively to be formally renouncing America’s historic role as the “indispensable leader” of the free world (a stock phrase used by virtually all US presidents since the end of the Second World War) in favour of a vision of the world in “continuous competition”. Although the written report itself takes a tough line on both China and Russia — both of which, it claims, “challenge American power, influence and interests, attempting to erode American security and prosperity” — in presenting it, Mr Trump had far more to say about China, warning that economic aggression is a key US national security concern. As Mr Diamond (quoted above) puts it:

“The strategy document…reflects [Mr] Trump’s focus on trade since coming into office, and while it does not threaten the use of tariffs as [Mr]Trump has, it makes clear the US will ensure that trade is ‘fair and reciprocal”’.

To be fair, history tells us that very often much of an NSS never gets put into practice. And such are (in my view) the contradictions within this latest one (both within the document itself and also relative to much of Mr Trump’s repeated rhetoric), that this will almost certainly be the case this time around too. But there is a growing weight of evidence to suggest that Mr Trump is about to live up to the NSS’s claim that:

"The United States will no longer turn a blind eye to violations, cheating, or economic aggression”.

And it is China which looks to be increasingly in the President’s cross-hairs.

Shared concerns

Insofar as he personally cares, Mr Trump may believe that key allies share his concerns about China to the point where he can count on at least some support. Certainly many of those concerns do appear increasingly to weigh on others. Consider.

  • In Canada, the intelligence services have been warning the government for some years about alleged Chinese attempts to gain influence over key individuals in central and provincial governments.
  • A research report published last September has triggered calls for deeper scrutiny of Beijing’s influence over the ethnic Chinese diaspora in New Zealand.
  • Earlier this month in Australia (which has historically been cautious about criticising China openly given the importance of economic ties), Prime Minister Malcolm Turnbull provoked a torrid backlash from Beijing when he was openly critical of alleged (nb: Beijing denies the claim) Chinese interference in Australia’s political processes when he announced a new anti-espionage laws in parliament.
  • In Europe, the annual ‘16+1’ summit between China and 16 central and eastern European countries, most recently held in Hungary in late November, is the object of increasing suspicion in Brussels. For sure, the main subject matter, ie investment and trade, is legitimate; and it is certainly the case that Beijing sees members of the 16 as important components in Xi Jinping’s flagship Belt and Road project. But the concern is that it is also being used to nurture the increasingly deep ‘east/west’ division within the EU to China’s geopolitical advantage, with Beijing’s authoritarian approach to governance clearly resonating in the likes of Warsaw, already close to crisis point with Brussels, and Budapest.
  • Also in Europe, earlier this month Germany’s spy agency accused China of using social media with the aim of “gleaning information and recruiting sources”.

Clearly, concerns have been building for some time — as is underlined by the launch this month in the United States by the Congressional-Executive Commission on China of hearings into Beijing’s efforts to secure political influence in the West. However, it may be no coincidence that there is what appears to be a sharp rise in willingness to speak openly among Western policymakers so soon after the 19th Congress of the Communist Party of China when Xi Jinping was more explicit than ever that the days of China’s ‘hide and bide’ foreign policy are now well and truly over.

'Sharp power'

Piecing all this together, the 16 December edition of The Economist opined, in a front page feature (subscriber access only), as follows:

“China’s approach could be called ‘sharp power’. It stops well short of hard power, wielded through military force or economic muscle; but it is distinct from the soft attraction of culture and values, and more malign. Sharp power is a term coined by the National Endowment for Democracy (NED), a think tank in Washington DC, funded mainly by Congress. Anne-Marie Brady of the University of Canterbury in New Zealand refers to China’s intrusions as a ‘new global battle’ to ‘guide, buy or coerce political influence…. China is a keenly courted trading partner that is investing huge sums beyond its borders…. This naturally gives it influence, which it is using to shape debate abroad in areas where it wants to muzzle criticism.”

Although this particular article has nothing more to say about trade per se, its overall conclusions nevertheless apply, in my view, as follows:

“China’s sharp power poses a conundrum to Western policymakers. One danger is that policies designed to smooth over relations whip up anti-China hysteria instead….Rather than learning to live with each other, China and the West might drift into sullen miscomprehension. The other concern is that policymakers play down the risks. If so, the public and politicians in the West may underestimate the threat from China’s rise. How do you strike a balance between self-protection and engagement? Just now, nobody is quite sure.”

One way or the other, wherever that balance lies, I doubt that Mr Trump will find much sympathy among traditional US allies if his response to China is indeed to resort to trade protectionism. In the sidelines of this month’s WTO’s biennial ministerial meeting, the EU and Japan joined with the US in trying to increase pressure on Beijing (albeit without specifically naming China) over trade, state subsidies and intellectual property. A related leader in the Financial Times (subscriber access only) described the intention of the alliance was: “…to avert a lurch towards protectionism by wringing concessions from Beijing” (which may well be the case for two of the members but I would be more cautious about applying it to the third). The FT continued as follows:

“…from a broader perspective, such mounting tensions represent an existential test for the global trading system. At issue is whether China’s state-driven, hybrid system has become so divergent from free-market principles that fruitful cooperation is precluded.”

Damage limitation

Consistent with this view, a subsequent FT leader (published on 28 December), describing Mr Trump as the greatest threat to global trade since the start of this century, praised “other big trading power, particularly the EU [for resisting] the temptation to follow the US down the protectionist route” in 2017. However, in the light of now seemingly inevitable deeper trade tensions between the US and China, I believe that the FT was right to conclude that: “The focus for trade policymakers in 2018 should be mainly about damage limitation.”

But, as The Economist suggests, even this may be hard to achieve as broader Western concerns about China’s geopolitical agenda come more to the fore.

Alastair Newton

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