China and the US can escape the Thucydides Trap if they choose to fight their common enemies
There are concerns that China and the United States are in danger of sliding into what Graham Allison, the Douglas Dillon Professor of Government at Harvard University, has called “the Thucydides Trap”.
China and the US can escape the trap, if they choose to fight against common enemies, the list of which is rather long: global warming, global poverty, international terrorism, pollution, and the pandemic, to name a few. Now, the most dangerous common enemy is, without doubt, the pandemic. Without close cooperation and coordination among all countries it will be impossible to win the war against it.
To fight against the pandemic and repair the global supply chain disruptions caused by the pandemic, China has taken a series of measures to facilitate international trade. In October, China”s exports totaled $300.2 billion, a 27.1 percent increase year-on-year. It is worth mentioning that 40 percent of China’s exports are intermediate goods, and 15 percent are capital goods, which show that China’s exports are, indeed, helping to repair the global value chains.
By the end of 2021, China would donate 100 million vaccine doses to other developing countries, in addition to donations worth $100 million to the COVAX Facility. China’s contribution to the global efforts to contain the COVID-19 should not be brushed off easily.
The Joe Biden administration has declared: “We welcome competition with the People’s Republic of China… Our objective is not to escalate trade tensions with China or double down on the previous administration’s flawed strategy.”
China welcomes these declarations, but the Biden administration has failed to change “the previous administration’s flawed strategy” in a fundamental way. Instead, it has blacklisted many Chinese firms; prohibited US residents from buying or selling publicly traded securities of 59 Chinese companies and set rules aimed at cutting off Chinese companies from US capital markets.
However, China remains hopeful that ties with the US can be improved. It has pledged to optimize market-access requirements for foreign banks and insurance companies, improve rules on cross-border transactions between parent companies and subsidiaries, and to expand channels for foreign capital to participate in its domestic financial markets.
China is also pursuing complementary domestic reforms and working to strengthen its adherence to international rules and norms, such as intellectual-property protections-a key concern of foreign companies operating in China. As the US-China Business Council notes, China’s IP laws and regulations “increasingly reflect international standards”.
China is also working to strengthen regional and multilateral cooperation in trade and investment. The country supports the revitalization of the World Trade Organization. It has also been a key promoter of the Regional Comprehensive Economic Partnership that will come into effect on Jan 1. And it has officially applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
Some politicians in the US have advocated that the US needs to “decouple” from China. But, decoupling is certainly not in the interests of the US business community. As the US Chamber of Commerce recently reported, “American companies would lose hundreds of billions of dollars if they slashed investment in China or the nations increased tariffs”.
China and the US have been engaged in a tariff war since 2018.However, as the US-China Business Council reports, after the two countries signed the Phase One trade agreement in 2020, both sides halted tariff escalations. Furthermore, the US instituted a “robust system of tariff exclusions”, with China responding in kind.
In 2020, US exports to China grew by roughly 18 percent over the previous year, helping China retain its position as the third-largest market for US exports.
China has also been maintaining ties with the global economy. As Nicholas R. Lardy of the Peterson Institute for International Economics observes, “despite economic and financial tensions and a plethora of foreign restrictions on the transfer of technology to China”, the country continues to attract “record amounts” of foreign direct investment. In 2020, China’s inbound foreign direct investment grew by more than 10 percent to a record $212 billion, accounting for one-fourth of the global total.
Some Western observers believe that China has been pursuing its own form of decoupling for more than a decade through its campaign to develop more advanced technologies at home. However, China’s industrial upgrading policies are not aimed at decoupling. If any steps China takes in this process are considered problematic, they can be negotiated within the WTO framework.
Disruption in the global value chains have exposed weaknesses in the chains. Although, the global supply chains generate significant economic gains for participants, the risks are also high. Because of the fragmentation of production and the extensive division of labor across borders, the probability of disruption is much higher than when the production process is entirely within a country. Two years into the pandemic, to review the viability of the chains is not only necessary, but also natural.
Globalization does not need to be reversed but it probably does need adjusting. It is time for countries to reshape the global value chains to achieve a better balance between efficiency and safety and make them more sustainable. For that, some internalization is necessary. That being said, there is no need to politicize such adjustments.
Nobody knows when the pandemic will end. All countries are in the same boat. They must put their differences aside and unite to fight against it. At this critical point of time, to use the pandemic to score political points is despicable.
Returning to Allison’s historical paradigm, it is worth remembering that while Sparta emerged as the winner of the Peloponnesian War, its victory paved the way for Sparta’s own decline.
The lessons of history should not be forgotten.
The author is a senior fellow and member at the Chinese Academy of Social Sciences. The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.