Cutting Losses and Preparing to Recover from the Trump Trade Wars

Cutting Losses and Preparing to Recover from the Trump Trade Wars

Ambassador Chas W. Freeman, Jr. (USFS, Ret.)
By video from Washington, DC recorded July 3 for July 9-10, 2019

I am honored that C. H. Tung invited me to speak at this distinguished gathering.  Sino-American relations are of vital importance.  I have spent five decades working to steady and improve these relations in ways that benefit the United States as well as China, the Indo-Pacific region, and the world.  When I informed Mr. Tung that I was physically unable to travel to Hong Kong, he surprised me by asking me to share a few thoughts with you by video from my home in Washington.  I will be brief.

Fifty years ago, President Nixon realized that no world order excluding China could be stable.  At his invitation and that of his successors in office, China gradually became an integral part of a new global architecture.  Now another American president is demolishing the foundations of that architecture.

No country has a bigger stake in saving what it can of the system the Trump administration is dismantling than China.   China’s inclusion in the open, multilaterally managed, rule-bound, market economy is what enabled its recovery of its wealth, power, and pride.  Without a world order that maximizes global commerce and cooperation, China’s continued progress is at risk.

It’s right to hold this discussion in Hong Kong.  No part of China has a greater stake in preserving a well-regulated international system than Hong Kong.  The people of Hong Kong owe their prosperity to two key factors: the continuing rule of law, and the inclusion of greater China in the American-led world order.  Without both these factors, there would have been – and there can be – no Hong Kong.  Without them, there can also be no long-term success for China.  America’s sudden lapse into belligerent xenophobia and protectionism threatens more than China.  It endangers the entire world, including the United States itself.  I care deeply about that.

Like President Nixon, General Secretary Xi Jinping and his colleagues understand the importance of active participation by both the United States and China in every element of the international system.  This is the prerequisite for global stability, predictability, and prosperity as well as for both countries’ continued advance.  At present, such cooperation is not possible.  It is very unlikely that the upcoming U.S. elections will correct this.  If Americans choose to abandon the norms we promoted in the last century, China and other countries cannot stop us from doing so.  They must live with our rogue behavior and cope with its consequences as best they can.

The existing order has been remarkably beneficial to China as well as to other countries, not least my own.  China’s response to its disruption has so far been reluctant, restrained, and limited.   This is wise.  But, while restraint can minimize damage, it does not offset it or provide a basis for its eventual reversal.  The strategic question all must now ponder is: what stopgap measures, what interim arrangements, what long-term initiatives by China and others can preserve the benefits of the rule-bound international order and enable an ultimate return to it?

Despite occasional false dawns, the prospects for Sino-American relations remain gloomy.  China and others must therefore look beyond today’s America for answers.  The starting point for doing this is awareness that dissatisfaction with China’s international trade and investment practices is not limited to the United States.  It is shared by many in Europe, Japan, and others.  These countries too want China to boost imports, better protect intellectual property and technology, and curb discrimination against their investors.

If China cannot appease American grievances, there is nothing to stop it from acting to mitigate those of others.  The object would be to expand economic relations with them, bypass American obstructionism of global governance, demonstrate China’s continuing commitment to reform and opening, and lay the basis for ongoing liberalization of global trade and investment flows.  China has already provided proof that such an approach is feasible.

The Asian Infrastructure Investment Bank, the New Development Bank, and “Belt and Road” initiatives all supplement and complement the resources of legacy institutions like the World Bank and the regional development banks.  The new funds are the partners, not the competitors of the old.  They operate under similar, if slightly more open rules.  The international community welcomes the capacities they add to global governance.  They address needs that would otherwise remain unmet.

China and the other sponsors of such new structures have left the door open, the light on, and a chair free for the United States when and if it decides to rejoin the international consensus.  Any effort to advance the missions of the WTO or other pillars of the rule-bound order by paralleling them should do the same.   Americans will eventually rediscover the merits of free trade, supply-chain economics, and cooperative facilitation of trade and investment.  But, in the meantime, other stakeholders need not stand idly by while a deeply misguided American administration destroys legal frameworks and economic arrangements that enrich the world and sustain its peace and prosperity.

This is true of international politics as well as economics.  If the United Nations is stymied on issues like climate change, the laws of war, or outrages against universally accepted norms of behavior, there is nothing to prevent its members from convening ad hoc gatherings to forge collective responses to these threats.  If the parties to the Law of the Sea treaty differ about their rights and duties under it, perhaps they should meet to clarify things, and, if necessary, amend the text.  If tensions between multiple countries are rising, maybe all concerned should empower plurilateral regional diplomacy to compose their differences.  Opposition to problem solving by a few need not prevent the many from acting to the benefit of all.

In the foundational document of Sino-American relations – the Shanghai Communiqué – the two sides wisely set aside ideological differences to enable each other to work in parallel on issues of common concern.  The time has come to reinstate this approach.  It is the key to reversing the current drift toward war over issues like Taiwan and the South China Sea.

This brings me to a final thought on the bilateral interaction between China and the United States.  If the object of bilateral negotiations is just to get along, they will almost certainly fail.  Success requires each side not just to have a clear concept of where it wants to take its relationship with the other.  Both must agree on the mutually beneficial objectives they will pursue.

A relationship not grounded in strategy leaves its parties hostage to events.  This is the current state of affairs in Sino-American relations.  It will take time to correct it.   For now, the world must conduct an active defense of globalization and multilateral systems of governance.  These have been and remain the best ways to promote mutually beneficial, non-violent competition, peace, and prosperity.