For Biden — and America — it’s basically China from now on

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I set myself a mental challenge a few weeks back. Could I make it through a Washington day without talking, reading or thinking about China? It failed abysmally. Like it or not — I’m in the foreboding camp — our futures will be increasingly dominated by Sino-American rivalry. It would be nice to think that our world will also be shaped by a new era of US-China co-operation to tackle global warming, future pandemics, cyber crime and other common threats. But prospects of that have been receding quite rapidly.

Last week John Kerry, Biden’s climate envoy, and king of global air miles, visited China to try to make progress on climate change. He came away empty-handed. Worse, Wang Yi, China’s foreign minister, reiterated his country’s version of Kissengerian cold war linkage — the idea that diplomatic progress in one area should be linked to progress in another. Indeed, Kerry did not physically meet Wang, who only consented to meet by video in spite of the fact the American had travelled all the way to Tianjin to meet him. Deals on climate, Wang said, “cannot be divorced from the overall situation of China-US relations”. 

That is a pretty bad omen. If China plans to hold co-operation hostage to demands that Joe Biden stop criticising its human rights record, abandon Taiwan, end freedom of navigation patrols in the South China Sea, welcome Huawei and so on, the world will forever be waiting for Godot. Biden is little different to Donald Trump on most of these issues (though far stronger in his rhetoric on human rights). It is very much the new Washington consensus.

For the time being, China does not even want to have much of a dialogue with the US. As my colleagues Demetri Sevastopulo and Tom Mitchell reported earlier this week, President Xi Jinping recently turned down Biden’s offer of a bilateral summit to hash out which areas can be cordoned off from their strategic rivalry. In their 90-minute call, Xi and Biden at least agreed not to let “competition veer into conflict”, though the fact they had to stress that is far from reassuring.

Where does it go from here? Nowhere fast, I hope, because the likelier direction would be downwards. Biden’s unveiling of the three-way military technology deal with Australia and the UK on Wednesday is a further sign of a hardening cold war. Much of the focus has been on France’s injured pride and damaged balance sheet — its $50bn-plus “contract of the century” deal to supply Australia with conventional submarines has been scuppered.

In the law of unintended consequences, Biden’s move could accelerate European discussion of strategic autonomy. If that resulted in continental Europe stepping up its defence spending nobody in Washington would complain. But it is the Indo-Pacific, not the Atlantic, that is the new theatre of gravity.

The most important meeting in the coming days will be a gathering of the leaders of the Quad countries — Japan, the US, Australia and India. Though the Quad is not a formal alliance, nor is it likely to be, it is a far more critical body than Nato for Biden’s foreign policy. The only thing stopping it from becoming a mutual defence body is India’s reluctance to make treaty alliances. The other three, as we saw this week, are deepening their defence co-operation. Japan went out of its way to praise the Aukus deal since it would cement Britain’s eastward tilt.

Amid all this, Bob Woodward’s latest book, Peril, has landed with a thump. The most startling revelation, assuming it was not taken out of context (which has been known to happen), was the two telephone calls that Mark Milley, chairman of the US joint chiefs of staff, made to his Chinese counterpart in October and January — both to reassure Beijing that Trump was not planning a pre-emptive Wag the Dog-style military strike on China to somehow prolong his presidency. Milley’s propriety, or otherwise, and the question of whether he was breaking the nuclear chain of command, of which he is not a part, is another question. My point here is that China is on America’s brain. And America is on China’s. Which doesn’t fill me with comfort.

There has been much debate on whether the US and China are now officially in a cold war 2.0 or not. Those who dispute the description point out that the US and China are so economically entwined that conflict would be unthinkable. During cold war 1.0, the Soviets and the Americans operated within almost entirely separate global trading blocks. That may be so. But the same was true of Britain and Germany before the first world war.

When incendiary rhetoric gets entrenched, as has happened in both China and the US since the pandemic began, governments create public expectations that risk becoming self-fulfilling. A Gallup poll earlier this year found that 45 per cent of Americans saw China as “our greatest enemy” — a doubling over the previous year.

Rana, are we in a new cold war? If so, what can we do to keep it within peaceful limits?

Recommended reading

  • My column this week looks at Democratic double standards on wealth inequality. This week’s published outline of the House of Representatives Democratic tax measures in the $3.5tn reconciliation bill make it clear that wealth is off the table, while tax breaks for high earners in Democratic states are very much on the cards. “America’s super-rich seem to have bought themselves several more years of reprieve,” I write.

  • My FT colleague Katrina Manson landed the first interview with Zalmay Khalilzad, Afghanistan envoy for Trump and then Biden, since the fall of Kabul on August 15. As you might expect, former Afghan president Ashraf Ghani does not come out of it well, although if I were Khalilzad, having negotiated the original shoddy withdrawal agreement with the Taliban, I would be keeping a low profile nowadays.

  • Sarah O’Connor has an excellent FT column about the creeping reality of a continuous work week. “The disintegration of the old working week creates winners and losers,” she writes. “One of the stark divides in the post-pandemic world will be between those who can fit work around life, and those who must fit life around work.” I rather like the French idea of the “right to disconnect” (from emails, etc) but fear it will be unenforceable.

  • Finally, do read Benjamin Wallace-Wells in The New Yorker on why America’s right is so infatuated with Hungary’s Viktor Orban, the pioneer of illiberal democracy and, in my view, postmodern fascism. His piece makes for disturbing reading.

For more politics news from Europe, and the latest on the upcoming German election on September 26, sign up to our Europe Express newsletter.

Rana Foroohar responds

Ed, I’m worried about all the same things you are, and I think there’s no question that we are in a cold war. I also disagree with the conventional wisdom that being economically enmeshed with China is some sort of protection. In fact, it’s one of the reasons that politics have become so polarised, since policymakers were not transparent about the fact that certain areas of the country (this one, and many others) would be hollowed out by China’s entry to the World Trade Organization, and that it would take decades for them to recover, if indeed they ever did (see David Autor, David Dorn and Gordon H Hanson’s China shock paper). 

I’m very afraid that nationalism in China and populism in the west could turn a cold war into a hot conflict (and honestly, I worry more about the former in Xi’s China). But I also think that a certain amount of deglobalisation was not only inevitable, but welcome.

First, there are the issues of supply chain concentration. Just on the point of Taiwan, how could anyone think that it was ever a good idea to place 92 per cent of the world’s advanced semiconductor manufacturing capacity in this tiny, hotly contested country? As I’ve argued in Swamp Notes past, some regionalisation of foundry capacity would be good for everyone. Throw in the emissions issues from far-flung supply chains, and climate concerns around them, and you start to see what some regionalisation or even more national capacity in areas including textiles and agriculture make sense for many nations. 

I honestly think that the whole “world is flat” meme, which holds that ever more global economic connection is required for peace, is overblown. In the digital economy, ideas and data can and should flow across borders, but there are also more opportunities to retether wealth and place (think 3D-printing, multiple digital currencies, and so on). 

But if communication breaks down, that’s a problem. Xi has decided that China is now a country with enough consumer demand and supply to create its own trade path and financial ecosystem. There’s nothing Biden or the west can do about that. The question is whether we will be in what amounts to a bipolar world, with the US and China on opposite poles, or a tripolar world (Europe finally becomes more committed to full regional co-operation), or some mix in which the US and China duke it out for the rest of the OECD nations and their alliance. The latter possibility worries me, particularly given how core Europe (Germany and France) seem to have landed on issues including their relationship with Russia, trade with China, defence and so on. 

I’ll be watching the upcoming US-EU trade and tech conference in Pittsburgh closely for more clues about whether the transatlantic alliance can be strengthened. Watch for a column on that topic in a couple of weeks from me. 

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Your feedback

And now a word from our Swampians . ..

In response to ‘Pipeline problems’:
“Tripolar risk is indeed heating up. We see this first through the lens of politics. But investors are beginning to realise that investment risk has a strong national component, as politics is risk management writ large. The lessening of US hegemony is a catalyst. The Soros vs Fink team spat highlights this. BlackRock ploughs on in China, Soros deems investing in China a ‘tragic mistake’. Yes, we understand the organisational momentum around investing in China. But the man from Mars would clearly state that the equity risk premium for a western investor should be higher in China than, say, the US or Switzerland. There was a time when we thought the equity risk premium was largely a global metric, but no longer.” — Mike Clark, Oxfordshire, England

In response to ‘The Republican party: Covid-19’s dependable ally’:
“Rana, I’m not sure the world is all that rattled by the loss of US credibility. I’m old enough (sad!) to remember Vietnam, and the end of US power and prestige widely trumpeted then. As Tooze says in the article Ed refers us to, credibility is shot when a country doesn’t put its military capabilities and maintain its intent in areas where its real interests lie — and Afghanistan stopped claiming that primacy of place a long time ago.” — David Ritchie, Canberra, Australia 

We’d love to hear from you. You can email the team on [email protected], contact Ed on [email protected] and Rana on [email protected], and follow them on Twitter at @RanaForoohar and @EdwardGLuce. We may feature an excerpt of your response in the next newsletter

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