World feel­ing the chill of a new cold war be­tween gi­ants

The US-China stand­off is deeper than most would like to be­lieve

The Weekend Australian - - FRONT PAGE - PAUL KELLY

Four months into the COVID-19 cri­sis, the world and Aus­tralia con­front a worse prob­lem — the de­scent into a ver­sion of cold war be­tween the US and China, many years in the mak­ing but now ap­par­ently sealed in the great-power an­i­mos­ity un­leashed by the virus.

The virus will be con­quered by sci­en­tific, ra­tio­nal and log­i­cal pub­lic pol­icy. But such el­e­ments are ab­sent on the US-China front. Vet­eran an­a­lyst Alan Dupont ar­gues that a geopo­lit­i­cal trans­for­ma­tion is un­der way — the US-China con­flict over trade, tech­nol­ogy, strat­egy and val­ues “has pre­cip­i­tated a new cold war” that con­sti­tutes “an ad­ver­sar­ial con­test for global supremacy” be­tween “di­a­met­ri­cally op­posed po­lit­i­cal sys­tems and as­so­ci­ated val­ues com­pounded by their sense of ex­cep­tion­al­ism”.

Four months into the COVID-19 cri­sis, the world and Aus­tralia con­front a worse prob­lem — the de­scent into a ver­sion of cold war be­tween the US and China, many years in the mak­ing but now ap­par­ently sealed in the great-power an­i­mos­ity un­leashed by the virus.

The virus will be con­quered by sci­en­tific, ra­tio­nal and log­i­cal pub­lic pol­icy. But such el­e­ments are ab­sent on the US-China front where Don­ald Trump and Xi Jin­ping have tipped each other into a con­fronta­tion nei­ther seems will­ing to aban­don, with es­ca­la­tion the most likely re­sult.

The coro­n­avirus pan­demic that recog­nises nei­ther na­tion­al­ity nor ide­ol­ogy should have brought the lead­ing pow­ers into co-op­er­a­tion but the op­po­site has hap­pened — the threat to hu­man­ity has ex­posed the true de­scent in the USChina cri­sis. The warn­ings lights are flash­ing on emer­gency.

A week ago an alarm­ingly er­ratic Trump warned he “could cut off the whole re­la­tion­ship” with China, say­ing baf­flingly it would save $500bn, prompt­ing China’s For­eign Min­istry to call on the US “to aban­don its Cold War and zero-sum men­tal­ity” — while Xi ex­ploits the virus to push China’s trade and strate­gic in­ter­ests yet en­gages in sub­tle ac­com­mo­da­tion of the “eval­u­a­tion” res­o­lu­tion into the virus as pushed by Aus­tralia and the EU.

In his 30,000-word anal­y­sis for the Cen­tre for In­de­pen­dent Stud­ies, vet­eran an­a­lyst Alan Dupont ar­gues a geopo­lit­i­cal trans­for­ma­tion is un­der way — the USChina con­flict over trade, tech­nol­ogy, strat­egy and val­ues “has pre­cip­i­tated a new cold war” that con­sti­tutes “an ad­ver­sar­ial con­test for global supremacy” be­tween “di­a­met­ri­cally op­posed po­lit­i­cal sys­tems and as­so­ci­ated val­ues com­pounded by their sense of ex­cep­tion­al­ism”.

Dupont told In­quirer: “The test for Aus­tralia is not that of­ten posed: hav­ing to choose be­tween the US and China. The prob­lem now is we need to re­think vir­tu­ally ev­ery area of pol­icy be­cause our ma­jor trad­ing part­ner has be­come ac­tively hos­tile to­wards us and our prin­ci­pal ally is capri­cious and self­in­ter­ested. Not only is this the most chal­leng­ing se­cu­rity en­vi­ron­ment we have ex­pe­ri­enced since the sec­ond world war, it comes when we face the worse eco­nomic cri­sis since the Great De­pres­sion. It is a dual dilemma the like of which we haven’t ex­pe­ri­enced be­fore.”

While as­sess­ments vary and many econ­o­mists are ap­palled at the cold war la­bel — cor­rectly say­ing the trade con­flict is an act of mu­tual self-harm — Dupont says the cri­sis far tran­scends a trade dis­pute. “The trade and tech wars are symp­to­matic of a deeper and more dan­ger­ous geopo­lit­i­cal di­vide,” he says in his CIS brief.

“China’s ex­pand­ing tool­kit in­cludes pro­pa­ganda, ag­gres­sive diplo­macy, so­phis­ti­cated dis­in­for­ma­tion cam­paigns, me­dia ma­nip­u­la­tion, sub­ver­sion, fi­nan­cial in­duce­ments, theft of in­tel­lec­tual prop­erty, law­fare, co­er­cion and the use of eco­nomic and mil­i­tary pres­sure for strate­gic pur­poses.”

Dupont’s the­sis is that China’s lead­ers de­cided some time ago their chal­lenge to US pri­macy de­pended on match­ing and sur­pass­ing US mil­i­tary power pro­jec­tion in the West­ern Pa­cific and re­vers­ing the US lead in cut­ting-edge tech­nol­ogy. The essence of China’s chal­lenge as an au­thor­i­tar­ian state lies in its “mo­bil­is­ing all el­e­ments of na­tional power” with Xi’s method of po­lit­i­cal war­fare re­sult­ing in a po­ten­tially more for­mi­da­ble ad­ver­sary than the old Soviet Union.

China’s strat­egy is de­signed to ex­pose the vul­ner­a­bil­i­ties of demo­cratic states. But it also “re­flects the ide­ol­ogy of an in­se­cure state that feels im­per­illed by lib­eral val­ues”. Dupont quotes China watcher El­iz­a­beth Econ­omy’s con­clu­sion that Xi “con­sid­ers con­sti­tu­tional democ­racy, hu­man rights, aca­demic free­dom, ju­di­cial in­de­pen­dence and free­dom of the press as fun­da­men­tal threats”.

Dupont iden­ti­fies the six dis­tin­guish­ing fea­tures of the cold war: “First, the US-China con­flict is be­tween the world’s two most pow­er­ful states, one a lib­eral democ­racy and the other avowedly com­mu­nist. Sec­ond, it is a sys­tem-wide con­test for supremacy. Third, it is about ide­ol­ogy as well as na­tional power. Fourth, it will be a multi-decade strug­gle for global as­cen­dancy. Fifth, a sec­ond geopo­lit­i­cal bi­fur­ca­tion of the world is likely. Sixth, nei­ther side wants a full-scale mil­i­tary con­fronta­tion.”

While a “hot war” re­mains a “dis­tinct pos­si­bil­ity”, a com­pre­hen­sive po­lit­i­cal war will still be “cor­ro­sive” and the world will pay a price. It will “usher in an ex­tended pe­riod of great-power com­pe­ti­tion that could roll back the gains from more than 70 years of trade lib­er­al­i­sa­tion, dis­rupt global sup­ply chains, Balka­nise the in­ter­net and bi­fur­cate the world into two mu­tu­ally in­com­pat­i­ble po­lit­i­cal sys­tems”.

The per­son­al­ity and char­ac­ter of lead­ers Trump and Xi is piv­otal. Xi aban­doned China’s pre­vi­ous cau­tion in favour of a drive to shift the re­gional and global or­der in China’s favour, while Trump re­pu­di­ated the US global lead­er­ship model since World War II, launch­ing an “Amer­ica First” as­sault on China hav­ing de­cided it was the win­ner from the ex­ist­ing or­der.

Un­der pres­sure, Xi and Trump are only likely to dou­ble down on the nar­ra­tives that un­der­write their do­mes­tic power. The out­look is grim. Xi’s prospects of re­tain­ing power must be rated as su­pe­rior to Trump’s prospects of re-elec­tion this year. But bedrock sen­ti­ment has changed. His­to­rian Niall Fer­gu­son says “mid­dle Amer­ica is awake to the Chi­nese threat, not just the elites”, while Xi has fanned China’s na­tion­al­ism and turned it against the US.

In his re­cent For­eign Af­fairs ar­ti­cle, Kevin Rudd wrote: “Nei­ther a new Pax Sinica nor a re­newed Pax Amer­i­cana will rise from the ru­ins (of the virus). Rather, both pow­ers will be weak­ened, at home and abroad. And the re­sult will be a con­tin­ued slow but steady drift to­wards in­ter­na­tional an­ar­chy across ev­ery­thing from in­ter­na­tional se­cu­rity to trade to pan­demic man­age­ment. With no­body di­rect­ing traf­fic, var­i­ous forms of ram­pant na­tion­al­ism are tak­ing the place of or­der and co-op­er­a­tion. It may not yet be Cold War 2.0 but it is start­ing to look like Cold War 1.5.”

Dupont says the re­think in govern­ment at­ti­tudes in Aus­tralia be­gan un­der Mal­colm Turn­bull and has ac­cel­er­ated un­der Scott Mor­ri­son. He says: “The re­al­i­sa­tion of how Bei­jing op­er­ates through a China Inc ap­proach to the world and its use of po­lit­i­cal war­fare is now broadly ac­cepted within the Mor­ri­son govern­ment.

“Al­though the new cold war is play­ing out across the world, its ge­o­graphic cen­tre of grav­ity is the Indo-Pa­cific, not Europe. The US and China are both Pa­cific pow­ers. Their ri­valry will be felt most keenly in the Indo-Pa­cific, par­tic­u­larly

in the mar­itime do­main where their in­ter­ests col­lide. North Korea and the East and South China seas are the most likely can­di­dates, but Tai­wan and Hong Kong are po­ten­tially are­nas for con­flict.

“Xi has el­e­vated in­ter­fer­ence and in­flu­ence op­er­a­tions into an art form, sow­ing dis­cord in demo­cratic so­ci­eties and coopt­ing sym­pa­thetic or naive elites while co­coon­ing his own peo­ple in­side thick­en­ing walls of re­pres­sion and con­trol. This is clas­sic asym­met­ric war­fare be­cause it plays to China’s strengths in po­lit­i­cal mo­bil­i­sa­tion and do­mes­tic con­trol while ex­ploit­ing the West’s rel­a­tive open­ness.”

Dupont refers to the the­o­ries of two Chi­nese colonels, Qaio Liang and Wang Xiang­sui, that the bat­tle­field had changed, say­ing: “It was no longer a place where mil­i­taries met and fought. In­stead, so­ci­ety it­self was now the bat­tle­field. Fu­ture wars would in­evitably en­com­pass at­tacks on all el­e­ments of so­ci­ety with­out lim­its, us­ing mil­i­tary force, co­er­cion, pres­sure and both lethal and non­lethal means to com­pel an en­emy to ac­cept one’s in­ter­ests. The bar­rier be­tween sol­diers and civil­ians would be erased be­cause the bat­tle would be ev­ery­where. The num­ber of new bat­tle­fields would be ‘vir­tu­ally in­fi­nite’ and could en­com­pass en­vi­ron­men­tal, fi­nan­cial, trade, cul­tural and le­gal war­fare among oth­ers.”

Trump is fun­da­men­tal to the tenor and na­ture of the emerg­ing cold war. Dupont told In­quirer: “Many peo­ple have un­der­es­ti­mated Trump’s abil­ity to un­der­stand bet­ter than his pre­de­ces­sors the na­ture of the China chal­lenge. Trump de­cided the US had to push back on all fronts against China oth­er­wise it would be rel­e­gated to the sta­tus of a sec­ond-or­der power. It is an ex­is­ten­tial chal­lenge for the US and I be­lieve Trump re­alised that. In my view his core po­si­tion is cor­rect.”

The prob­lem, how­ever, is Trump’s push­back strat­egy. Dupont says: “It has been com­pletely self-in­ter­ested and alien­ated many other coun­tries who are sym­pa­thetic to what Trump seeks to achieve vis a vis China, and that in­cludes Aus­tralia. He has alien­ated the peo­ple who would be his nor­mal sup­port­ers, the Euro­pean democ­ra­cies and democ­ra­cies in Asia. His lead­er­ship qual­i­ties are poor and lead­er­ship is needed now more than ever. His short­com­ings have been il­lu­mi­nated by his in­choate re­sponse to the coro­n­avirus cri­sis. The more com­plex this be­comes the more Trump’s lack of lead­er­ship and self-in­ter­est will be ex­posed.”

Rudd of­fers a sav­age in­dict­ment of both Xi and Trump. He pre­dicts China’s eco­nomic growth this year will be zero, the worst since the Cul­tural Rev­o­lu­tion. Its debt to GDP ra­tio is 310 per cent. The pan­demic makes im­pos­si­ble the lead­er­ship’s goal of dou­bling GDP across a decade. “Con­trary to the com­mon trope, China’s na­tional power has taken a hit from this cri­sis on mul­ti­ple lev­els,” Rudd says.

As for the US, Rudd says Trump has given a demon­stra­tion of what “Amer­ica First” means in prac­tice — “Don’t look to the US for help in a gen­uine global cri­sis be­cause it can’t even look af­ter it­self.” He says the US po­lit­i­cal es­tab­lish­ment is more frac­tured by the cri­sis and the US econ­omy is likely to shrink be­tween 6 per cent and 14 per cent this year.

“The cri­sis ap­pears to have shred­ded much of what was left of the US-Chi­nese re­la­tion­ship,” Rudd says. “In Wash­ing­ton any re­turn to a pre-2017 world of ‘strate­gic en­gage­ment’ with Bei­jing is no longer po­lit­i­cally ten­able. A sec­ond Trump term will mean greater de­cou­pling and pos­si­bly at­tempted con­tain­ment, driven by Trump’s base and wide­spread na­tional anger over the ori­gins of the virus.”

Rudd says the Demo­cratic nom­i­nee, Joe Bi­den, if suc­cess­ful, would pur­sue strate­gic com­pe­ti­tion and de­cou­pling in some ar­eas while leav­ing open some scope for co-op­er­a­tion in cli­mate, fi­nance and pan­demics. China would pre­fer Trump be­cause of his ten­dency to frac­ture al­liances and with­draw from mul­ti­lat­eral lead­er­ship, leav­ing op­por­tu­ni­ties for Bei­jing. Rudd says: “Strate­gic ri­valry will now de­fine the en­tire spec­trum of the US-Chi­nese re­la­tion­ship — mil­i­tary, eco­nomic, fi­nan­cial, tech­no­log­i­cal, ide­o­log­i­cal — and in­creas­ingly shape Bei­jing’s and Wash­ing­ton’s re­la­tion­ship with third coun­tries.” Trump’s dele­git­imis­ing of mul­ti­lat­eral in­sti­tu­tions means “an in­creas­ingly dys­func­tional and chaotic world”.

A warn­ing of Trump’s folly has been is­sued by Bob Zoel­lick, a for­mer World Bank pres­i­dent, US spe­cial trade rep­re­sen­ta­tive un­der pres­i­dent Ge­orge W. Bush and friend of Aus­tralia, who has high­lighted the im­mense ben­e­fits the US ob­tained from its pre­vi­ous gen­er­a­tion-long co-op­er­a­tion with China.

Warn­ing against Cold War war­riors who seek con­tain­ment of China, Zoel­lick says that can­not work. Writ­ing in The Wall Street Jour­nal, Zoel­lick says the US can­not break the regime; it can im­pose costs on China “but to what end and at what price to Amer­i­cans?”.

Zoel­lick says else­where that de­cou­pling from China won’t stop its dis­rup­tive be­hav­iour but only guar­an­tee Bei­jing “will be less con­cerned” with the norms pushed by the US. “I’m not try­ing to say we’ll re­turn to the 1930s but if you have an eco­nomic down­turn ex­ac­er­bated by pan­demic risks and moves to­wards eco­nomic au­tarky, it can get pretty nasty,” he says.

Zoel­lick re­calls the days of ra­tio­nal US Repub­li­can pol­icy on China when Bei­jing cut its cur­rent ac­count sur­plus from 10 per cent of GDP to near zero, when dur­ing the GFC it launched the largest stim­u­lus to avert global de­pres­sion, and from 2000 to 2018 when US diplo­macy prod­ded China to sup­port 182 of the 190 UN Se­cu­rity Coun­cil res­o­lu­tions that im­posed sanc­tions on states.

The ul­ti­mate ques­tion Zoel­lick poses is about re­sults: what re­sults is Trump get­ting for the US, for the Amer­i­can peo­ple and the world? “It is flat wrong to sug­gest that work­ing with China has not served US in­ter­ests,” Zoel­lick says. The re­al­ity is that the US and China don’t need a cold war — but the na­tions led by Xi and Trump are mov­ing re­lent­lessly to that des­tiny.

Re­view­ing the trans­for­ma­tion in trade pol­icy, Dupont says: “The use of tar­iffs and other forms of trade dis­crim­i­na­tion for geopo­lit­i­cal pur­poses — what Wal­ter Rus­sell Mead calls the ‘Trumpi­fi­ca­tion of world pol­i­tics’ — is fast be­com­ing a tool of first re­sort in the na­tional strate­gies of the larger economies.” This is the pre­cise in­stru­ment Bei­jing now de­ploys against Aus­tralia.

Dupont goes to a crit­i­cal point: “Trump has made mat­ters worse by fail­ing to build an in­ter­na­tional con­sen­sus for ac­tion, need­lessly alien­at­ing friends and per­versely al­low­ing China to por­tray it­self as the de­fender of the rules-based sys­tem de­vel­oped and nur­tured by ev­ery other US pres­i­dent since World War II.” China, in fact, uses its trade and fi­nan­cial power to pres­sure other na­tions to­wards com­pli­ance — The Philip­pines, Canada, South Korea and Aus­tralia have all felt its sting.

There has never been a greater chasm be­tween Aus­tralia and the US on trade pol­icy for a half­cen­tury. In­stead of gath­er­ing a global coali­tion to pres­sure China on its trade tac­tics, Trump has gone solo on mas­sive re­tal­i­a­tion. While Trump sab­o­tages the World Trade Or­gan­i­sa­tion, the Mor­ri­son govern­ment has launched ini­tia­tives to try to sal­vage it. While Trump pulled the US from the Trans-Pa­cific Part­ner­ship, the Turn­bull govern­ment, work­ing with Ja­pan and oth­ers, kept the TPP alive.

WTO econ­o­mists ex­pect global mer­chan­dise trade to de­cline by be­tween 13 per cent and 32 per cent this year. But the trade war has widened into a tech war, a bat­tle­ground cen­tral to mil­i­tary ca­pa­bil­ity. China’s plan de­fined in its Made in China 2025 re­port is to dom­i­nate the ad­vanced in­dus­tries of the fu­ture. In his ground­break­ing Oc­to­ber 2018 speech, US Vice-Pres­i­dent Mike Pence hit back — pledg­ing that US power would be mo­bilised to com­bat China on a scale not seen since the first Cold War. Dupont says Pence’s speech is redo­lent of Churchill’s March 1946 “Iron Cur­tain” dec­la­ra­tion. He warns that Bei­jing ac­cepts there is no chance of reach­ing a set­tle­ment with the US for the fore­see­able fu­ture. The ri­valry “is more likely to es­ca­late than deesca­late”.

“In the short term I am a pes­simist be­cause it is too late to re­verse the trends,” Dupont says. “But we must look at ways of mit­i­gat­ing this cold war even if we can­not prevent it.” He makes nine rec­om­men­da­tions de­signed to re­duce ten­sions, res­ur­rect the trade sys­tem, strengthen mid­dle pow­ers, man­age con­flict risk and bet­ter in­te­grate eco­nomic and se­cu­rity pol­icy. Rudd warns much de­pends on the lead­ers — the right de­ci­sions “could pull us back from the abyss”.

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