China, the US, and Statecraft in the 21st Century

[MUSIC PLAYING] SARAH BALDWIN: From the Watson Institute at Brown University, this is Trending Globally. I'm Sarah Baldwin. Technology, defense, civil liberties, economics, the election, there is one story that plays a role in all of these-- the fast-changing relationship between the US and China. Recently, it's taken center stage thanks to President Trump's ongoing trade dispute with China.

But as Chas Freeman, former Assistant US Secretary of Defense and Watson Senior Fellow believes, this tension goes far beyond trade and economics. Everything about the US-China relationship is being called into question. And it's shaking up not just these two superpowers but the entire world.

CHAS FREEMAN: When the elephants fight, the small animals flee. The ants are crushed. And the grass is smashed. So everybody else has got a big stake in what's going on between the United States and China.

SARAH BALDWIN: On this episode "Connecting the Dots Around the World to Understand the US and China's Evolving Relationship," Edward Steinfeld, director of the Watson Institute and of Watson's China initiative, sat down with Chas to discuss what may be the biggest story of decades to come-- the changing relationship between the US and China and what peace and progress will look like in a multipolar world. Here's Ed.

EDWARD STEINFELD: Chas, we are here today to talk about your new paper "A World Divided-- The International Implications of the Sino-American Rift." It's a fantastic and extremely provocative paper as are all of your papers. "In a World Divided," you argue that the US and China are now in a protracted conflict, that they've reconciled themselves to a protracted conflict in which each views the other as really an existential threat.

And I think you document very well on the American side what the manifestations of this conflict look like-- tariffs on Chinese goods coming to the US, embargoes on US technology exports to China. What about on the Chinese side?

CHAS FREEMAN: Well, I think for a long time, the Chinese were in denial about the level of American hostility and the way in which it's spread first from the trade sector to technology to the political sector and of course, the military. And maybe the military or security concerns have been the main drivers of the American opposition to China.

The Chinese have been very reluctant to get into tit-for-tat retaliation against the United States. They have not taken retaliatory measures against American travelers. They have not cut off scientific intercourse with the United States in retaliation for American moves to do that.

And of course, militarily, we're in their face. They're not in ours. We're over on their shores. They're not off San Diego or Puget Sound yet. So I think on the Chinese side, there's been shock. There's been confusion. There's been reluctance to accept that this hostility is here to stay.

But with the passage of time, the Chinese have now had to come to accept that this is a long-term pattern. And it's going to be around for decades. Some, as I have done, analogize this to the Sino-Soviet split.

EDWARD STEINFELD: I know in the paper, you don't want to get into the question of who started it. And of course, in a protracted conflict, each side attributes to the other nefarious motives. But there are certainly some Americans who feel that in recent years, decades, the Chinese have militarized certain disputes, South China Sea, East China Sea, Sea of Japan, that the Chinese have engaged in industrial espionage, aggressive industrial policy. Is there any validity to these kinds of concerns?

CHAS FREEMAN: Yes, of course there is considerable validity to them. And thoughtful Chinese fault themselves for not taking the mounting evidence of American frustration and anger seriously enough and not addressing it at a time when it might have been addressed.

But I think my basic point in this paper is not to ask who's right, who's wrong, or even who's going to win but rather to look at the implications for everyone else in the world of these two behemoths going at each other.

When the elephants fight, the small animals flee. The ants are crushed. And the grass is smashed. So everybody else has got a big stake in what's going on between the United States and China. And nobody's thinking about what this is doing to reshape the world we both inhabit.

So I don't really want to get into who's right and who's wrong. I'd say every fight has two sides. If you want to end the fight, you can't start by assigning blame to one side rather than the other. In politics, perception is reality. And it's the perception that counts, not the objective judgment of it by some third party.

EDWARD STEINFELD: And I think your paper makes the point that regardless of whether this is perception or reality on the part of China and the US, the reality is that the world is being divided in new and very particular ways.

You argue that there are two distinct ecosystems that have emerged or are emerging in the trade sphere or trade and investment, two distinct ecosystems in the technology sphere, and maybe two ecosystems or even anarchy in the military security sphere.

CHAS FREEMAN: Sure. I think the key point is there is no single world order. There never has been. It's always been more complex than that. But what we're doing is fragmenting what remains of the previous order. So for smaller countries, those between us, this is a test of agility and judgment and the ability to cope with a rapidly-evolving global environment.

If you're, for example, you mentioned the technology ecosphere, if you're trying to get into 5G, then you now have a choice between Huawei, CTE, Chinese companies, Ericsson, and Nokia, both Scandinavian companies. The arguments against boil down to do you want to be bugged by the US national security agency? Or would you prefer the ministry of state security in China?

Do you have a real choice? Maybe you're going to get bugged by both no matter what you do. So there is a new reality coming into existence, which is very challenging for smaller countries. And it is also very troubling in terms of its long-term implications.

EDWARD STEINFELD: I was really struck in your description of the emerging trading ecosystems. Your description is so different from what the Cold War looked like. In the Cold War, there was the Soviet bloc, which certainly wasn't associated with a great deal of trade or capitalism or markets, and then the US bloc.

In the new system that you describe, there are coalitions of nations that are interested in a liberal order and lots of trade and lots of movement of capital and physical goods. And China in your view tends to be aligned with those various coalitions versus a different ecosystem USA aligned which is bilateral and one in which might makes right effectively for resolving disputes. Am I describing that correctly?

CHAS FREEMAN: Yeah, I think the US, the Pax Americana, if you will, the US-led liberal order is rapidly contracting mostly as a result of US actions, not actions by anyone else, protectionist policies. In the case of China, I think over the past year or so, tariffs have gone from an average about 3% to 23%. This is the level of the Smoot-Hawley tariff in the depression.

But the United States has big trade wars not just with China, but with Canada, with Mexico, with Europe, with Japan, with Korea. Basically, the countries most closely associated with us are now under-- feel they're under attack. Those countries do not favor the protectionist mercantilist approach of the Trump administration.

As we speak, there are a whole series of new multilateral or plurilateral trade arrangements being worked out. We see this with Japan having picked up the banner of TPP and created its own Japanese-led economic system mostly in Asia but spanning the Pacific. We can see the RCEP, the Regional Comprehensive Economic Program, that 15 countries have now completed.

And in a way, the Belt and Road Initiative, which is China's major economic integration effort globally, is mainly the negotiation of free trade arrangements, arrangements for customs clearance on an expedited basis.

EDWARD STEINFELD: But don't you think many of or at least some of the participants in the Belt and Road Initiative, the national participants, are skeptical of China's intentions and view China as essentially a mercantilist power?

And my broader question is, is it possible, whether it's coalitional or broader, to have a system of free trade without a dominant power that's willing to enforce principles of free trade? And I'm not necessarily saying the US did it consistently in the past. But I sense that most major economies, the European economies, Asian economies, are skeptical of China's ability and willingness really to enforce and back a liberal order economically.

CHAS FREEMAN: I don't think the Chinese have any aspiration to supplant the US in the role that we played after World War II, which was the global hegemon, the regulator, the rule maker, but in the end, not the rule taker. I don't think they aspire to that at all.

EDWARD STEINFELD: But the Chinese, not unlike many powers historically, have shown a willingness to use their economic power and influence to achieve other national concerns, so whether it's small examples like the recent kerfuffle in Prague or previously a few years ago with South Korea and US air defense systems, I think there's reason for small or medium-sized countries in the world to be concerned about Chinese power exerted through economic instruments.

CHAS FREEMAN: Well, it's interesting you should say that because I think one of the main lessons that is to be learned from recent history is that you should not put all your eggs in one basket. You should be very careful to diversify your dependencies. And interestingly, it's less China than the United States that has driven this realization. We have sanctions on almost everybody, including sanctions that are indirect.

If you're a company in Sri Lanka, and you deal with Iran, we'll sanction you, even though it's got nothing to do with us directly. There's a difference, an interesting difference, between sanctions as we do them and the way the Chinese do. But we're both using our economic power. As you say, that's normal.

The difference is this. The United States will impose sanctions with very clearly-stated objections to some policy that we want to change. We will then forget about the policy objectives and measure the success of the sanctions purely in terms of the level of pain we believe they're inflicting.

And we don't really monitor whether there are changes in policy. That's probably explainable by the fact that usually there aren't, except in the wrong direction, since sanctions tend to anger more than they entice.

The Chinese case-- very different. They put sanctions on, but they don't announce them. They never explain what the terms are for their removal. They basically put the other party in the position of having to think what did I do wrong? How can I fix this?

EDWARD STEINFELD: And the Chinese position is you should know what you did wrong.

CHAS FREEMAN: Exactly.

EDWARD STEINFELD: You know what you did wrong.

CHAS FREEMAN: Precisely. So it's actually a pretty effective technique. It's one that is not available to a country that is under the rule of law where if you injure private interests as sanctions do, they're always painful for everybody, except the Congress critters and Washington beltway and swamp inhabitants who proclaim them. They win always because the purpose of the sanctions is not to accomplish anything but to strike a pose.

But the people down the line, people who are making things or buying things, are hurt. And you can't do that in a country that's under the rule of law without explaining why and justifying your action in terms of some credible broader objective. Chinese don't have that requirement.

EDWARD STEINFELD: What do you think the ramifications will be of China's effort to push state-backed digital currency, so a PBOC cryptocurrency? What are the ramifications for different trading ecosystems? And what are the ramifications for even what you just mentioned-- the ability to use pressure to get other countries to do what China wants?

CHAS FREEMAN: Well, I think we are in the process of discovering that we no longer have the monopoly on financial power that we once did. The Chinese initiative, which is not just the Chinese initiative, because it was endorsed at the BRICs summit meeting by Russia, Brazil, India, and South Africa as well, they intend to create an alternative mode of finance that avoids the Federal Reserve in New York and the dollar.

This is going to have long-term implications of many kinds. Maybe the first is the one that you mentioned. We will no longer be able to enforce our will through financial sanctions to the extent we did in the past.

But the longer-term implication of this is that the United States, which has had the luxury of being able to pay for foreign goods and services with little green paper portraits of dead presidents is not going to have that luxury. So our balance of payments deficit, which is chronic, is going to have to be corrected. And that means domestic price levels are going to be corrected. And that means a lot of pain domestically.

EDWARD STEINFELD: The issue of digital currency and the Chinese central banks pushing of a digital wallet, I think, brings us over to the issue of technology ecosystems. And more broadly, given that issues of AI and Internet of Things and digital payments seem to represent the next kind of Industrial Revolution, the next locus of innovation, the next locus of national power, why wouldn't it be the case that countries view the technology sphere as something that should be independent somehow and a target?

Why isn't it natural that-- I am not advocating this. But maybe the technology itself is driving countries, particularly large countries like China or the US, to see technology in defensive ways and intimately tied to national security.

CHAS FREEMAN: Well, I think in the case of the United States, we have changed our position on a whole range of economic, technological, and other relationships internationally. And we now apply a national security lens rather than a prosperity promotion lens to these things. There are a number of things happening that are going to make the transition very difficult.

Just imagine you're a company. And you're producing something, or you're providing a service. You're no longer going to be able to produce a global product for a global market because the global market is now being subdivided.

Standards in each technological ecosystem will evolve differently. That means equipment, hardware, and software are going to be incompatible increasingly. So we're looking at an immensely complicated process that is a challenge we haven't really faced.

Second, you can't really become independent in many of these technologies. You always have to collaborate in science and technology, advance through collaboration out through closing the door and thinking great thoughts in a quiet room.

The fundamental basis of much of the artificial intelligence work that everybody is doing around the world was a paper written by four guys in Microsoft's Beijing research center. It's called ResNet. This was a Chinese set of innovations which have powered the global system.

EDWARD STEINFELD: Yeah, I tend to be a technology optimist. And I tend, I think like you, to believe that more openness leads to more innovation, more prosperity for everybody. But at the same time, 25 years ago when I thought about the growth of the internet, we were witnessing that, and the Chinese state seemed reluctant and determined to shut off as much as possible those flows, I felt both that shutting off the flows was impossible. And also, shutting off the flow of information was detrimental to China's development.

At the same time now, 25 years later, I see companies like Facebook and Google that are able to not just track so much information about the individual citizen but shape his or her views in a way through advertising, views about not just commercial issues, consumer issues, but political views as well, the Cambridge analytical story.

So again, I come back to the issue of technology spheres increasingly feeling to many of us like security domains and domains in which we need to shut off outside interference rightly or wrongly. And so even on that kind of level of outside influence on our domestic processes, I know the Chinese worry about this all the time, is the story likely going to be siloed technology, national technology domains for data and these kinds of things?

CHAS FREEMAN: I agree with you. Of course, cutting off the free flow of information is very damaging. It inhibits innovation. It is a barrier to progress. But then the question is what information is being cut off?

What the Chinese are trying to do is cut off the political information but not the scientific information. What we're trying to do is cut off the scientific information but not the political information. I don't think either side can hope to succeed in this over the long term. And both are hurting themselves by taking this track.

Finally, I suppose some measure of a return to the preglobalized information domain is inevitable. That was, after all, the norm historically. People in Albania really didn't know very much about what was going on in Ohio or vice versa. So I'm not sure that this is quite as profound a development as we sometimes think. We'll just have to wait and see.

EDWARD STEINFELD: With these separate spheres, separate trading spheres, separate technology spheres, of course, Chinese and Americans aren't the only people in the world. There are many innovative people, innovative countries. How might countries, whether they're small or medium sized or even large, how might they move across these two separate domains? How might they leverage this kind of division between China and the US?

CHAS FREEMAN: Well, we're beginning to see some of that. I think the effort to scare everybody out of using Chinese technology for 5G has clearly failed. There are a few who have signed onto that.

But very quietly, while we are beating our breast about this issue, Huawei's already, by the end of the year, they'll have put in 130,000 relay stations. And by the end of next year, 300 Chinese cities will be fully wired for 5G. And of course, they've basically won the African market. And they're winning in Latin America as well as far as I can tell.

EDWARD STEINFELD: And Europeans arguably interested in pushing innovations in AI and IoT in China itself.

CHAS FREEMAN: Well, I think one of the basic factors we have to bear in mind is the relative wealth of scientific talent and workforces. One fourth of the world's STEM workers, scientists, technologists, engineers, and mathematicians, are Chinese. They're young. They're just starting their careers for the most part. And they're beginning to innovate massively.

Now, one problem with the idea of cutting off scientific exchange in order to preserve national security is that essentially you're cutting yourself off from the world's largest pool of talent. So it's a gamble. You might win in an area or two, but overall you're more likely to lose.

Then of course, that gets us back to the real question, which is, why on earth are we interested in offensive warfare with each other. Actually, I don't think the Chinese are in an offensive posture. But I'm hearing stuff from people in the Pentagon and reading it in the press about preparing for all-out war with China, which sort of overlooked the fact that there are nuclear weapons that would be involved in an all-out war.

And one of the worst things that the government is now doing is sniffing around in university laboratories to see if they can smell any Chinese. This is terribly injurious to precisely the qualities that made us the world's greatest centers for innovation.

Our universities have been the best because they've been open, because we've been open to foreigners, to foreign ideas. We've been collaborative with others. To some extent, that is being shut down. And that hurts us more than anyone, I think.

EDWARD STEINFELD: It's interesting that at the same time, the Chinese state and party state also seems increasingly willing to push loyalty tests in China and to intercede in what had previously been domains with much less government intervention.

CHAS FREEMAN: Which is why in the-- in what I call-- what I would say the political sphere in terms of competition politically, internationally, prior to the American turn toward protectionism and a warfare state and surveillance state and sort of xenophobia in the United States, there was no contest. Nobody likes the Chinese political system, not even the Chinese themselves. And nobody believes that it's the answer.

People will look at whether that system delivers prosperity and domestic tranquility at higher levels than others, but they don't want to copy it. It's just no contest in that sphere. Chinese, in fact, what they're doing now is making it even more of no contest. But I'm sorry to say the United States is not the exemplar of liberty that it once was.

EDWARD STEINFELD: Yeah, your description, Chas, of these emerging, fragmented trading ecosystems and emerging, fragmented technology ecosystems-- none of those descriptions scare me all that much. They're not ideal, but it's your description of the emerging security architecture or lack of architecture that really terrifies me.

And my sense in this paper is that you're saying both China and the United States are backing out of alliances. Maybe China was never willing to be in alliances. But neither is willing to restrain other powers in ways that we might expect a great power to do so.

And at the same time, a number of emergent powers, Saudi Arabia, Israel, Russia, Turkey, Japan, South Korea-- we can name many-- all in different ways are pursuing a variety of interests that may be regional but have ramifications for the rest of the world and potentially with weapons that have global ramifications. That kind of description of anarchy is to me even more frightening than the idea of Americans preparing for some great war with China. What does this period of anarchy look like for us?

CHAS FREEMAN: Well, for one, I share your concern, obviously. For one thing, the experiment with a sort of version of the rule of law internationally, meaning a rule bound order, which is a product of World War II and the lessons we thought we learned from that and from the decades that led up to it-- this has all gone away.

International law is not a constraint on international behavior to any significant extent anymore. The United States has essentially led the way in abandoning deference to the UN charter, even though it was our creation. And despite our talk about the rule bound order, the only context in which we talk about it, it appears, is the South China Sea.

EDWARD STEINFELD: But at least during the Cold War arguably, the US and the Soviets were concerned enough about global conflict to contain and constrain and limit local conflicts and the ambitions of local players, regional players.

CHAS FREEMAN: And that deference to great powers worked pretty well in the bipolar context. There is no bipolar context. There's really not much of any context at all now. And what we have seen as you suggested is the emergence of entirely independent policies on the part of medium and smaller countries that essentially ignore the interests of their former patrons.

And we've seen one country you didn't mention which epitomizes much of this is Turkey, which is very rapidly moving into an independent position between Europe, Russia, and the Middle East, exerting its own pressures on neighbors, taking its own actions, often in direct disregard of American objectives or counter to them. We came very close in northern Syria recently to having a nice little battle between Turkish and American soldiers. So it is very dangerous--

EDWARD STEINFELD: How close did we become?

CHAS FREEMAN: The Turks actually shelled an American position deliberately apparently very-- not the position itself, but very closely to indicate that if we didn't stand down, they were going to get us. We are not in the habit of standing down, so it was close.

But I think the biggest implication of all of this is if there's no protection from the rule of law, if the United States is no longer providing effective deterrence for those countries that have chosen to associate themselves with us, extended deterrence as part of the loss, that means the best thing you can do as a small country perhaps to preserve yourself against stronger, larger neighbors is go nuclear.

Because we've seen the case of India and Pakistan, for example. India was much the stronger power. It foolishly led the way into nuclear weapons. Pakistan then went nuclear. Pakistan is now equal in many respects to India in the war game. So there are many countries that are beginning to talk about going nuclear, some we're not paying much attention, apparently. Turkey is one of them. South Korea is another. And there are others as well.

EDWARD STEINFELD: There's the other option, I guess now technologically enabled, to pursue cyber weapons. So arguably, one can be a very strong country without having any kinetic military force, any ability to project power kinetically.

CHAS FREEMAN: Or even a nonstate actor. Cyber is a particularly dangerous area because nobody knows how to deter attacks. They are frequently very difficult to attribute to any particular party. They're easily run as false flag operations, provoking party A against party B when the provocation is really coming from party C.

And they are, as you said, as is the case with nuclear weapons an equalizer. Small countries can do enormous damage to large ones through this-- shutting down electric grids, breaking transport links, causing dams to fail, shutting down industry, aborting air travel, erasing financial records, all sorts of things which we didn't have to worry about in the past.

EDWARD STEINFELD: I want to maybe conclude with a vast question. I'm not sure how one answers it in a short amount of time. But you've laid out a very persuasive argument for why old strategies don't work anymore-- containment, mercantilism. But what, at least in the United States' case, what might a new grand strategy look like for the coming years?

CHAS FREEMAN: We're not capable at the moment of producing any strategy, grand or otherwise. We're in the process as has been illustrated in the impeachment hearings of unilaterally disarming ourselves diplomatically.

We are destroying what capacity we had. And I don't think it was as good as we thought it was in the diplomatic field, leaving the only alternative instrument of state graft as the military. This is the wrong direction to be going in. But it is one that reflects our political realities at present. And I see no effective opposition to it.

So now if we're going to get into the future, part of what we have to do is rebuild capacity, do it on a basis which is more directly relevant to the new world disorder than to the assumptions that we had in the past. It may be that as seems to be the case, the United States and China are locked in a long-term, broad, relentless contention. But that doesn't mean that we can't find specific matters on which to cooperate.

And there are some where obviously without cooperation between us, things will only get worse. Climate change is one of those. And it doesn't help that we are the odd country out on that. Now that Syria has joined the Paris accords, we are the only nonmember in the world and going in a very different direction from everybody else.

I'm afraid, however, that in order to correct the incapacities we have developed, we're going to have to suffer some sort of disaster, a wakeup call in the form of a catastrophe, at which point I have great confidence in our ability to rise to the occasion.

But at the moment, we are complacent. We don't seem to spend a lot of time thinking about how things are changing and what we must do to accommodate them or deal with them or fend them off or redirect them. And so it's hard to be optimistic about the short term.

The difference between the past and today is that some angry person in the Democratic Republic of the Congo can strike the seat of government in Washington. The ability to reach across vast distances annihilating distance effectively is unprecedented. And we are now the neighbor as we've learned of Afghanistan. We have a border with Afghanistan. That's what 9/11 showed. And we have yet to accommodate this reality.

EDWARD STEINFELD: Well, Chas, I hope that "A World Divided-- The International Implications of the Sino-American Rift," this really wonderful paper, provokes the kinds of discussions that I think we all need and that you accurately observe are really not happening, at least not in public spaces and not in the electoral process that's going on in the United States. I really want to thank you as always for sharing your wisdom, your geopolitical knowledge and vision. It's extraordinarily provocative. I really thank you.

CHAS FREEMAN: Well, thank you, Ed, as always.

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SARAH BALDWIN: This episode of Trending Globally was produced by Dan Richards and Jackson Cantrell. Our theme music is by Henry Bloomfield. I'm Sarah Baldwin. You can subscribe to us on iTunes, Stitcher, or your favorite podcast app.

If you like what you hear, leave us a rating and review on iTunes. It really helps others find the show. For more information about this and other shows, go to watson.brown.edu. Thanks for listening. And tune in in two weeks for another episode of Trending Globally.

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