In Foreign Policy (6 February, 2017), Robert Kagan, Senior Fellow of the Brookings Institution, argues that America must check the assertive, rising powers of Russia and China before it’s too late. Accepting spheres of influence is a recipe for disaster. Click here
His argument is based on the following premises -
(a) that the America-led uni-polar world order including strong ties with US allies remains the only one that works;
(b) that the rising "revisionist" powers of Russia and China will not be satisfied with regional spheres of influence, implying that either or both would seek global dominance;
(c) that China, in particular, may push the United States out of at least East Asia, "not only militarily but politically and economically";
(d) that we are returning to the 19th and 20th centuries when Great Power conflicts for spheres of influence led to global wars; and
(e) that to save the world from a looming WWIII, the United States should build up its military further to restore US hegemony.
Kagan dismisses out-of-hand the viability of Niall Ferguson's "tri-polar world order" jointly led or influenced by the United States, Russia and China with strategic "cooperative rivalry" respecting each other's core interests. He considers such strategic balance unsustainable as both Russia and China are dissatisfied revisionist great powers which are bound to progress from an inch to an ell. Instead, he thinks that the only option is for the United States to redouble her military strength to maintain a US-led world order. This emphasis on military dominance merits a little more thorough think-through.
First, it begs the question whether history inevitably repeats itself. In the Age of the Fourth Industrial Revolution characterized by global interdependence and inter-connectivity, concepts of global hegemony, power exclusivity, and a zero-sum-game mentality may no longer work. For example, why should China push the United States off anywhere economically when American finance, technology, and businesses continue to define the global supply and value chain, much to China's benefit?
Second, Russia has shown relatively limited ambition to achieve dominance beyond her Eurasian "near abroad". Notwithstanding narrower national calculations, she has displayed a more proactive role in maintaining regional peace and stability, as in the case of Syria following years of bloody conflict. Similarly, despite assertiveness in the South China Sea, which are critical sea-lanes central to her economic lifeblood, China continues to defend the global trading system, not to mention the international compact against Climate Change. China has also been fielding the largest peacekeeping contingent among Permanent Members of the UN Security Council. Both rising powers are therefore capable of contributing to the global commons. Unless they are deliberately threatened or provoked militarily, it may be too early to conclude that World War III is inevitable.
Third, the United States military is already by far the strongest in the world, with military expenditure exceeding the rest of the world combined. If this is deployed to coerce Russia or China, both countries are likely and well able to respond. Russia's military remains formidable, including possession of more nuclear warheads than the United States. China's military is no longer a walk-over. Her rapid military modernization and build-up is largely in response to a de facto US encirclement of China's vital economic sea lanes with American military assets, including missile and bomber bases, as described in film-maker John Pilger's new documentary "The Coming War on China". In addition to state-of-the-art inter-continental multi-warhead ballistic nuclear deterrence, China is more than capable of defending core interests in the South China Sea. Such defense includes robust ant-access/area-denial (A2/AD) capabilities both above water (such as mobile anti-ship ballistic missiles (ASBMs)) and under water (such as remote-controlled manoeuvrable sea-mines).
Fourth, any dramatic US military build-up is likely to start a vicious arms race with Russia and China, spreading to many theaters, including space. This would only serve to reinforce their deterrence capabilities, consolidating their positions in a tri-polar world.
Perhaps that's why President Trump seems inclined towards greater rapport with Russia. The recent joint astronaut survival training in Siberia is instructive. America's commercial energy interests in Russia may be part of the reason. So may be calculations for a possible US-Russian detente to balance against China. However, Russia is unlikely to come too close to bed with an fickle nemesis responsible for the collapse of the former USSR. Nor would Russia sacrifice China as her largest energy customer by far, or for that matter, as a strategic hedge against American hegemony.
Perhaps that's also why, despite a worrying initial period of apparent apathy, if not hostility toward China, he has sent a letter to President Xi making amends and holding out an olive branch for constructive, results-based, "win-win" relations.
Ultimately, that is, reality speaks louder than rhetoric.
In considering the following highlights as regards China and Mexico, the leading targets of Trump's possible trade wars, it is important to remember that only 19% of China's exports go to the United States, compared with Mexico's 82%. Moreover, thanks to continuing economic re-structuring, exports now only account for 20% of China's GDP, the rest represented by services, investment and domestic consumption.
The following findings of the Goldman Sachs report are noteworthy -
According to Nicholas Fawcett, Senior Global Economist Goldman Sachs, tariffs of 45% and 35% on China and Mexico respectively would reduce America's GDP by 0.77 % by 2019, compared to China's reduction of 0.3%, taking into account likely retaliations and global spill-overs, all-out trade wars are likely to damage the United States more than China.
Immediate losers will be American consumers, who will face increasing inflationary pressures.
Targeting imports misses the point. For example, one-third of imported auto components (including a large proportion from China) are for car production in the United States. Imposing punitive tariffs on these will only make US-produced exports even less competitive. The same goes for many goods and products in the ubiquitous global production and value chain.
Being mooted is Destination-based taxation with border adjustment (DBTBA) equivalent to an import tariff plus an export subsidy. Instead of taxing companies’ total income net of total costs, it would tax companies only on income earned domestically and allow them to deduct only domestically sourced costs. Net exporters (like aircraft manufacturers) would benefit, while companies with a high net import share (like apparel or computers) would suffer. Importers with smaller margins would be the most vulnerable. The Dollar will get a further boost, perhaps neutralizing some of the advantages given to exports.
Depending on the severity of Trump's tariff wars, China may retaliate possibly even more robustly, targeting America's exports of airplanes, cars, agricultural products and even key US enterprises in China. While unlikely, China may also resort to selling more US Treasury bonds, putting pressure on US interest rates.
Trump's aggressive trade rhetoric is in answer to his electorate's deep-seated grievances in the declining traditional machinery, automobile, furniture, rubber, plastics, textile and clothing sectors. Tariffs alone are unlikely to revive the competitiveness of these industries.
A more likely first tariff salvo is to target China's imports of steel, aluminum, glass, and solar, where there is already huge Chinese excess capacity.
As for currency manipulation, the possibility of some window-dressing initiative cannot be ruled out, for example, enacting a non-country-specific, anti-currency manipulator piece of legislation with fast-track presidential powers.
Looming trade wars are part and parcel of Trump's world viewthat America's championship of global trade is being taken for suckers. Instead, according to Dr. Richard Haass, president of the Council on Foreign Relations, "trade has an important geopolitical dividend. It’s a way of supporting allies and promoting human development around the world, as well as integrating adversaries in a way that makes them think twice before they disrupt the status quo". Similarly, "our investment in the rest of the world is not an act of charity; it’s an act of self-interest.".
In an article "The Twilight of the Liberal World Order" (24 January, 2017), a brief for the Brookings Institution, Robert Kagan hits the nail on the head. What matters most is not ISIS. It's the inflexion point of a possible collapse of the liberal world order that has defined global peace and stability since the Second World War.
There is popular anger that American largess as guarantor of the liberal world order has been taken advantage of by "Others". The Trump Presidency shows every sign of abdicating from America's global responsibilities unless compensated by calculated, short-term transactions.
This is feeding the inevitable revisionism of dissatisfied rising powers, which, together with huge historical grievances, are re-asserting themselves to modify the US-dominated world order to suit their own world view and national interests.
All these hark back to the unstable world order prevalent in the late 19th century, eventually leading to two World Wars.
Kagan rightly points out that US global military dominance is best suited to maintain global security. Neither China nor Russia can be a credible substitute.
However, military coercion cannot overturn what may, after all, be the changing tide of history as Western power and influence are beginning to give way to the rising East.
China has been embedded firmly in the world economic order underpinned by the United States. While America is now backing off, China wants to uphold the status quo. From WTO rules to climate change, it seems that most of the world feel unsettled by America's change of course and begin to think that China may be a force for good.
China in the 21st century is no longer the weak China of previous centuries. It is the world's second largest economy, soon to become the largest as the productivity and ingenuity of a fifth of mankind continue to be unleashed.
China's global strength is not the military. Or economic size. It's her economic connectivity. From mobile phones, cars and household goods, almost everything has China embedded, even if the final product is not marked "Made in China". That's why six of the top eight container ports around the world are in China, including Hong Kong. This "centrality" cannot be reversed easily as no other developing country has the manufacturing scale, capacity and global connectivity.
Global connectivity is very much at the heart of the Zeitgeist of the times defined by the world's Fourth Industrial Revolution. Driven by a combination of technologies and powerful integrated cross-border platforms, it is upending business models, labor markets, socio-political matrix, and is reshaping economic, social, cultural, and human environments.
Nothing illustrates the power of internet-economics better than President Trump’s apparent agreement that Jack Ma’s Alibaba internet-driven global business empire could help create a million American jobs by selling US goods and services to China and the rest of Asia, Trump’s China-bashing and protectionist rhetoric notwithstanding.
China is in no position to replace the United States as the guarantor of a new global order. Nor does she wish to do so, knowing her own many limitations. However, a reformed, rising, and more assertive China is sufficient to challenge an American-First world order.
Russia under Putin is also playing her cards deftly. While the United States looked powerless with the Syrian crisis, Russia is now seen as a more effective problem-solver.
The growing global gravitas of these rising powers cannot be deterred by relying only on brute American military dominance.
As President Trump focuses on America First, prioritizing American jobs, profits, and the military, it begs the question whether the world is not being driven towards another historical inflexion point of global instability.
May I first wish you and your family Merry Christmas and a Happy and Prosperous New Year!
We all need blessings as 2017 promises to be a decisive year with highly uncertain outcomes, for better or for worse. Would a Trump presidency usher in a new era of aggressive American dominance? Will it upend the existing Western liberal world order? Will there be a global trade war and arms race? Will the greenback continue its upward trend? Will oil and gas be back with a vengeance at the expense of global responses to Climate Change? What would become of Europe with Brexit and rise of right-wing political parties? How would China adapt to this new global reality? How would the nation transit to a new team at the 19th Party Congress by end- 2017? Would a soon-to-be-elected new Chief Executive be able to turn a new page for Hong Kong?
These are all gripping questions with no simple answers. Perhaps some of the following may offer a little fresh insight and perspective.
US face-off with Russia over Syria and military threats against Russia and China (Live TV interview with RT International)
South China Sea
10 Reasons Why the South China Sea Ruling May Lead to Regional Peace and Cooperation (Op-ed in the South China Morning Post and a Reprint in a management journal. An in-depth analysis of the Hague ruling is here. My riposte to a critique from the President of Princeton Energy Advisors, New Jersey, provides some further elucidation.)
North Korea's Special Economic Zones (An updated report)
A reportoire of inspirational music, videos, songs and words, There is also a collection in Chinese.
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Donald Trump has won the White House on a rising tide of anger from xenophobic, chauvinistic, blue-collar working-class Americans.
As President-elect, Trump has chosen several dyed-in-the-wool hardliners for strategy, defense and security. He has picked Climate Change deniers as Secretary for the Interior and as head of the Environmental Protection Agency. He is ditching the US-led Trans-Pacific Partnership. He has threatened to leave the World Trade Organization (WTO) without better terms Click here.
A Trump America thus appears overtly coercive and money-centric at putting “America First” at the expense of American soft-power and a U.S.-maintained liberal world order. This is worrying both allies and rivals.
Trump pledges to double down on America’s predominant military, including its Asia-Pacific navies. He has not given up aggressive views on China’s currency and trade. How may a gung-ho President Trump build “win-win”, if transactional, relationship with China, slated to be the most important foreign relations in the 21st century?
The following may offer food for thought.
On trade, without abrogating from the WTO, America may negotiate product-specific agreements with China, for example, on food safety or adequacy of supply of rare earths for strategic industries. America would also benefit from early conclusion of a bilateral investment protection agreement, covering intellectual property rights and other areas of concern.
On Climate Change, the historic 197-nation Paris Agreement has inbuilt momentum Click here. It is likely to endure with or without the United States Click here. China has been taking a lead in de-carbonization, for fear of regime-threatening pollution and energy security. According to a 2016 U.S. Department of Commerce study Click here, there are vast American business opportunities in China for high-voltage transmission, synchrophasor technology, smart cities and smart grids.
An energy-hungry China should stand to gain from its world’s-largest technically-recoverable shale gas reserve Click here. Operational constraints, however, include water-intensity, difficult terrain, and aquifer pollution risks. Additionally, to drive a greener economy, energy efficiency in power plants, factories, cars, and homes, is a top national priority. American technologies and expertise in these areas are likely to find a welcoming market.
Trump is committed to better infrastructure in order to create more jobs and boost productivity. China’s cost-competitive globe-trotting builders of large-scale infrastructure, including high-speed rail, may come in handy, subject to competitive bids, quality assurance and where necessary, national security vetting.
On the Renminbi, the Chinese currency, much of China’s perceived market distortion and disruption is due to an immature financial system. As the world’s most sophisticated financial superpower, America’s regulators and think-tanks have much to offer for China’s ongoing financial reform.
On healthcare, according to a recent U.S. Council for Foreign Relations report Click here, China’s 13th Five Year Plan (2016-20) provides many opportunities for American pharmaceutical, hospital, and insurance companies. Possibilities are driven by China’s aging demographics, rising incidence of non-communicable diseases, massive urbanization, widespread information technology, and friendly R & D policies and public-private partnerships.
U.S.-China cooperation is possible in attaining the United Nations 2030 Sustainable Development Goals (SDGs) Click here. As China’s financial and economic footprint is ubiquitous in the developing world, such as Africa, both China and the United States would stand to gain in global standing, apart from profits, by joint projects in food security, poverty relief, healthcare, disease prevention, education, and ecological preservation,
North Korea may also offer possibilities for thinking outside the box for US-China cooperation. In North Korea, there is a relatively affluent class representing some 10% of the population Click here. Apart from cronyism, a proportion are likely to be early beneficiaries of wealth-producing special economic zones Click here These are connected with across-the-border Chinese businesses. Given more investments and logistical links, they could play a constructive developmental role. Aside from more narrowly-targeted sanctions, the United States and China could consider stabilizing the regime through economic development. North Korea’s nuclear ambition is but an insurance policy against regime change. Mere sanctions, let alone military coercion, would only worsen such fear. As with Vietnam, national transformation often happens through economic development rather than regime-changing war.
As for the South China Sea, temperature is already lowering as a few rival territorial claimants, including the Philippines, are developing greater rapport with China. There has been recent breakthrough, albeit guarded, in reaching an agreed Code of Conduct between ASEAN and China by mid-2017 Click here. The prognosis is favorable for all sides to set aside (though not give up) their respective historic claims and instead, cooperate on exploration of maritime resources, management of over-stretched fisheries, and conservation of marine ecology. The United States would have a most fruitful role in this scenario.
On the Middle East, although China does not see eye to eye with the United States and is unwilling to get involved in wars, China is intent on fighting Islamic terrorist separatists on her own soil. Opportunities exist for joint US-China anti-terrorism intelligence-sharing and related covert actions. Where the United Nations is involved, China’s sizeable peacekeeping contingent may also assist in humanitarian operations, as in the case of Syria.
On space exploration, Russia and America have cooperated for decades since the mid-70s. This cooperation still continues with the International Space Station (ISS) under the Global Space Exploration Strategy, endorsed by 14 space agencies worldwide including the U.S. and China. Click here As China’s space program is gathering pace, trust-building joint missions are possible, if NASA restrictions are lifted.
Last but not least, Wanda Cinema, which owns the largest cinema chains on the Mainland, has bought AMC and Legendary, the two largest American cinema chains. It has unveiled a 408-acre, state-of-the-art studio in Qingdao, expected to open in 2018. It wants to partner, not to complete, with Hollywood Click here. Its vision is to make films that sell not only in China but across the globe. America’s producers, script-writers, actors and cinematographers should be well poised to tap into this potential goldmine.
In short, electioneering rhetoric aside, the incoming Trump presidency would be able to leverage China to make America great again, without necessarily compromising America’s global soft-power or turning the US-led liberal world order upside down.
A series of reports by The Red (Team) Analysis Society, a non-profit geopolitical consultancy, expounds upon Russia's grand plan to exploit the massive energy resources of the Arctic and its increasing navigability to boost Russia's global clout at a time when the Arctic's economic and geopolitical potential is being opened up by climate change.
The Red (Team) Report of 19 December 2016 traces the Russian North's history up to its most up-to-date development. Reference is made to its navigational potential linking up the Russian Ural and Western Siberia with the Canadian North Sea Route. It is noteworthy that Exxon's drilling in the Russian Arctic was halted only by Western sanctions whereas a more Russia-friendly Trump president-elect names Rex W. Tillerson, Exxon chief, as Secretary of State.
It is also interesting that China has been invited to take part in the Russian North project. China has invested $12 billion in the Yamal-Nenets Automous Region and the adjacent Arkhangelsk Port bordering North West Europe. This investment has fresh strategic meaning if it eventually links up with China's maritime "Silk Road" route to Northwest Europe as part and parcel of the One Belt, One Road grand strategy.
Russia's new and more powerful icebreakers capable of breaking up to 3 metres thick ice are making it possible for Russian and Chinese cargo convoys to ply along the Northern route all year around. This route follows the Siberian coast to and from the Bering Strait to the Russian and European northern ports from Norway to Rotterdam.
Concurrently, the Russian ministry of Defence is rapidly militarising the Arctic, through the creation of the Joint Strategic Command North and the deployment of nuclear submarines and other naval assets. Click here
As I heralded in March 2014, the Arctic Region is poised to change the world. Click here.
The world could become even more closely connected physically if a visionary China-Russia-Canada-America high-speed rail should ever become a reality. However, the Arctic is also likely to become a proxy arena for great-power geopolitical rivalry.
Either way, it is no surprise that China is quietly boosting economic and geopolitical ties with the Arctic region, especially its most powerful player - Russia. It's also indicative that a new Trump presidency is likely to adjust America's foreign relations with Russia.
A PowerPoint presentation on 16 December, 2016 to the Founding Chairmen Group of the Denmark-based Executive Global Network (EGN), Hong Kong, of which I am an Advisory Board Member. Download Implications of a Trump Presidency